Why Washington Can’t Get the Deficit Under Control
With seemingly permanent $1 trillion annual deficits on the near horizon, America desperately needs to make another “grand deal” to get revenues and spending under control, says Brian Riedl of the conservative Manhattan Institute. However, making that deal will be all but impossible under current conditions, Riedl warns, since many of the conditions necessary to reach an agreement are currently absent in Washington.
That hasn’t always been the case. Reviewing 14 major deficit-reduction efforts since 1980, Riedl found three variables that determined the success or failure of each attempt. In the six negotiations that succeeded, at least of two of the variables were satisfied, which Riedl says point to some minimum level that must be present to make a deal possible. The three variables are:
1. An automatic penalty. Riedl says that a “painful policy” that goes into effect in the absence of a deal brings negotiators to the table and forces them to come up with an agreement. Examples from the past include potential cuts to Social Security and the threat of default on federal obligations.
2. An involved public. Voters voiced concerns about fiscal issues in the 1980s and 1990s, pressuring politicians to reach deals that eventually led to a balanced budget.
3. Good-faith negotiations. Reidl says that in past successful negotiations, “[e]ach side honestly laid out their priorities, made generous concessions, avoided hardball tactics, and worked towards a deal in which both sides could claim victory. Neither side relied on leaking to the media or publicly bullying the other.”
None of the three variables are in play right now, Riedl says, suggesting that Washington is unlikely to turn its attention to the growing deficit any time soon.