Obama has Given Up Seeking a Solution to America’s Financial Woes

Without a bang or a whimper, all hopes of striking a so-called “Grand Bargain” to put America’s public finances on a sustainable track died a quiet death this week.

And because cynicism passes for wisdom in Washington, the passing was little lamented. But its death is a loss to the cause of putting America’s house in order, and all-but-officially marks the moment the Obama administration gave up trying to bridge the political divide on this most fundamental issue.

The death notice itself was printed in the pages of the Obama budget, which quietly rescinded the offer of long-term healthcare and pensions reform by withdrawing the offer of what Capitol Hill policy-wonks call “Chain-weighted CPI” from their budget blueprint.

A contentious but courageous plan, it essentially moved to link social security payments to the rate of inflation, slowing the rate of growth slightly and ultimately saving billions in a society with an aging population.

On the left, Liberals and the big unions howled in protest, but it was a substantive outreach to Republicans by Mr Obama after his 2012 re-election and it could have formed the basis of that “grand bargain” to deal with America’s $17 trillion debt mountain.

Fixing the debt was, after all, supposed to be the animating idea behind the Tea Party protests that first popped up five years ago. But because divided government is a fact of life with a Democrat president and a Republican-controlled House of Representatives, any real solution to problem would have required compromise.

But fiscal rectitude really was dear to Tea Party hearts, then Republicans should have applauded the novel sight of a Democratic president offering to enact real entitlement reforms in the face of bitter complaint from his own base on the Liberal Left.

But instead, President Obama’s policy outreach was ignored by Republicans in favor of tribal talking points that falsely framed every debate as a competition between Mr Obama’s “obsession” with tax hikes and GOP “common-sense” commitment to fiscal discipline.

The gap between the reality and the rhetoric reflected the disconnect between fiscal conservatives and fiscal responsibility.

We saw this same gap four years ago when the Bowles-Simpson commission, jointly chaired by a Republican and a Democrat, was appointed to find common ground on fixing the finances, unveiling their bipartisan proposals to deal with the deficit and the debt.

The Republican House members of the Commission – including Paul Ryan – voted against it. And when a bill based on the commission plan was brought to a vote in the House it went down to a dismal but telling defeat by a 382 to 38 margin with 22 Democrats voting in favor and only 16 Republicans.

The reason went beyond the usual my-way-or-the-highway posturing of hyper-partisans – instead the real problem was that the required cuts in services to the elderly and the poor were unpopular even to Tea Party members.

Today, thanks to the essential X-factor of economic growth, the deficit is now shrinking even while debt remains a serious problem.

However any urgency for addressing the underlying problem has faded as both parties pin their hopes to the next election, effectively taking the rest of the year off.

President Obama can rightly say that his offer for a grand bargain and entitlement reform were rejected by recalcitrant Republicans.

Conservatives can argue with some credibility that the president did not frontload entitlement reform, but they cannot say he did not try.

A historic opportunity has been wasted, kicking the can to the next president. Whatever Mr Obama’s presidential legacy, it will now not include putting America on a sustainable financial footing.

Another long-discussed opportunity seemed lost this week when Republican Congressman Dave Camp unveiled his long awaited tax reform bill.

Camp’s plan was courageous and dangerous in the degree of specificity he offered. But while inevitably contentious, the plan was non-crazy and closed loopholes even as it proposed to lower rates.

At least it should have provided a start to policy talks. Instead, party leadership on both sides of the aisle pronounced it dead on arrival, largely out of fear and fealty to the Wall Street donor class that provides a huge chunk of campaign cash.

Both these proposals – a Grand Bargain and Tax Reform – are needed to get America’s long-term fiscal house in order. Candidates will continue to campaign in favor of them and a future president will enact them.

Whether our era’s hyper-partisan fever or just animus to Obama is to blame has yet to be seen. But the failure is another measure of why this congress is the most polarized, least productive and least popular on record.

Too many politicians would rather demagogue an issue than deal with it.

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