No Deal

There's a ton of stuff the last couple days about a possible grand budget bargain in the works -- yielding lots of worry from liberals, who as usual are panicked that any Democratic president's number one agenda item, at all times, is to sell them out. I agree completely with Ryan Avent's astute analysis (via Sullivan):

I would expect neither Obama administration Jedi mind tricks or secret deals to yield real budget solutions. Explicit outside pressure, from bond markets, will yield deals. And that pressure is not yet forthcoming.

Yup. The last two major deficit reduction packages -- the bipartisan one during the George H.W. Bush administration, and the partisan one passed by the Democrats in 1993 -- were both driven by that kind of "explicit outside pressure." There's simply no reason to believe that Republicans would agree to significant increased revenues under current circumstances, and no reason to believe that Democrats would slash spending enough to make a serious dent in medium-term deficits without a Republican buy-in on taxes.

There are, however, major incentives for various politicians to act as if they are serious about negotiating such a deal. Not the least of which is that the sorts of people who write editorials love that sort of thing.

It's also true that some sort of deal will have to get done on the 2011 continuing resolution, on 2012 spending, and on other budget-related items over the next two years. So we'll get bargains. Just as we had a deal at the end of the 111th Congress to slash taxes (and, therefore, to massively increase the deficit).

So I'd expect plenty of stories about possible Grand Bargains. Regardless, that is, of whether there's anything much to it.

Anyone who thinks that the constituency for deficit reduction is larger than the constituencies against tax increases and large-scale spending cuts, however, is almost certainly mistaken. Absent, as Avent says, a conviction among politicians that deficits pose an immediate, tangible threat to the economy.