The twelve-member budget “super committee” established by the recent debt ceiling legislation faces a tall order: to get seven of their members to agree to $1.5 trillion in deficit reduction over the next ten years. This will require members of opposing political parties to vote together despite the fact that the respective Congressional party caucuses sharply differ on fiscal issues. The super committee’s task is as difficult as it is important.
The recent history of bipartisan negotiations has much to tell us about which tactical approaches might maximize the committee’s chances of success. It also has much to teach us about the substantive compromises that might be reached. In particular, we should not anticipate a bipartisan accord on tax policy in the absence of a binding commitment to a hard cap on total federal spending as a percentage of GDP.
The recent successful example of bipartisan fiscal negotiations is the Simpson-Bowles commission: 11 of 18 members of that commission voted for an ambitious package of fiscal reforms dealing with politically vexatious issues from fundamental tax reform to Social Security reform. Members who voted for the package spanned a great distance on the political spectrum, from conservative Republican Senator Tom Coburn to liberal Senate Democratic Whip Dick Durbin.
On the unsuccessful side is the recent budget negotiation between the White House and Congress –unsuccessful at least in producing a fiscal “grand bargain.” These discussions did ultimately resolve the debt ceiling standoff, but they failed to produce agreement on fiscal corrections anywhere near the magnitude of the Simpson-Bowles commission. The President repeatedly expressed public frustration over the inability to close such a deal, frustration occasionally echoed by Congressional leaders on both sides.
Why were commission co-chairs Simpson and Bowles able to secure bipartisan agreement on measures that this summer’s negotiations could not? There are several reasons and they offer important lessons for the joint committee:
#1: Some of the increased difficulty in getting bipartisan agreement is now unavoidable. We can admire the work of the Simpson-Bowles commission but we must also recognize that in some respects their task was not as difficult as the one that has since faced the Congress, the President and now the joint committee.
The Simpson-Bowles commission had a few critical advantages. One was its membership: they could acquire votes from individuals like the two co-chairs, as well as Alice Rivlin and Dave Cote, all of whom could be fearless of political consequences. The commission also had the luxury of offering “options” instead of specifics in places, as they did with their tax reform proposals. Moreover, it’s generally easier to put out a descriptive document than to agree to specific legislative text. The joint committee won’t have any of these advantages.
An irreplaceable opportunity was therefore missed when the White House declined to advocate for the Simpson-Bowles recommendations when they were issued last December. It will be harder now to generate fiscal agreements that accomplish nearly as much, but there is nothing the super-committee can do about that.
#2: Successful bipartisan negotiations on fiscal reforms will always displease ideological advocacy groups. From the start it was abundantly clear that commission co-chairs Simpson and Bowles would not make a goal of winning the support of various advocacy groups (other than, that is, bipartisan deficit-hawk groups). The co-chairs forcefully articulated this at virtually every opportunity.
This positioning had costs but it had even greater benefits. The commission as a whole, and the co-chairs personally, were aggressively criticized by groups ranging from those working to hold taxes low to those working to keep spending high. In the end, however, the positioning had a liberating effect: commission members could vote for the final package without feeling that they were delivering a win to an opposing political constituency.
This successful tactic was not unique to the Simpson-Bowles commission. The landmark 1983 Social Security reforms, for example, were fiercely opposed by the most powerful senior lobbying group, the AARP. While there is a persistent bipartisan dream that a responsible package of fiscal reforms will one day be supported by the various powerful advocacy groups, this is indeed a dream –a pipe dream. As in Aesop’s fable, if you try to please everybody you’ll end up pleasing nobody. Negotiators need to start with the assumption that their reforms must be enacted over the objections of various advocacy organizations. Only if a bipartisan process commits up front to withstanding such external pressure does it have a reasonable chance to succeed.
#3: To claim the political center, one must capture the substantive center. Reforms can be left-leaning, or they can be right-leaning. But comprehensive fiscal reforms can’t be enacted unless they claim the support of the political center. Simpson-Bowles accomplished this with balanced, specific substance – including a Social Security package that was almost exactly 50/50 on revenues/cost restraints, by going after most areas of appropriations, and by simultaneously offering higher revenues to the left and lower tax rates to the right. By so doing, they isolated their opponents on the political wings while securing the support of the commission’s political center.
This can’t, by the way, be done on the cheap. No one in the recent budget negotiations could successfully isolate their opponents because no one made public a comprehensive proposal specific enough to establish an enduring claim to the center. There were occasional attempts to isolate political opponents with rhetoric, but rhetoric alone is not nearly enough to accomplish this.
