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The Politics of a Grand Bargain in 2012

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It is gradually dawning on many Americans that an extraordinary collection of economic and fiscal events will converge at the beginning of next year, the collective impact of which will/would be greater than any other single such moment in our history. These events include: the lapse of the Bush II tax cuts (worth about $4 to 5 trillion over 10 years); the 2011 sequestrations of both defense and social programs ($2 to 3 trillion also over 10 years); the payroll tax cuts, and the debt ceiling, just for starters.

Each of these events has already been 'kicked down the road' (at least once) because the Congress simply could not deal with them on their essential merits in a practical, substantive way because of the political 'freeze' of the past three-and-a half years.

About 18 months ago, Erskine Bowles and Alan Simpson produced the Simpson-Bowles Commission Report, a 65-page outline of a plan to deal with the overall budget and deficits crisis. Their plan combined revenue gains with budget cuts and structural reforms, offering the promise of a sound footing for the nation's finances for decades to come. The plan went nowhere, falling victim to the determination of Congressional Republicans to allow no progress where the political benefit might accrue to the President. President Obama apparently realized Simpson-Bowles was dead on arrival, because he left it untouched (for which he has been roundly criticized from all sides), presumably to keep it open as a future option.

Bowles said very recently that we are now facing the biggest economic crisis in our history. But he also said it is the most avoidable crisis in our history, if we address it in time and substance.

Bowles also disclosed that he and Simpson are still hard at work on the same plan with dozens of members of both the Senate and the House. The original plan is now about 700 pages of legislation covering virtually all the elements that need to be addressed, including the tax code, budgets, health care, deficits and virtually all the ingredients in all those areas. Bowles believes and hopes that the urgency of the deadline and the enormity of the problems, if not properly and timely addressed, will create a crisis in which a Grand Bargain can and must be struck.

One hopes he is right! Yet, far too many thinking Americans have grown so cynical that they simply put their heads in their hands and moan and say, "Impossible -- things will only be delayed again."

They may be wrong because there is a political window about to open in early November through which a Simpson-Bowles Bill, a Grand Bargain, could quickly become law.

Recently, there was a report in Vanity Fair that the night after Election Day 2008 a group of leading Republicans dined together and agreed on their basic strategy for the next four years: Republicans would stay firmly together for four years and oppose virtually everything, ensuring that Obama would serve only one term. That strategy, of course, was and is the underpinning of the political freeze we have been suffering through.

In the summer of 2011, Speaker Boehner made a major effort to reach a Grand Bargain with President Obama, but they failed. Despite serious support from a group of moderate Republicans, the far right invoked the freeze agreement and threatened Boehner with a revolt.

While the revolt drew all the attention, the incident was more interesting for its evidence of what was thought to be an extinct species: moderate Republicans who are more concerned with the national welfare than party warfare.

While no one can confidently predict the future, we can be 100 percent certain that the freeze strategy will have its goals realized or dashed on Election Day, the first Tuesday of November 2012. It is in that moment when the Grand Bargain can, finally, offer something for everyone and the roadblocks must be cast aside.

If Obama is reelected, moderate Republicans are likely to say to their colleagues, "You misled all of us. Now our duty is to the country." Obama will also be able to claim that his reelection was a mandate to lead the country his way. While some Democrats may want things differently, they also need and want to save the country.

If Mitt Romney is elected he will face the same crisis, but as president-in-waiting, he will have to act through surrogates. Since the firebrand Republicans indirectly controlling the House at the moment are both suspicious of Romney and rigid in their ideology, his most direct route to relevance in the post-election period -- and his only hope for not inheriting a disaster on or after January 1, 2013 -- lies in quickly engaging with Obama and moderate Republicans to rally around something very close to Simpson-Bowles.

The end of the freeze strategy may be the kernel of change that evaporates the glue among Republicans and opens the window of opportunity for a Grand Bargain to clear the decks and get on with the 21st Century.

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