US Analysts Fear Elections To Make Fiscal Reforms Harder

Published Nov 1, 2010. By John Shaw.

WASHINGTON (MNI) - If the polls and pundits are correct, Republicans are poised to make substantial gains in the mid-term elections Tuesday, winning back control of the House and coming within a whisker of controlling the Senate.

Riding the same theme of change that Democrats used to their political advantage in 2006 and 2008, Republicans are trying to tap into the anger and frustration of the American public over the weak recovery and large budget deficits.

To regain control of Congress, Republicans need to pick up 39 seats in the House and 10 in the Senate. They are likely to do the former, but not the latter.

In its final report before the 2010 mid-term elections, the Cook Political Report predicted Monday that Republicans will win between 50 and 60 House seats to win control of the lower chamber. It projected Republicans will win between six and eight Senate races, not enough to recapture the Senate.

If Republicans do secure control of both the House and Senate, Congress is likely to be in near perpetual battle with the White House, with political and governmental stalemate the likely result.

If the GOP wins the House and Democrats manage to hang on to the Senate, the two chambers are poised to be in frequent conflict, with the White House siding with the Democratic controlled Senate.

Almost as consequential as the outcome of Tuesday's elections are the fiscal campaign themes that each party has advanced over the past year.

Budget experts say this fall's political campaigns will make it appreciably harder for political leaders to tackle the nation's increasingly serious fiscal problems. Neither party, budget experts agree, has spoke clearly about the severity of the nation's fiscal predicament.

"There is no doubt that this campaign has made it far more difficult to fix our budget problems," says Bill Frenzel, a former Republican congressman who is now a guest scholar at the Brookings Institution.

"The Republicans have run an issueless campaign. The Democrats have run a campaign trying to justify what they've done over the past two years, but apparently they are convincing few voters," he said.

Frenzel said that few candidates have discussed fiscal issues in a constructive, let alone frank, manner.

"The Republicans are deeply cemented in place on taxes and have given themselves little flexibility to deal on revenues next year, even if they want to. And the Democrats have dug themselves in more deeply on protecting entitlement programs and don't appear to be able to deal on them--even if they wanted to," he said.

"We have a serious fiscal problem that requires action. Unlike in the mid-'90s, gridlock in Congress would be a bad thing," says Bob Bixby, executive director of the Concord Coalition.

"If there is any mandate coming out of this election, I guess it is to something about the deficit. But what? Raise revenues? I haven't heard a lot of support for this idea. Make a serious attempt at reforming entitlements? Almost everyone supports entitlement reform in the abstract, but there are no signs of support for specific proposals," Bixby adds.

Republicans have hammered President Obama on both the weak economic recovery and on the nation's massive deficits and surging debt. GOP candidates have almost uniformally backed unspecified future spending cuts and the extension of the Bush tax cuts of 2001 and 2003. Renewing all the Bush era tax cuts and making adjustments to the alternative minimum tax would cost about $4 trillion over a decade.

House Republican leaders have unveiled a plan that they call a "governing agenda" that has as its central organizing principle extension of all of the Bush era tax cuts and freezing most federal spending.

The House GOP leadership plan calls for repealing the health care law signed by President Obama this spring. It would place a cap on most federal spending at 2008 levels, except for the budgets of the Defense and Homeland Security departments. House Republican leaders said this would save $100 billion a year over a decade.

But the House GOP plan carefully avoids any discussion of specific programs that need to be cut, eliminated or reorganized.

The most striking aspect about the House Republican plan was the absence of its inclusion of any of the detailed fiscal work done by Rep. Paul Ryan, who is poised to become chairman of the House Budget Committee.

Ryan has developed a sweeping fiscal overhaul plan, called "A Road Map for America's Future," which was reintroduced in late January. Ryan's plan is premised on the notion that the U.S. is racing for the fiscal precipice and the only way to avert a catastrophe is for a major restructuring of Social Security, Medicare and other spending programs coupled with bold tax reform.

In their campaigns, Democrats have lamented the slow recovery and large budget deficits, but have largely argued that the Obama administration inherited an economic and fiscal mess of historic dimensions from President Bush.

Congressional Democrats support extending most of the Bush era tax cuts, except for individuals making more than $200,000 and couples making more than $250,000. This would cost about $3 trillion over a decade.

Analysts say that an early indication about how Congress will deal with fiscal issues in 2011 can be gauged by how lawmakers react to a presidential panel on deficit reduction.

That panel, chaired by Erskine Bowles and Alan Simpson, is charged to issue a report in December about cutting the deficit. However, any recommendations must win the support of 14 of the panel's 18 members.

Frenzel of Brookings said that it is very unlikely that the panel will achieve enough internal consensus to issue specific recommendations on how to cut the deficit. But, he said, it could issue a report that outlines the dimensions of the nation's fiscal problems or Bowles and Simpson could issue a "chairman's report" that sets out their personal recommendations.

"It will be very important to see how Congress reacts to anything that Simpson and Bowles can produce. This is going to give us some indication about how serious people are about tackling the deficit," he said.