The left and the coming fiscal crisis: Get in the game before it's over

/ Source: Politics Daily

The debt reduction plan produced by President Obama's bipartisan fiscal commission has been met with scorn, dismissiveness and outrage from many liberals. But they might want to think about getting in the game while they still have a Democratic Senate and White House.

By that I do not mean proposing to reduce the $1.3 trillion deficit or $13.8 trillion debt by means of a public health insurance option (designed to drive down health care costs) or a cap-and-trade system (designed to raise money by capping carbon emissions and selling permits to pollute). Obama and a heavily Democratic Congress were unable to pass those ideas in the last two years. With Republicans taking control of the House and 47 Senate seats in January, they are even more dead, if that's possible.

Nor do I mean standing on the sidelines booing and lobbing insults at what the left calls the cat food commission — a reference to proposed Medicare, Medicaid and Social Security cuts that, according to blogger Jane Hamsher, amount to "telling little old ladies to suck it up and chow down with kitty." Former Labor secretary Robert Reich goes even bigger-picture, writing that the whole focus on deficit and debt reduction during a recession is wrong.

Panel member Rep. Jan Schakowsky (D-Ill.), who offered a plan that revives the public option and cap-and-trade and hikes taxes on the wealthy, had a point this week when she said that some people have lost a lot and others have gained much under the economic policies of the last few years. "We're not starting at the same point," she said, and "sacrifice in fact has not been shared" in the commission plan.

Though seven of 18 members of the commission voted against the final package, all 18 praised it as proof that the country and its leaders are getting serious about solving the dangerous debt problem. As members from all points on the political spectrum made clear, there will be changes in entitlement programs and in the tax system. There will be spending cuts, both military and non-military. The only questions are when, and who controls the outcome.

The best-case scenario for Democrats is to reach some kind of grand bargain next year, when Congress will need to raise the debt limit — already at a stratospheric $14.3 trillion — in order to avoid a default and financial chaos. At that point, at least they'll have Democrats nominally setting the Senate agenda and Obama at the White House with a veto pen. No matter how unbearable the choices appear now, it's a given they'll be more appealing to Democrats than what Republicans will do if they win the White House and-or the Senate in 2012.

Look at just one example from New Jersey. As he was leaving office, former Democratic governor Jon Corzine proposed saving $300 million by reducing state aid payments to school districts and making them use 75 percent of their budget surpluses instead. That would have been painful. But not as painful as what Republican Gov. Chris Christie is doing — saving $475 million and requiring districts to use 98 percent of their surpluses.

Would liberals have protested Corzine's more modest plan had he been re-elected? Probably. Some groups had already asked him to fix the state budget by raising taxes on the wealthy instead of making cuts. Would worsening economic conditions have forced him toward the Christie position? Not necessarily. Maybe he would have raised a tax or two, or made cuts more to liberals' liking.

A national example is the health reform bill that almost died in January after an unexpected special-election victory by Republican Sen. Scott Brown in Massachusetts. Democrats realized too late they should have finished work on that bill while they still had a filibuster-proof 60 votes in the Senate. Belated resolve, last-minute compromises and fancy parliamentary maneuvers salvaged the law. But Republicans came very close to killing it.

Now we have the tax debate that's consuming Capitol Hill. Obama and Democrats have talked for years about letting rate cuts put in place by former president George W. Bush expire on schedule this year on household income above $250,000. Republicans have been adamant about wanting to keep them in place for all income, no matter how high.

Polls suggest the public sides with Democrats on this issue. The party also had ammunition from the nonpartisan Congressional Budget Office: a deficit-reduction argument (CBO said keeping the lower rates for income above $250,000 would cost $700 billion over 10 years) and an economic argument (CBO said the high-end tax cuts were the least effective way of stimulating the economy).

But Democrats decided not to vote on the expiring tax rates before the elections. Republicans won the House in a landslide and gained ground in the Senate, and chastened Democrats are now operating from a position of weakness. Better to have made their case on taxes, and held those House and Senate votes, when they had more clout.

Some liberals already acknowledge the fiscal decisions in store and are trying to shape what happens. Illinois Sen. Dick Durbin, for example, a member of the bipartisan commission, says its plan to raise the retirement age for full Social Security benefits to 69 by 2075 is reasonable — though perhaps "heretical" to some in his party. (He voted yes on the package.) Andrew Stern, former president of the Service Employees International Union, a member voting no, issued a personal plan Thursday that would keep the current ages for Social Security. But, among other changes, he'd allow Social Security trust fund managers to invest up to 15 percent in bonds and index funds (they are now limited to Treasury-backed securities).

Stern departs from other plans — and fulfills the fantasies of many progressives — with a new $75 billion trust fund for broadband, electricity, water, education and other investments the country needs to be competitive. But he also told me that he's "ready to make hard choices on discretionary spending" from among the cuts suggested in the many debt-reduction plans on the table.

Conservatives are preparing to push their own ideas from their new highly visible platform — the House. It's a safe bet that liberals are going to despise most of them, from dramatically lower corporate tax rates to cost-conscious transformations of Medicare and Medicaid to Social Security cutbacks and private accounts.

Some strategists say these issues are so momentous that they should be debated in the glare of the 2012 presidential campaign. Given their performance last month, Republicans are sounding confident that their ideas will prevail. Rep. Paul Ryan (R-Wis.), incoming head of the House Budget Committee, called the midterms "a repudiation election." He also predicted support for cuts to Social Security and other programs. "The people are ahead of the political class. They're ready for this," Ryan said Thursday at a Christian Science Monitor breakfast.

I'm not as sure as Ryan that voters will flock to a Republican nominee and GOP plans on taxes and spending — public polls and the 2010 voter exit poll either contradict him or are murky. It's possible that in 2012, voters will warm to the Republican agenda and standard-bearer. It's equally possible they will remember what they like about Obama and his party.

And that's the point. You never know. Two years ago, who would have predicted a midterm debacle for Democrats? Liberals should figure out how to participate in the debt-reduction process and bend it toward a result they can live with. Otherwise they run the risk of terrible regrets on election night in 2012.