Peeking Over the Fiscal Cliff

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In our Sept|Oct “Politics Issue,” we featured an interview with Penn President Amy Gutmann and an excerpt from her book, The Spirit of Compromise: Why Governing Demands It and Campaigning Undermines It.  In the interview, Gutmann expressed, if not the expectation, then at least the hope that the political parties would be more willing to work together after the November election.  The first test of that hope will come almost immediately, in the form of the looming “fiscal cliff”—the package of automatic tax increases and spending cuts set in motion after the debt crisis of 2011 and scheduled to go into effect on January 1, 2013.

A week after President Obama won a second term in the White House—and the Democrats retained control of the Senate, while Republicans held their majority in the House—Gutmann and her co-author, Harvard University Professor Dennis Thompson, participated in a panel discussion, “Time to Deal: Reawakening the Spirit of Compromise in American Politics.”  Joining them were fellow experts William A. Galston, senior fellow in the Brookings Institution’s Governance Studies Program, and Russell Muirhead, an associate professor of democracy and politics at Dartmouth and author of the forthcoming In Defense of Party Spirit. The event was sponsored by the Annenberg School for Communication, and Annenberg Dean Michael Delli Carpini C’75 G’75 moderated.

Thompson began with a prediction: there definitely will be a compromise before the country falls off the fiscal cliff—“if members of Congress read our book.”

Failing that, Thompson went on to offer a mixed bag of reasons for and against.  On the plus side, the campaign is over “for the time being,” and President Obama did win a second term, so preventing that outcome is no longer a motivation for Republican intransigence.  Also, the mixed election results have disabused those who fantasized that a landslide victory one way or the other would make a solution easy work,  and those results were widely seen less as  a mandate for any particular policy than a call for politicians to work together.  “We would say, compromise,” Thompson explained. “Some Republicans, chastened by this, are even using the word.”

On the other hand, many in the GOP, especially the most conservative, interpret the retention of their House majority as vindication of their “uncompromising stand,” while Democrats have been “emboldened” by Obama’s victory and their own legislative gains.  Meanwhile, the “permanent campaign”—characterized by the media’s “horse-race” coverage of governing as if it were campaigning and a ceaseless “money chase” by politicians—continues apace.

Compromise may still be possible under these circumstances, Thompson said, “but only if politicians and the public restrain the campaigning mindset and unleash the governing mindset.”

To do that, they first have to overcome some misconceptions about compromise.  For instance, polarization in itself is not necessarily an obstacle to compromise—as shown by the examples of the Reagan-O’Neill deal on the Tax Reform Act of 1986 and various initiatives on children’s health and disability issues put forward by Orrin Hatch and Ted Kennedy, as well as more recent efforts by Democratic Senator Dick Durbin and Republican Tom Coburn (both members of the Simpson-Bowles Commission) that could form a framework for “the way we get out of this mess.”  In fact, figures like these—staunch partisans, all—are somewhat inoculated against charges of selling out their side, Thompson added.

Shared principles aren’t necessary, either.  Thompson reiterated his and Gutmann’s distinction between “classic compromise” and “common ground.”  She joined him in a reenactment of an exchange between House Speaker John Boehner and CBS’s Lesley Stahl in which the Republican leader said he would work to find common ground with the other party but repeatedly refused to characterize this as involving compromise.  (In the days after the election, Thompson noted, Boehner still didn’t use the term.)

Politicians like “common ground” because it allows a “win-win” situation, but on most of the toughest issues it’s hard to find. Classic compromise, by contrast, involves sacrifice and hard choices on both sides, but it is the only way to make progress.  “It is time to ask our representatives to get on with the business of governing—that is to say, compromise,” Thompson said.

Dartmouth’s Russell Muirfield agreed that the current political moment is one in which compromise is in the interests of major players on both sides—Obama looking to his legacy, some Republicans hinting at a softened stance on higher taxes on the rich and immigration reform, for example—but questioned whether the occasion and the interest would be enough to tip the balance toward an actual act of compromise. “There hasn’t been a lot of practice at this lately,” he said.

Echoing Gutmann and Thompson’s analysis regarding the “compromising mindset,” he noted that the necessary sense of mutual respect—being able to appreciate one’s opponents and their goals—was both critically important and extraordinarily difficult to achieve in today’s political environment.

Galston—who called The Spirit of Compromise “admirably realistic about where we now are,” but perhaps still “ not realistic enough”—took the argument further.  The former policy advisor to President Clinton, whose current work focuses on political polarization, began by offering a defense of Speaker Boehner, who, given political realities, “can only execute a classic compromise if he refuses to admit that that’s what he’s doing,” or risk losing his leadership position.

