Grand Bargain Was Always a Bad Idea

Grand Bargain

Yesterday, over at Political Animal, David Atkins wrote, With Courage, Democrats Can Still Win With Seniors. It is about a new poll that finds that older people would reward a party or candidate who pushed for increased Social Security benefits. Atkins proposes increasing entitlement spending by raising taxes on the rich and cutting corporate welfare. He’s quite right that the Republicans would have an extremely hard time countering that kind of proposal.

Of course, the Democrats will not promise such policies. It all goes back to my much repeated observation that we really don’t live in a democracy. Such ideas are simply “off the table” while very unpopular ideas like cutting Social Security are perennially Good Ideas™. But my question is why Obama spent the whole of his first term looking for the ultimate bipartisan prize: the Grand Bargain. Politically, it made no sense.

Even worse, it made no sense economically. The idea was always that in exchange for the Democrats’ agreeing to cut entitlement spending, the Republicans would agree to raise taxes. Let’s think this through. We are in a liquidity trap — there is too little demand in the economy. So the Grand Bargain would cut government spending. This would be bad for the economy because it would reduce demand. And the Grand Bargain would raise taxes. This would be bad for the economy because it would reduce demand. Economically speaking, the Grand Bargain is a lose-lose proposition.

There’s only one reason for the Grand Bargain: to cut the federal government’s budget deficit. But we need bigger deficits right now, not smaller deficits. Just look at total government spending after the last four recessions. Do you notice anything? The government is not spending the way it normally does and we’ve had effectively no recovery. In 1937, Keynes said, “The boom, not the slump, is the right time for austerity.” But apparently we’ve forgotten. (Or more likely: we now have a major political party that will destroy the economy until they get power.)

Total Government Spending After Recessions

So the Grand Bargain is bad politics. And the Grand Bargain is bad economics. So why is Obama so interested in it? Why do I still fear if the Senate goes Republican next year that he may bring it back with even more concessions? (“I’ll tell you what, if you agree to get rid of just one loophole, I’ll raise the retirement age to 88 and end the food stamp program!”) I think he has a kind of addiction to being seen as The Reasonable One™ among those we refer to as the Very Serious People. A year and a half ago, I wrote, Return of the Son of the Night of the Simpson-Bowles. I noted then that trying to get credit from such people was a fool’s errand because they will always proportion the blame evenly between the Democrats and Republicans.

I would like to think that Obama has learned his lesson, but I don’t think he really has. Nor has the Democratic Party learned the most basic fact about politics in the United States. The one area where the Democratic Party is truly liberal — on social policy — the nation is conservative. On liberal economic policy — which is wildly popular — the party is conservative. But like I said: we don’t live in a democracy — at least one where every person has an equal vote. “All Americans are equal, but some Americans are more equal than others.” But I don’t expect Obama or the rest of the Democratic establishment to ever admit that.

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About Frank Moraes

Frank Moraes is a freelance writer and editor online and in print. He is educated as a scientist with a PhD in Atmospheric Physics. He has worked in climate science, remote sensing, throughout the computer industry, and as a college physics instructor. Find out more at About Frank Moraes.

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