Washington is done dwelling on the debt.
Fatigued by a government shutdown and repeated failures to reach a grand bargain, leaders from both parties have moved on.
President Barack Obama isn’t expected to spend much time on deficit reduction and entitlement reform during Tuesday’s State of the Union address, instead focusing on issues such as economic inequality and raising the minimum wage that will be the centerpiece of his 2014 agenda.
Republicans don’t want to divert attention from Obamacare and plan to demand changes in the health care law, not spending cuts, in exchange for a debt-limit increase next month. They dismiss grand bargain talks with Obama as fruitless.
For Obama, the shifting political landscape is a chance to move past an issue that some Democrats see as a political loser headed into the midterms — the president even complained to Senate Democrats this month that he doesn’t get enough credit for previous deficit cuts. Republicans see an opportunity to redefine themselves as a party that has an agenda beyond budget cuts. They say they will now focus on “kitchen-table” issues like increasing take-home pay, creating new incentives for school vouchers and charter schools, and some form of immigration reform.
Not that the $17 trillion debt is going away anytime soon. The debt as a share of the economy is projected to decline over the next few years, and the deficit has dropped at the fastest rate since World War II — a point that Obama repeats often these days. The brightened outlook will last only a few years before an aging population and rising health care costs force deficits to balloon over the next decade. But the temporary cease-fire in the budget wars and an improvement in the fiscal picture have diminished any lingering sense of urgency for Washington to act on a large-scale deal.
That means there won’t be renewed efforts to tackle the real drivers of the debt until next year at the earliest, but likely not until after the 2016 presidential election.
“Neither party wants to talk about it,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. “This is the first time we have been staring into the political horizon and there is no action-forcing moment.”
House Speaker John Boehner (R-Ohio), whose ascension in 2011 was fueled by small-government conservative activists, has all but ruled out any further deficit reduction talks with Obama because they can’t move past a basic disagreement on taxes. They also insist Obama has shifted his demands too often.
In next month’s fight to raise the debt ceiling, Boehner is not expected to renew his demand to cut spending by an equal amount — a principle that pushed Obama into extended, unsuccessful talks with the speaker in 2011. Instead, Republicans are zeroing in on Obamacare, and are likely to insist on some kind of fix in exchange for increasing the country’s borrowing authority.
White House aides said Obama stands by his last offer to Boehner in December 2012, which included Medicare cuts that infuriated Democrats. But the president believes he’s reached the end of the line with Republicans on this issue, aides said, and has reoriented his White House toward fighting income inequality.
“The president has repeatedly demonstrated his willingness to compromise with Republicans to reduce the deficit,” White House spokesman Josh Earnest said. “In fact, the deficit has been cut in half since he took office five years ago. That improvement in our deficit picture means we have more room to put in place, in a fiscally responsible way, policies that will expand opportunity for all Americans.”
For Democratic lawmakers, many of whom never bought into Obama’s focus on debt and deficit reduction, the move away from austerity couldn’t have come soon enough.
“It is amazing how it has faded as an issue except among a small group,” said Sen. Chuck Schumer (D-N.Y.), the No. 3 leader. “The reason is, first, we have made big progress and, second, it has become apparent that it is not on the average person’s mind.”
Obama moves on
Obama’s rhetoric over the past year underscores the shift.
The president gave the budget top billing in last year’s State of the Union address, turning to it immediately after detailing the general themes of the speech. The White House and Congress had agreed to $2.5 trillion in spending cuts and tax hikes over the past few years, he told lawmakers, putting them more than halfway toward the goal of $4 trillion to stabilize the country’s finances.
“Now we need to finish the job. And the question is, how?” Obama said as he renewed calls for tax and entitlement reform.
Although he pushed for a repeal of across-the-board spending cuts known as the sequester, they kicked in last March, locking in budget savings that allowed Obama to tout several months later that the deficit was on a rapid decline.
“It’s now dropped at the fastest rate in 60 years,” Obama said at an August town hall in Birmingham, N.Y., as he called for only “some modifications” to entitlement programs. “I want to repeat that, because a lot of people think that — if you ask the average person what’s happening with the deficit, they’d tell you it’s going up. The deficit has been cut in half since 2009 and is on a downward trajectory. And it’s gone down faster than any time since World War II.”
