A Grand Exit From The Grand Bargain

Bill Scher

The Center for American Progress, the most prominent left-leaning institution supportive of a “grand bargain” deficit reduction agreement that would include reducing Social Security benefits, today released a new report that effectively renounces that position.

After detailing how we’ve already achieved significant deficit reduction, while job growth continues to lag, and sterner austerity abroad is faring even worse, CAP concludes:

…the push for debt reduction has, at best, made it harder to boost economic growth; at worst, it has actively dragged the economy down. The time has come to recognize and respond to the new reality: It’s time to hit the reset button on the entire fiscal debate.

This is first significant casualty for Team Grand Bargain since austerity has been officially declared a loser among the intellectual elite. But the “so what” question remained: So what if elites declare austerity dead, if the politicians don’t change any policies in response?

The CAP move has real political impact. While we’re not seeing any elected officials shift yet, CAP’s new stance makes it harder for President Obama to sell any grand bargain to fellow Democrats. Democrats would need significant intellectual back-up from politically friendly and credible sources to justify any deal that cuts retirement benefits. Without CAP, they probably won’t get it.

However, the impact is limited. The economy needs more jobs, and that requires both parties to agree to do something about jobs, and that requires money. We are long way away from seeing Republicans accept any argument for more spending, and there’s nothing a left-leaning institution like CAP can do about it.

CAP’s revamped policy prescriptions, in turn, are constrained by that political reality. It acknowledges that the “main objective in seeking to fix the sequester” is mainly “to avoid further economic damage.” CAP also notes Congress should “actively take steps to boost job creation and lay foundations for future economic growth.” But instead of an ambitious goal of full employment with a massive public works program, CAP proposes the repeal of the sequester for three years with a partial offset of the cost, along with a $5 billion-a-year investment in infrastructure, $2 billion-a-year investment in preschool education and $1 billion-a-year investment to help the low-income and long-term jobless find good-paying work.

All of which would be far better than nothing. But it’s hard to see how we get even that much from the current lot of House Republicans without agreeing to a larger “Grand Bargain” that include more tough cuts.

Such painful trade-offs are decisions that those in power are often forced to make, faced with the lawmakers they have. But those on the outside have the latitude to try to broaden the conservation and fundamentally reshape the political dynamic.

Great strides have been made on that front, as “austerity is dead” is becoming a mantra. With the intellectual pillars of austerity crumbling, now we have a moment to make the case for new pillars. CAP chose only to take a partial step in this direction, but others can take the baton from here.

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