An honorable shutdown exit for the GOP and President Obama.

[sinkspur]

http://online.wsj.com/article/SB10001424052702304176904579111373960504830.html?mod=WSJ_Opinion_LEADTop

The Budget Reform Pivot

An honorable shutdown exit for the GOP and President Obama.

October 4, 2013


Both parties are digging in deeper over the budget impasse, and the likelihood now is that the partial government shutdown elides into the debt-limit deadline later this month. Neither side may be listening at the moment, but there is a political exit from this mess that has the added advantage of helping the country.

The exit ramp is for both sides to pivot from the ObamaCare stalemate to negotiations over tax and entitlement reform. The Ted Cruz Republicans would have to give up their mission to defund the Affordable Care Act with only one house of Congress. President Obama would have to show he's willing to negotiate with Republicans over the debt limit. Both sides would step back from the brink and give themselves a chance for some long-term political gains.

The advantages for the Republicans are obvious. The Cruz faction has paraded the GOP into a shutdown without a strategy for getting out, as even some of them are figuring out. Their strategy of "keep it shut" is a dead end. The political impasse is doing no good for the Republican image, and the longer it continues the more it is putting at risk in 2014 the swing seats that provide its House majority.

Mr. Obama is simply not going to delay or defund his signature legislation. And the political irony is that instead of learning about the glitches and problems of the health law's rollout this week, the public is hearing only about the GOP willingness to punish other Americans to get rid of ObamaCare. The Cruz Republicans have helped Mr. Obama change the subject from his faulty program to their political tactics.

By turning to a reform negotiation, Republicans would have the chance to achieve at least some of their policy goals. Those include a down payment on entitlement reform, including significant changes in Medicare. Republicans won't get Paul Ryan's superior 2011 reform, but they might get increases in the retirement age, the end of first-dollar Medigap coverage, and other changes that over time add up to real fiscal savings. They might even get the Keystone XL pipeline or repeal of the medical-devices tax in the bargain.

Such a negotiation is also the GOP's best chance for tax reform before 2017. The obstacles will be high—and insuperable if Mr. Obama insists on $1 trillion in additional revenue on a static basis. But Mr. Obama is on record as favoring a cut in the corporate tax rate, and Finance Chairman Max Baucus also wants to leave the Senate with a reform legacy.

Progress on either front would show swing voters that Republicans are able to govern without maximalist demands. They could point to progress on reducing debt, and above all they would help the economy and thus show that their policies raise middle-class incomes. Regarding ObamaCare, they could rightly say they fought as hard as they could to delay it, but that to replace it they will need more Republicans in Congress. This could be a major campaign theme in 2014.

As for Mr. Obama, he'd benefit immediately by stopping any damage from the shutdown and the threat of a debt default. He might think Republicans will blink on the debt limit, but that's what he thought about a shutdown. He also might think he can blame Republicans if the worst happens, but any economic harm will mar his final term.

Mr. Obama's left wing won't like entitlement reforms, but it will like easing the sequester spending caps on education, welfare and public works. If Democrats really believe that public spending is crucial to economic growth, they'll also get more spending immediately in return for long-term reforms. Without a larger budget deal, Democrats face three more years of ever-tightening discretionary budget caps.

The biggest upside would be the growth impact of tax reform. On the economy's present growth trajectory, Mr. Obama will finish his second term with lower real middle-class incomes than in 2009. He'll be the toast of the hedge-fund class but have increased income inequality. If he wants a second-term economy like Reagan's or Bill Clinton's, he needs bipartisan cooperation for pro-growth reform.
***

We realize this is all a political long shot. The Cruz faction is a rump caucus, but it will have more influence the more GOP leaders fail to deliver any reform. Mr. Obama can reduce its influence if he uses this moment as an opening for compromise rather than to humiliate House Speaker John Boehner into surrender or a debt-limit crack-up. On the other hand, Mr. Obama may welcome a default if his real political goal is to tar the GOP as irresponsible and take back the House in 2014.

There's also the question of whether Mr. Obama is even capable—temperamentally—of negotiating such a compromise. He is so sure of his own superior political virtue that he disdains meeting other politicians halfway (foreign dictators perhaps excepted). We'll find out soon enough, but he can't say he wasn't offered the opportunity.

[massadvj]

And the political irony is that instead of learning about the glitches and problems of the health law's rollout this week, the public is hearing only about the GOP willingness to punish other Americans to get rid of ObamaCare.

