Will Biden Pursue a “Grand Bargain”?
When Biden enters office, the deficit for Trump’s last year in office could eclipse 4 trillion. This number is not just large, but over double the largest in history. While mostly due to the 2020 Stimulus, Trump’s changes to taxes and military spending, the yearly structural deficit stands at about 1 trillion in times of below average unemployment. A simple budget with no adjustments could balloon to at least 1.2 trillion because of economic conditions.
With a 4 trillion dollar deficit, there will be massive pressure to immediately address it. From nearly all quarters, the overwhelming focus and pressure will be austerity and how much government spending to cut. Perhaps even more importantly, key opinion makers in the beltway will make the issue singularly important.
Cable news and the political press have an outsized impact on any administration-and there’s some evidence that this is even more true of Biden. Throughout Biden’s career, he’s been at the center of conventional wisdom. Biden sided with Jimmy Carter and the conventional wisdom in the battle against inflation in the late 1970s. Biden was tough on crime when it dominated Beltway thought in the 1980s and early 90s. He adopted the turn toward deregulation that was prevalent in the 1990s. Biden’s turn toward marriage equality happened when it reached mass popular approval.
In other words, there’s reason to believe that when Biden is pressured into cutting spending he will readily do so. It won’t matter that no one voted for it, and it’ll will matter even less that majorities want major expansions of government. The last 50 years of politics has made this fact clear.
Republicans will talk non stop about the debt/deficit, and Democrats will acquiesce. The pattern is a familiar one. A Republican President is elected, and embarks upon an agenda of vastly increased military spending and cutting taxes for the rich. Immediately upon leaving office, the Republicans will claim the debt/deficit are the biggest issue and that cuts need to be made. Even more strangely, austerity is often implemented in economic recessions-the very worst time that a government should start to do them, risking a double dip recession or depression.
The past has shown us that Democrats not only buckle, but readily agree on the entire case made by Republicans. The main disagreement is not over the need to cut, but whether or not cutting taxes was the prime driver of the deficit. The need Democrats feel to clean up Republican budget deficits is practically innate. Bill Clinton did it in response to the recklessness of the Reagan years and Obama did so with Bush. Jimmy Carter did so without any reckless spending to “correct” for. In all of these cases the cuts to government programs did nothing but demoralize Democratic voters. Presidents Clinton and Obama lost Congress quickly and worked with Republicans to pass “compromise” legislation that was actually just conservative.
There exists a major possibility a so called “grand bargain” will be revived under a Biden administration if the GOP retains control of the Senate, or takes back the House in 2022. A grand Bargain would be premised on a classic “I’ll give you x in exchange for y” approach. Liberals could take away the following from such a deal:
-Taxes raised on the wealthy to where they were before Trump’s cuts.
-Corporate taxes raised slightly, but not to their pre-Trump levels.
-Defense spending cut to pre-Trump levels.
-New brackets for the ultra rich.
-Costly special interest loopholes/credits abolished from tax code.
-Raising the entitlement tax cap for the wealthy.
-The debt ceiling raised for the foreseeable future.
In exchange for these concessions, Republicans would get
-Social Security cuts in the forms of chained CPI, COLA freezes.
-Benefit cuts to Medicare that are arcane and hard to understand.
-Gradually raising the retirement age by a year or two.
-An aggressive across the board spending cut.
-Some method of giving states more control of Medicaid.
-An agreement to make the Trump tax cuts permanent.
We can surmise most of this deal by the previous ones brokered by Joe Biden under the Obama administration. Biden offered the following deal to Republicans in 2013:
-The Bush tax cuts would be made permanent.
-Obama would sign across the board cuts to spending.
In exchange, the Obama administration got:
-Taxes raised on the wealthy, and a new higher bracket.
-A long lasting raise to the nation’s debt ceiling
-Insistence on defense being included in the spending cuts.
The other parts of the deal are what seem the most politically likely with Biden in office. Raising the entitlement tax cap has long been advocated by mainstream liberals like Biden, and even some occassionally heterodox Republicans John McCain. Chained CPI (a benefit cut) for Social Security was in several Obama budgets. The changes to Medicare and Medicaid were offered as part of the last “Grand Bargain” attempt in 2011. Calling for the elimination of Tax subsidies for oil companies and other unforgivable corporate welfare have been a standard Democratic talking point for years.
The deal would almost certainly be shaped around these ideas. But why is it so bad? In such a deal, Democrats would essentially just go back to 2016 on a wide variety of tax and spending issues. This would be a system less rigged, but rigged nonetheless. Republicans would get to truly advance their cause-undermining the social safety nets. The Republican concessions actually put us in Reagan territory-undermining the safety nets and New Deal.
While Dems could say the compromise helps undo the worst of Trump, Republicans could say the compromise undoes the work of their enemies-LBJ and FDR. It doesn’t take a genius to know who got the better deal in such a case. Unfortunately, we know this is all likely because it’s been nearly done before with many of the same players.
When the mutterings of such a deal begin to emerge, it must be fought, and fought hard.