By last month, Obama had essentially declared an end to the budget battles during a speech on income equality.
“When it comes to our budget, we should not be stuck in a stale debate from two years ago or three years ago,” he said. “A relentlessly growing deficit of opportunity is a bigger threat to our future than our rapidly shrinking fiscal deficit.”
MacGuineas and others expect Obama to play up how much the deficit has dropped, from $1.4 trillion in 2009 to $680 billion last year — just as he did during a White House meeting with Senate Democratic leaders last week.The expectation among budget experts for Tuesday’s State of the Union is that Obama won’t give it much of his time. Some vulnerable Democrats view budget cuts and entitlement reform as such a political loser that they are planning to distance themselves from the White House by highlighting their opposition to Obama’s support for certain Medicare cuts, according to sources.
“People who care about issues count the words” in the State of the Union, MacGuineas said. “We would be lucky to get a half-sentence on how there is more to do.”
GOP demands evolve
The Republican shift is evident in the party’s stance on the debt limit.
In May 2011, Boehner gave a speech in New York, declaring that he would raise the debt ceiling only if the cuts were “greater than the accompanying increase in debt authority the president is given.”
“We should be talking about cuts of trillions, not just billions,” Boehner said.
A year ago, Republicans raised the debt ceiling for the promise that the Senate would pass a budget, and in October, Republicans weren’t able to extract any concessions from Obama and Senate Majority Leader Harry Reid (D-Nev.) after forcing a government shutdown.
While the macro argument in Washington has certainly changed, so have the politics inside the House Republican Conference. Republicans are still interested in curbing the debt and deficit, but they have come to the realization that Obama is not ever going to be the partner they hoped he was.
Boehner now is pretty much ruling out deficit reduction talks with Obama.
“How many times have we talked about this,” Boehner told reporters this month when asked about the prospects of hashing out a grand bargain with Obama. “Plenty. The president has not only made clear that he will not negotiate on the debt limit, he’s also made clear, as have Democrats here on Capitol Hill, that they won’t talk about long-term spending problems unless Republicans are willing to raise taxes. Republicans are not going to raise taxes. And so we find ourselves in a fairly difficult box when it comes with dealing with our long-term spending problems. The president just won’t do it without raising taxes, so not much to talk about.”
Senate Republicans who dined regularly with White House chief of staff Denis McDonough on a potential grand bargain stopped meeting in August. Sen. Bob Corker (R-Tenn.), who participated in the talks, said he hasn’t raised the issue with McDonough in months.
“There is no momentum around the issue right now,” Corker said. “The executive branch has like zero interest in discussing or addressing it, and unfortunately most bodies are just looking towards 2014 and not wanting to upset the apple cart.”
The talk about the debt and deficits has been replaced by a host of new issues.
In exchange for the debt-limit increase, Republicans have signaled they will ask for a repeal of the so-called risk corridors in Obamacare, which they say amount to a bailout fund for the insurance industry. Other options include asking for a repeal of a tax on medical devices, which funds the Affordable Care Act.
They are also trying to align themselves with a more positive agenda beyond opposing Obamacare. Prominent Republicans like House Majority Leader Eric Cantor and Rep. Paul Ryan of Wisconsin have shifted to talking about education reform and finding conservative solutions to help lift people out of poverty.
They could face resistance from the tea party, which remains furious over a bipartisan budget agreement last month that rolled back part of the sequester.
“Make no mistake: The deal is a betrayal of the conservatives who fueled the Republicans’ 2010 midterm shellacking of Democrats,” Jenny Beth Martin, co-founder of the Tea Party Patriots, wrote in an op-ed for The New York Times titled “John Boehner’s Betrayal.”
But the budget deal eliminates crisis governing for at least the next year. Without budget crises, deficit reduction isn’t a top issue.
“It’s sort of played out. People are tired of it and want to move on,” said Bob Bixby, executive director of the Concord Coalition, a group that advocates for deficit reduction. “There is a broad bipartisan consensus to leave it alone for a couple of years.”