Budget 2013: Why a Grand Bargain is Totally Out Of the Question

It is unlikely anytime soon that there will be a grand bargain to end America's ongoing political civil war. No laying down of arms at an economic Appomattox, no armistice, no surrender ceremony on the deck of a figurative Battleship Missouri. What we are in now is a federal policy stalemate with none of the sides, not Dems or Reeps or Tea Partyists with enough clout or muscle to prevail.

So in the short run I suspect we will get this: a grudging agreement by the Republicans to keep government working by extending the debt ceiling for a year past the mid-April date when it currently needs to be raised. To get that, I also suspect Democrats will agree to leave the sequester cuts in place. The two parties will likely find ways to soften the sequester's blow by taking its current even spread of cuts and rejiggering them to fall more heavily on areas like advanced military weapons systems that are of arguable importance.

Part of this is likely to be a deal revising entitlements like Social Security and Medicare. As to the Tea Party, which seems to be a separate player on the right, I am going to guess that as long as the amount of the sequester's cuts remain the same they will be willing to back off (a bit) on their libertarian push for overall reductions in the size of government.

I also expect to see the Obama administration agree to some reforms (cuts in plain English) to entitlements, phasing in, for instance, an increase in the age of full Social Security eligibility, along with means testing its benefits and possibly capping benefits at the high end for the very wealthy. I also expect to see people paying payroll taxes on larger levels of incomes (meaning higher earners will pay a bit more). The likely tradeoff is that Republicans will agree to allow negotiations over prescription drug costs for Medicare. 

All this is the easy part, though. It leaves the same irreconcilable issues in place and brings our political civil war no closer to an end. The reason, as Robert Levine notes in his Moderate Voice blog, is that the sides in this civil war answer to totally different constituencies. He comments, "Republicans see government spending as the root of all evil and want to bring the budget deficits and debt under control by cutting federal spending and shrinking the government (except for the Department of Defense). The Democrats are willing to cut spending to some degree but also want to raise revenue by eliminating tax loopholes on the very affluent and corporations, so that government programs that aid the poor and disadvantaged will not have to be reduced as drastically."

The problem, a new McClatchy-Marist poll shows, is that while Americans support some cuts in spending – such as to energy and jobless benefits – rather than increases in taxes, they strongly prefer to raise taxes rather than cut spending on education, Social Security, Medicare, Medicaid and infrastructure. But the question is broader than that. Do we want more revenue or less military spending, more revenue or less funding for public health programs like the Centers for Disease Control, a reduction in tax exemptions or a cut in transportation funding, the list goes on? Such choices seem impossibly inharmonious today.

None of these, though, offer the basis of a long-term political cease-fire. To get that we need bigger ideas that don't just rejigger the current size and scope of government, but that restructure the way our society deals with 21st century economic and social realities. We need to find commonality in two opposing views:

1. That government has a vital role in regulating economic activity and preserving rights and opportunity;

2. That government that is too big and all encompassing can be stifling and encroach on the liberties we want to protect.

One such bigger idea is a proposal by University of Texas economist Jamie Galbraith (son of economist John Kenneth Galbraith). He proposes to allow people to retire on full Social Security benefits at a younger age. In saying so he notes that the current structure, which has steadily raised the retirement age, indexing it to our increasing life expectancy, is keeping potential retirees on the job longer, damaging job opportunities for younger Americans just entering the work force.

Galbraith's idea may increase costs in the short run but " … encouraging early retirements," Galbraith says, "would mean that young people — just out of school, with fresh skills, good health, and high energy — would get the jobs they need now … Meanwhile, the retirees, supported by Social Security and Medicare, would provide a continuing stable support to total demand, creating jobs for others as they get older." Millennials would be big beneficiaries of such a change.

It is time for armistice talks in our political civil war before it becomes as damaging as the combat of the Civil War between the U.S. and the Confederacy was to the nation in the 1860s. Failure to end this war will be destructive both to our economy and to our world standing as a nation. Whether such an armistice is possible until the sides are too weary to sustain the fight, though, is anybody's guess.