This Week’s Debt Deal Is George W. Bush’s Revenge – But It Won’t Last
There is plenty of blame to go around for the recent debt and deficit shenanigans, but who should get the credit?   I nominate George W. Bush. Not only did his administration’s negligence secure the foundations for the financial upheavals which ultimately created much of the short-term deficit. The role of his tax cuts in driving much of the medium term deficits is also certainly well-known. But the last month’s budget warfare also highlights the significance of his distinctive innovation in fiscal policy: Unlike FDR and LBJ, W established a major new entitlement – Medicare Part D prescription drug benefits for seniors – without a revenue stream to pay for it. This unhappy innovation also helped shape the austerity plan the President signed this week.
Consider the following. The only certain budget cuts in the deal are $915 billion in discretionary program reductions over ten years. In fact, those cuts very nearly match the $815 billion in unfunded costs for Medicare Part D over the same period. And Bush’s dogged resistance to paying for those benefits has now revealed the priorities of those in both parties who think we do have to pay for them. Since those priorities dictate no new revenues for Republicans and no cuts in Part D benefits for Democrats, that leaves only the large-scale cuts in discretionary programs in this week’s deal.
But this also creates a quandary that is certain to become very prominent, very soon.  The plan says clearly that avoiding entitlements and taxes trumps everything else in the budget. Yet, the arithmetic, both budgetary and political, says that Congress and the President cannot deal with the long-term deficits and debt without venturing deeply into both areas. So far, the Tea Party’s acolytes in both houses have vetoed any new revenues, which in turn has locked in the progressives’ veto on entitlement changes. Yet, this week’s deal also sets up a choice down the road that will very likely isolate the Tea Party’s denizens in Congress.
The President and Harry Reid in the Senate have already vowed that unless revenues are part of the next, $1.5 trillion tranche of fiscal changes, they’re prepared to let across-the-board cuts go forward – and blame the other side.  And when that tranche of deficit reductions comes due, the Tea Party won’t have the leverage of an expiring debt limit. Instead, progressives will have more leverage, because the across-the-board cuts would slice through the fat at the Pentagon and well into the muscle. If history is any guide, conservative Republicans hate deep cuts in defense spending even more than they abhor tax increases.
George W. Bush never had to choose between defense and taxes, because Bill Clinton left a big budget surplus to spend.  When it ran out, W. opted for his legacy of large, structural deficits. Ronald Reagan started out the same way, but the deep recession of 1981-1982 brought on his big deficits quickly. And when that happened, Reagan opted repeatedly for new revenues to protect his defense spending.  Today’s Tea Party Republicans are no Reaganites: As John Boehner discovered when he tried to cut a deal with Barack Obama that included higher revenues and limited defense cuts, Tea Party House members have been determined to avoid new revenues even if it means much less for defense.
Limited defense cuts – $350 billon over ten years – are already part of the initial round of cutbacks. When the additional $1.5 trillion comes due, defense’s share of across-the-board cuts will draw dire predictions and protests – all with the administration’s tactical blessing. When that happens, what can conservatives like John Boehner and Mitch McConnell do but follow Ronald Reagan’s example. So, whatever the rightwing flank of the GOP says today, next time out Republicans will be forced to accept revenue increases. And since Medicare is on the line with defense, Democrats will also be forced to accept some changes in entitlements. The combination will leave the Tea Party with no choice but to howl and take their case into the 2012 elections.