I had a report yesterday that a high Treasury official recently told some foreign central bankers not to worry and that the Super Committee could still reach a deal after November 23. I would point out that the Committee had plenty of time from it’s appointment in mid-August until its failure to agree on any recommendations yesterday, and it had the benefit of the detailed recommendations of the Bowles-Simpson Fiscal Commission, the Bipartisan Policy Center, the Committee for a Responsible Federal Budget, and others. The Super Committee’s failure did not occur because it ran out of time; it occurred because House Speaker John Boehner (R-OH), House Minority Leader Nancy Pelosi (D-CA), Senate Majority Leader Harry Reid (D-NV), and Senate Minority Leader Mitch McConnell (R-KY) decided no deal was better than a deal which risked electoral defeat in 2012 and which offended their partisans with tax increases and entitlement cuts.
One night in early 1983, I watched Senator Pat Moynihan (D-NY) walk across the aisle on the Senate floor and work out the deal with Senate Finance Chair Bob Dole (R-KS) to save Social Security. Dole accepted a payroll tax increase and a new tax on the Social Security benefits of those with high incomes and Moynihan accepted a gradual increase in the retirement age from 65 to 67 and the more immediate six-month delay in the annual cost of living adjustment. President Reagan and Senate and House leaders embraced the deal, neutralizing any electoral advantage, and the country gained another 50 years of Social Security solvency.
In 1990, President George H.W. Bush signed off on a tax increase and spending cut deal crafted outside of the public glare at Andrews Air Force Base, which cost him his second term as president. His successor, Bill Clinton backed a similar tax increase and spending cut bill in 1993, which, together with his failed attempt at health reform, cost him the House and the Senate in the 1994 election. Those two deficit reduction deals produced the economic boom of the 1990s and four years of budget surpluses from FY98 through FY01, which President George W. Bush and Congress promptly squandered with tax cuts and an expansion of entitlement spending, primarily by extending Medicare to cover prescription drugs, that dwarfed any entitlement spending increases since President Roosevelt’s New Deal created them.
Strong leadership means going beyond your partisan base to do things that later prove to be for the long-run good of the country. Unfortunately, we don’t have that now in the Congress or in the White House, and no additional time is going to fix it. We will stagger along without doing much to boost our economy or to cut the deficit until the 2012 election. That’s what weak leadership does, it postpones and equivocates, it explains away the problems, until the voters can’t take it anymore. And don’t expect a severe market downturn or ratings agency downgrade to break this gridlock. That would just become more fodder for the 2012 election campaign blame game. We’re stuck until then.