Getting to a Grand Bargain

May 8, 2012 | Budgets & Projections

We all know about the fiscal cliff coming at year's end, and we all know policy makers will have to find a way out. Neither allowing the country to fall off the fiscal cliff nor dooming it to continued accruing debt is a reasonable option. Fortunately, there is a path forward -- a path which gradually and intelligently reduces our debt over the medium and long-term. As JP Morgan Chase CEO Jamie Dimon recently argued, "we know the way, it's called Bowles-Simpson."

The Bowles-Simpson Fiscal Commission recommendations made at the end of 2010 were certainly not perfect, but they represent an important blueprint and starting point for a possible "grand bargain." In fact, the Fiscal Commission recommendations remain the only proposal with bipartisan Congressional support that would actually solve the problem.

In the Huffington Post, yesterday, Abacus & Associates chair Frank Weil examined the politics of fiscal reform and how a "grand bargain" might be reached.

In order to enact a broad fiscal plan, Weil argues, compromise will be needed. And while that compromise has so far been hard to come by, the damage of inaction is so great, Congress will seek compromise no matter who wins in the election. Considering that, as Weils mentions, there has already been work to put Simpson-Bowles into legislation, it is ready to step into the void as the vehicle for a fiscal plan. He explains:

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.

He also goes into the rationale of how a grand bargain could be reached during the lame duck session or at the beginning of 2013.

It is in that moment [after the election] 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, 2012 -- lies in quickly engaging with Obama and moderate Republicans to rally around something very close to Simpson-Bowles.

Regardless of who wins the election, they will likely not have a strong enough grip of Congress to be able to pass their preferred plan entirely in 2013. Of course, that also says nothing for what would happen before the end of the year. While there is endless speculation about who will have the upper hand after the election, any permanent solution to the cliff will require both parties to be involved. Rather than fight along the same lines, it would be better to replace everything with smart and permanent solutions.