Who, exactly, is being "punished" by closing nonessential government services?  Certainly not the taxpayers.  And if the services are "nonessential" then I daresay the only persons being "punished" are the make-work public employees who occupy needless jobs.

The fact that this comes from WSJ indicates that the GOP House members are willing to stare down Wall Street on behalf of Main Street.

[sinkspur]

The fact is, the Republicans aren't even trying to delay Obamacare anymore.  Now, they're focused on getting spending cuts and entitlement reform out of the debt ceiling-CR deal.

In other words, Cruz dragged the GOP into an unnecessary shutdown confrontation, which they've lost.  And, had this not happened, the failed opening of the implementation of Obamacare would be the headline.

There is the chance, of course, that they'll get nothing.  Boehner's already said he's going to raise the debt ceiling, with or without a deal.

[Scottftlc]

"Glitches and problems" with the roll-out of Obamacare are not going to do anything to harm the program - and whatever bit of coverage they get, which will not be critical of the plan's goals anyway, is not going to do anything to harm the program.  It will merely cause more money and effort to be expended to fix those glitches.  And none of that process will harm Obama or Democrats in the least...the coverage would be how they're trying to help people.  This idea that a shutdown, that impacts almost no one anywhere outside D.C., is letting Obamacare skate is just plain stupid...a non-sequitur. 

[Scottftlc]

Wall Street is terrified of the potential impact of this on stock prices...particularly the debt ceiling fight...so they're trying to signal that worry with a vague suggestion of entitlement and spending reforms, which will be steamrolled by Obamacare in the years to come anyway.  Wall Street like any junky needs ever increasing hits of stimulus to prop itself upright.  All those pension investments, the institutional ones, will quickly collapse into insolvency without them...yet another Ponzi rearing its head.  Wall Street is no longer buttressed or reflective of the Main Street economy, it is solely dependent on debt and stimulus from Washington.

[DCPatriot]

If Obama could create another financial crisis like the one that suddenly appeared sixty days out of the 2008 election....he'd do it.

He needs a replacement for George Bush to blame.   The current group of House Republicans will be blamed for crashing the market and the economy.

Obama is cold-blooded when it comes to bringing down our system....anything goes and the more hurt the people feel. his attitude is,  "Good.  It's about time!  How does it feel?"

[Bigun]

"Glitches and problems" with the roll-out of Obamacare are not going to do anything to harm the program - and whatever bit of coverage they get, which will not be critical of the plan's goals anyway, is not going to do anything to harm the program.  It will merely cause more money and effort to be expended to fix those glitches.  And none of that process will harm Obama or Democrats in the least...the coverage would be how they're trying to help people.  This idea that a shutdown, that impacts almost no one anywhere outside D.C., is letting Obamacare skate is just plain stupid...a non-sequitur.

Absolutely!  I couldn't agree more!

[massadvj]

Wall Street is terrified of the potential impact of this on stock prices...particularly the debt ceiling fight...so they're trying to signal that worry with a vague suggestion of entitlement and spending reforms, which will be steamrolled by Obamacare in the years to come anyway.  Wall Street like any junky needs ever increasing hits of stimulus to prop itself upright.  All those pension investments, the institutional ones, will quickly collapse into insolvency without them...yet another Ponzi rearing its head.  Wall Street is no longer buttressed or reflective of the Main Street economy, it is solely dependent on debt and stimulus from Washington.

Main Street bailed on Wall Street in 2008, and for the most part that money remains on the sidelines.  The typical small business operator is heavily invested into his own working capital, and has spent the last several years paring away at any debt in order not to be beholden to Wall Street or bankers.  Those who do not have small businesses have diversified into precious metals, real estate, art, antiques and other more tangible assets.

Everyone outside of Wall Street and Washington realizes that to be invested in stocks or bonds is to be invested in OPapaDoc.  As you say, the two are inextricably locked together.  Therefore, whatever havoc ensues from debt default (in truth, it will be very little) will be deserved.

[xfreeper]

The more the public learns about obama care and how the congress doesn't think it is good enough for them, the less they will like it. Additionally, I don't know many people that are very concerned about the 'unessential' parts of an out of control fed gov't being shut down. I say, steady as she goes.

[Bigun]

The more the public learns about obama care and how the congress doesn't think it is good enough for them, the less they will like it. Additionally, I don't know many people that are very concerned about the 'unessential' parts of an out of control fed gov't being shut down. I say, steady as she goes.

Agreed!