He noted that two reliable techniques for reaching “easy compromises” in the past are no longer available.  One is the “log roll,” in which politicians trade favors (your dam, my bridge), which has been done in by the straitened economic climate, in which the language is one of subtraction, not addition.  The other, no longer tenable, technique is to “split the difference,” which is only possible when there is some rough agreement on policy direction and the question is “how far, how fast.”  In today’s political arena, only “hard compromise” remains, in which “all parties to the discussion accept a package with elements that each party regards as bad and perhaps even immoral public policy.”

The past half-century has seen the collapse of common frames of reference as the US has moved from a politics of consensus to one of polarization, Galston asserted.  Back then, “we had two Keynesian parties,” he said.  “We had an open-handed Keynesian party, and a cheap Keynesian party,” and the arguments were essentially matters of degree.  That ended with the Republicans’ embrace of supply-side economics.

As a result, Democrats and Republicans now have two fundamentally different theories of how the world works. One party says that if you cut taxes, revenues go up; the other that revenues go down.  One party wants to defend the “entitlement state” begun in the New Deal; the other wants to dismantle it. One party believes that government’s share of expenditures must increase; the other that government must shrink.  That means “getting to yes”—in this case avoiding the fiscal cliff—will be “incredibly difficult.”

Because of the distance between the parties’ world views, Galston found it unlikely that they could achieve a key requirement of a “classic compromise”—an agreement that the new policy succeeds in improving upon the status quo. In some quarters, going over the cliff is seen as preferable to compromise.

He added that, politically, both parties in a compromise must believe that they come out relatively even, both in terms of policy substance and with regard to the apportionment of credit or blame for the agreement reached.  “If the president will get the credit for having pulled the compromise rabbit out of the polarization hat, well then, the Republicans will say, regardless of the substance of the matter, ‘We are getting the short end of the stick.’”

Gutmann countered that it was supply-side champion Ronald Reagan who negotiated the Tax Reform Act of 1986, so there were not two Keynesian parties in office when that classic compromise was reached.  And while fringe elements on both sides might welcome the plunge, the vast majority of Americans clearly want their elected representatives to come to terms before the cliff is reached.  “If ever there were  a time for a dramatic shift from a campaign mindset to a governing mindset, it is now,” she said, calling on both parties to aim for the common good rather than common ground, out of simple rationality about the prospects of their party if not virtue.

Some Democrats may want the Republican party to become progressively more rigid, thereby consigning themselves to the dustbin of history at the presidential election level, thanks to changing demographics—but getting their wish would make governing a nightmare.  For Republicans, the desire for a better chance at winning the next election—by avoiding the blame for pushing the US over the cliff and taking the opportunity to moderate their stance on issues like immigration and women’s rights—should help prompt a more compromising mindset, she said.

Despite what the fringes on both sides may think, “the consequences of the fiscal cliff are dire” in the view of most economists, Gutmann insisted, and most people—politicians and voters alike—recognize that.  “I wouldn’t bet on it, but compromise is more possible now than it was before the election.”

She challenged the still-skeptical Galston to propose what would lead to a solution.  He pointed to the need for a “more of a popular constituency for compromise,” citing the “tri-partisan” group No Labels that he has had a hand in organizing, which has proposed specific institutional reforms aimed at altering incentives in politics—a precondition for changing mindsets, he said. “There needs to be a mass movement for compromise as much as there are mass bases for polarization.”

He also recommended a politics that is “less democratic with a small d” to provide politicians more freedom to resolve problems “despite public opinion,” citing studies showing support for compromise in general, but opposition to particular compromises.  “The president and Speaker Boehner have to be prepared to join hands and jump together, despite the fact that the public ground has not yet been prepared for what they are going to agree to,” he said.

Finally, he suggested that some “external forcing mechanism” may be required—for example, the negative response of US and world financial markets to going over the fiscal cliff—before a solution can be reached.

To Thompson, that last point suggested that Galston, “despite appearing in the guise of a more realistic politician,” had joined the “pantheon of people looking for escapes.”  First the election was supposed to resolve the issue, now the impact of going off the fiscal cliff would provide the incentive to force politicians to do their jobs of governing.  And the creation of a mass movement to shift incentives in favor of compromise, while laudable, “doesn’t work that fast,” he said.  As for a joint leap by Obama and Boehner, “that sounds like a [compromising] mindset,” he said.

Gutmann was leery of any scenario in which the fiscal cliff was not avoided,  citing the likelihood of the US going back into recession and the potential for another downgrade by financial-ratings agencies.  More people now know about the fiscal cliff, and more have spoken up in exit polls and surveys that they want cooperation, Gutmann said.  If those factors aren’t enough to spur compromise, she agreed that, once we go over the cliff, the incentives to come up with a solution will be even greater—but she cautioned that the consequences are likely to be more dire as well.

“I’ve never been somebody who believed that our ability to predict as human beings is so great that we should be able to say, ‘It’s got to get that much worse in order to get better,’” she said. “Because it doesn’t have to.”

Video of the panel is available here.

— John Pendergast

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