The New York Times reports that a group of Senators are quietly angling for a deal to avert mandatory government spending cuts in January, but liberal economic cheerleader Paul Krugman already sees the negotiation as an inevitable Democratic surrender.
The story so far is that a small bipartisan group in the Senate is crafting a three-point plan to avoid the "fiscal cliff" of automatic spending cuts and tax increases that will kick in on January 1 if no new budget alternative is passed. First, they'd agree to reduce the deficit by $4 trillion over the next 10 years. Then they'd assign the relevant committees to work out the details by re-writing the tax code, changing Social Security and Medicare, and slashing defense and other programs. Then they would have to pass a bill that cancels the sequestration, but trades it for a significant "good faith" reduction in the deficit.
The idea seems reasonable—everyone love bipartisanship—but there are just two minor problems with it. Republicans in the House of Representatives, who are not part of the talks and are not interested in raising taxes, ever, and the election, which could still change the make up of the Senate dramatically. There's no deal until after November and there's no way to know exactly what kind of deal can be had until we know who wins.
Either way, Krugman sees a huge red flag in the Social Security and Medicare talk. One of the main options being discussed is a deal based on the Simpson-Bowles plan, which focuses on deficit reduction above all things, a problem that Krugman insists is not really a problem. Also, striking a "grand bargain" with Republicans means huge cuts to entitlement programs, which is exactly what voters don't want if they're voting Democrat.
Krugman argues that a Election Day victory for the President and Senate Democrats would be a repudiation of the Republican mindset and a mandate for Dems to beef up the safety net, not tear it apart. A decisive win in November hands all the leverage to the Democrats, so why should they be talking about bargains now?
This election is, as I said, shaping up as a referendum on our social insurance system, and it looks as if Mr. Obama will emerge with a clear mandate for preserving and extending that system. It would be a terrible mistake, both politically and for the nation’s future, for him to let himself be talked into snatching defeat from the jaws of victory.
Krugman responds to today's story in his paper by adding that the deal currently being discussed "would be politically stupid as well as a betrayal of the electorate." If voters seriously cared about deficit reduction, Mitt Romney would be ahead in the polls and Republicans would planning their super-majority in Congress. But a second-term president has all the capital, as the saying goes, and his friends in Congress should be eager to spend it.