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« Identifying Panic Selling | Main | Weighing the Week Ahead: The Rise of Headline Risk »

August 11, 2011

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oldprof

Jack -- I think there will be further negotiations before the "Bush" tax cuts expire. I expect most to be extended.

It is the nature of compromise that everyone is disappointed with the outcome.

Jeff

Jack Reacher

2-1 is probably about right. But I am cynical enough to believe the committee was designed to now come to an agreement.

So, we are out the 2 Trillion dollars. And much higher taxes starting 1/2013.

Way to negotiate, republicans.

FedUp

Pat,

Since i'm sure you're VERY familiar with the Constitution. I'm sure you're aware that creating and passing budgets are the responsibility of Congress. (NOT the execuetive branch)

However, since Congress can't seem to put Country ahead of party it would be nice to see an adult lead them to the correct answer. However, given the separation of powers, there's not much the President can do. Aside from a speech or two.

Unfortunately the best way for each side to play the game politically is to have no deal and then attempt to blame it on the other side in time for 2012.
Thus proving that our system has become so disfunctional that they care more about be re-elected than actually governing the country.

Pat

PS. final thoughts cut off: "The core problem is that you need a President to LEAD and do the consensus-building and not delegate leadership to a committee. Obama hasnt done that."

PPS. Thanks for indulging my overlong comment!

Pat

Jeff, I appreciate your economic insights and your valuable commentary. Some points that I think you are missing on this item.

First, it is NOT good news that a Republican is off the cut-entitlements bus. While this is simply a pro forma statement of Republican talking points, that they have not and will not cut current benefits, being 'gun shy' on this means no real substance in any 'deal'. The real reason a 'grand bargain' never happened, and you need to fight through the clutter of DC spin and media bias to get to the kernel of truth, was that wannabe-Speaker Pelosi and Senate Democrats said no to entitlement reforms, and gave Obama a dressing down over this in July when news came out of discussions with Speaker Boehner on it. It's why Obama 'moved the goalposts' Speaker Boehner saw he was being taken for a ride and got off the bus, cutting off any hopes for the 'big deal'.

The dynamic of Democrat refusing any compromise that 'solves' entitlements exists because they want "Medi-scare" as a 2012 issue. On the flip side, if the Republicans see no reasonable Democrat effort on entitlements, they have no incentive to cave/agree on tax hikes, the grand bargain quid pro quo. Poof, no grand bargain, no serious budget reform.

That leaves the super-committee to either (A) fail to reach agreement, posturing ensues, Pelosi/Reid use it to blame 'intransigent' Republicans, etc. (could be their plan all along); (B) they put tax hikes and entitlements aside, and come up with a deal to mainly cut from discretionary accounts ( maybe a nick on entitlements and a few tax credit reductions, nothing more).

(B) is not as hard as it looks because they are needing to find $1.2+ T or so in cuts in a $40 TRILLION 10-year budget. Is 3% that hard? Senator Coburn had about $9 trillion in cuts in his proposal. Simpson-Bowles had $7 trillion or so. The ideas are out there, its just a matter of deciding to agree to cut Government spending.

But when you have someone like Sen Baucus, who opposed Simpson-Bowles final report, which you report above thus: "Among his objections were the elimination of farm subsidies and deep cuts to entitlement programs" ... it's hard to see how meaningful budget reductions will get such spending-addicted Democrats on board.

And while the Republicans had a mix of viewpoints on their side,the Democrats picked all liberals, a signal of a hard line.

Moreover, if the Democrats do come up with a plan and peel off Moderate Upton and Portman, and leave fiscal hawks Toomey and Hensarling out of it, then the 'deal' will be DOA in the House with the conservatives in GOP caucus. The Toomey / Hensarling position is the "Cut, Cap and balance" approach, the very one the Democrats rejected.

Bottom-line: I think expectations for a serious common-ground result of this are low for a reason. As with the July debt deal negotiations, posturing trumps consensus-building and any deal might well be voted down in the Congress. The core problem is that you need a President to

oldprof

Thanks, Paul.

Once again, this is an out-of-consensus prediction, where I could be wrong. I'll monitor.

Jeff

Paul Nunes

This article is one more example wy i find your blog so valuable; i very much value your insight on political outcomes. great work jeff and derek!

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