Wednesday, April 13, 2011

Thoughts on the Budget Deal

A government shutdown has been averted at least for now. Democrats and Republicans agreed on a budget that cut about $39 billion. Speaker of the House John Boehner has pledged that he will work towards cutting trillions and not billions. For his part, President Obama is readying a budget that he says will really address the deficit.

Looking at the politics of the situation, Obama has a chance to benefit greatly. The deficit is indeed a threat to America’s long term economic health. Obama could propose a plan that slows the growth of entitlement programs like Social Security and Medicare and produces real savings. The Republicans will have two unappealing options.

First, Republicans can oppose Obama’s plan while not proposing any more cuts. Republicans may choose this option because they do not want to get burned politically for making radical changes to popular programs. But if Republicans do this, they will appear cynical to independent voters and likely lose the ability to use the deficit as a cudgel against Obama with these same voters. They will also temper enthusiasm in the Republican base going forward into the elections.

Second, Republicans can try and avoid the pitfalls of the first option and keep the deficit as a major issue by proposing drastic cuts to government programs. If Republicans do this, they will be wide open to charges of extremism. They also risk alienating senior citizens—who tend to vote— who benefit from Social Security and Medicare in as an important election year comes up.

That is not to say that there are no risks for President Obama. If he accedes to meaningful cuts to Social Security and Medicare he will upset liberals who strongly support such programs. But the question then becomes how much he will truly pay for liberal Democrats being upset. Where else will they go? Paul Ryan (R-Wisconsin) has become the face of the Republican Party on the budget. Democrats have called his budget extreme and draconian. These voters will simply not support Republicans. Perhaps they will stay home. But I bet White House political strategists will end up convincing them that it is important to vote so they avoid right wing Republicans taking over government.

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