#4: Successful bipartisan negotiations enable the negotiators to abide by their most strongly-held policy principles. This is the biggest, most important lesson. If Republicans and Democrats cannot vote for an agreement without being true to their fundamental reasons for being in government, then an agreement won’t happen. Accordingly, one of the most important things that successful leaders can do is to listen carefully to concerns expressed from across the aisle – with the goal of enabling those concerns to be met, and not simply to argue why those concerns should not be held.
Press coverage of the budget debate has focused on one of the many sticking points dividing the parties: whether tax revenues should be on the negotiating table. Generalizing very broadly, Republicans don’t want to raise taxes, whereas Democrats believe taxes need to be raised. But where the White House-led discussions collapsed over the tax issue, all three Senate Republicans on the Simpson-Bowles commission supported a plan containing sweeping changes to tax law. Why were the results so different?
To understand the dynamic (and to simplify the issue) one can imagine the following conversation:
WH/D’s: To fix our fiscal problem, we need to raise taxes.
R’s: We disagree. The structural fiscal problem is essentially a spending problem.
WH/D’s: We recognize that spending, especially entitlement spending, is a problem. But we aren’t willing to cut it enough to avoid raising taxes. And if we agree to cut spending, you need to agree to raise taxes.
R’s: We don’t agree. Over the long-term both spending and taxes will be far higher than they’ve ever been before, even as it is. Raising taxes simply makes taxpayers pay for your unwillingness to deal with the real problem, the spending problem.
WH/D’s: OK, you don’t want to raise tax rates. What about tax deductions and credits? Would you agree this is just spending through the tax code?
R’s: We agree that tax expenditures embody costly government interference in the economy, yes.
WH/D’s: Would you agree to a package that has some cuts to direct spending, combined with revenue increases consisting of closing tax expenditures?
R’s: No. That still just forces taxpayers to pay for your unwillingness to deal with the remaining spending problem.
WH/D’s (to public): R’s are impossible ideologues. We can’t have reasonable negotiations with them on a balanced package. They refuse to compromise.
If this is the way that the conversation takes place within the super-committee, then it’s unlikely to reach agreement. The tactic of trying to convince one party to put aside their most fundamental policy concern is virtually certain to fail.
The more fruitful conversation on the Simpson-Bowles commission could perhaps be summarized like this:
Co-chairs: If D’s put entitlement spending on the table, you R’s need to put taxes on the table.
R’s: We won’t raise taxes.
Co-chairs: What if we closed tax expenditures and used part of the savings to reduce marginal tax rates, and part to close the deficit with increased revenues?
R’s: That’s intriguing. We’d like to see lower rates; that’s potentially better than higher rates with a lot of tax loopholes. But it still doesn’t solve our fundamental problem: we’re not interested in raising revenues so that Washington can continue spending an expanding share of the country’s economic output.
Co-chairs: Well, then, what if we committed to limiting federal spending to 21% of GDP over the long run – its historical average?
R’s: Now you’ve got our attention. Let’s talk.
The commitment of the co-chairs to limit federal spending as a percentage of GDP was the critical ingredient that enabled a discussion about tax revenues to take place on the fiscal commission. As a result, several of the Republicans on the commission voted for a package that would indeed increase federal tax revenue – because it also offered lower marginal tax rates and, even more importantly, a path to limiting federal spending at 21% of GDP.
The moral of the story is this: a successful bipartisan negotiation cannot be conducted simply by telling one side of the aisle that they need to put aside their most fundamental policy concern, which on the Republican side is the growth of federal spending and tax burdens. To the extent that revenue increases simply enable Washington to avoid addressing that concern, Republicans won’t be interested. No amount of criticism from across the aisle is likely to change this, especially if it is accompanied by a refusal to place any limits on how much of the economy Washington absorbs.
Obviously, nothing is sacred about the historical level of 21% of GDP. Some on the left will argue that it should be higher now, citing demographic trends, health care costs, and other factors. Some on the right will argue that it should be lower, citing among other things the co-existence with growth in state and local government. But whether the number is 20%, 21%, or 22% of GDP, it’s achieving a specific and stable limit that is essential to addressing conservative concerns. Republicans see little gain in raising revenues while allowing the long-term path of federal spending to rise perpetually as a share of the economy, for then both sides will be back arguing over still further tax increases just a few years hence.
The critical element that made the Simpson-Bowles commission process successful was that the co-chairs listened to the concerns expressed by those on both sides of the aisle, and crafted a package to address them. The element that made the recent “grand bargain” negotiations unsuccessful by contrast was that no final package resolved those concerns, while public admonitions were administered to the effect that the concerns should simply be shelved. Which direction the super-committee process takes will have much to say about whether it succeeds.
Charles Blahous is a research fellow with the Hoover Institution, a senior research fellow with the Mercatus Center, and the author ofSocial Security: The Unfinished Work.
