Now, I’ll Show You Mine: Why Obama Budged A Bit on the Budget

President Obama proposed his 2014 budget this week.  A huge document, it contains a number of interesting policy proposals.  One that is attracting a lot of attention concerns the “chained CPI.” In a nutshell, this change will reduce the rate of growth in social security payments over the next decade.  Overall, the proposal arguably represents a compromise with Congressional Republicans.  Perhaps understandably (although this is a classic chicken-egg situation), some Congressional Democrats and liberal interest groups are outraged. Did Obama overreach?  Has he sold out his party? To both questions, I argue “no,” and I also assert that, while Obama may be a pragmatist, this proposal isn’t a fair-minded compromise with the GOP.  It’s far more aggressive than that and positioned for the 2014 elections.

From a strategic standpoint, Obama is in an interesting situation.  He’s a lame duck president with a receding mandate and an approaching midterm election.  I think he has policy/legacy motivations to drive him to do more in his second term than most (all?) two-term presidents.  Accomplishing this would be greatly assisted by the Democrats doing well in the 2014 midterm elections.  (And, of course, he might want such a thing either on partisan or personal grounds, too.)

Going into 2014, the Democrats are in a tough situation in the Senate and a long-shot in the House. So how does Obama’s proposal affect this?  Not much in the grand sense, of course, because budget proposals are “inside baseball” for the most part and it seems unlikely (to me at least) that the public will buy into the narrative that “Obama is attacking Seniors.”

However, Obama’s proposal puts the House GOP in a bind and, by extension, potentially presents Senators of both parties with a challenge.  On the one hand, the House GOP can not simply “sign off” on Obama’s budget: for one, it raises taxes and, two, it’s Obama’s budget.  In taking a stand against his budget, though, the House GOP must come up with a reason.  While Boehner can try to claim that the proposal is incremental and doesn’t go far enough with respect to entitlement reform, this approach forces the GOP to come up with an even more aggressive plan or keep pushing the Ryan plan. Given the public’s lack of support for cutting social security, and the fact that Social Security is technically “off budget” and therefore of little value in reducing the budget deficit in the short term, it’s not clear to me what the GOP can counter with in terms of spending.  (And, of course, I wrote about this last year: there’s almost no way to balance the budget without new revenues or dramatically shrinking the defense budget.)

One way to view this is that Obama has “caved” to GOP demands and that this is another example of Obama not realizing that Congressional Republicans can not be dealt with.  Somewhat ironically, Obama’s very public and tangible concessions (even if “incremental”) are arguably the strongest positive bargaining move he has made in recent years. The key words here, and the “math of politics” of this post, are public and tangible.  By going public with a specific proposal, Obama is framing the next stage of the budget process. He is putting the spotlight on the Republicans and thereby calling their bluff that they have a politically feasible budget plan. (It’s a dual version of the logic I sketched out during Boehner’s stratagem during the fiscal cliff showdown.)

It is important to note that Obama’s budget was two months late.  He waited until after sequestration hit, after the House and Senate each passed their own budget resolutions.  In a colloquial sense, this forces the House GOP to respond to his proposal, as opposed to the Senate’s.

By going public (as opposed to privately bargaining with Boehner), Obama imposes “audience costs” on both himself and the House GOP.  For Obama, he would face a potentially huge cost if his budget was approved and sent to his desk for his signature.  (This isn’t going to happen, but a partial version could.) For the House GOP, of course, it now has the public’s attention on their budget priorities again.  That hasn’t worked out so well in the past.

By being tangible (i.e., by including the specific, headline garnering proposal regarding Social Security), Obama has arguably placed himself as the compromiser.  More importantly, Obama’s proposal presents Congressional Democrats with a useful foil and “clear indicator” of the importance of the 2014 elections.  Key here from Obama’s perspective is that he’s a lame duck president: if he has policy goals, he can be less concerned with maintaining his short-term popularity.  He can also turn to his partisan base and say (truthfully, in my opinion): “if you want Democratic priorities to win, you need to give me—and you—a Democratic House.  More importantly, perhaps, you better be darned sure the Democrats hold onto the Senate.”

With that, I think of the President of the Senate, and leave you with this.