There is a rational replacement that makes for better economic and fiscal policy and addresses top political concerns — for the Democrats, the necessity of more revenue, and for the Republicans, to start addressing entitlements. The cuts in discretionary domestic programs — which as a percentage of the economy are headed to the lowest level since the Eisenhower administration — would be replaced with cuts in entitlements, principally health care, that the White House would accept.
Higher revenue would substitute for the defense cuts. Given the political realities, that solution probably couldn’t fly for more than a year. At this stage, it’s doubtful even it could get through the House.
The cherished, elusive grand bargain — significant cutbacks in entitlements and more revenue, coupled with short- term stimulus spending on infrastructure and selected other programs — would boost the economy, increase market confidence and perhaps reduce some of the political pettiness that engulfs Washington. The partisan-inspired paralysis makes that a nonstarter.
The best hope is for a mini-bargain, building on a sequestration deal that itself may not occur. There is little good faith on either side, with many expressing disdain for one another. Republicans seem convinced Obama’s no-negotiations on the debt ceiling stance amounts to posturing. He has backed down before and, in a view shared by a number of Democrats, tough negotiating isn’t this White House’s forte.
The Republican blustering is more striking. Privately, some have suggested giving Obama a multiyear extension of the debt ceiling in return for changes in Medicare, including raising the eligibility age. Boehner continues to advance the notion that any increase in the debt ceiling must be matched dollar-for- dollar with spending reductions.
The biggest fraud is led by a few right-wingers in the Senate, principally Ted Cruz of Texas, who insist that an increase the debt ceiling must be accompanied by the defunding of Obama’s health-care measure. Cruz plans to barnstorm the country for 10 days this month to rally the faithful — and collect names and maybe money for any presidential hopes — to this illusory demand.
None of this is serious.
There are two possible outcomes. A one-year arrangement containing small, cosmetic changes that postpones bigger decisions. The other is going over the cliff, a la “Rebel Without a Cause.”
Albert R. Hunt is a Bloomberg View columnist.