Citigroup Vice Chairman Peter Orszag on the post-election Grand Bargain on Social Security, Medicare and Medicaid

Peter Orszag has a long piece in Democracy Journal #25 (Summer 2012) that just came out, called The Looming Showdown. Orszag is identified there as "vice chairman of Global Banking at Citigroup. He previously served as the director of the Office of Management and Budget and as director of the Congressional Budget Office." It's safe to say the article provides one good indication of how the corporate Democrats and the financial lobby see the upcoming post-election lame-duck-session budget confrontation.

Here's how he talks about cutting benefits for Social Security, Medicare and Medicaid, or "entitlements" in Republican/corporate Democrats/punditocracy language (my emphasis in bold):

... it’s possible that the drama of early 2013 will produce an agreement that avoids undue immediate fiscal austerity while modestly reforming the tax code and entitlement programs.

[Offered as an example of a desirable outcome:] The Administration also offers modest entitlement changes while dialing back the immediate spending cuts. Amid all the external demands for a deal that lifts the debt limit and resolves the uncertainty, it then dares the Republican House to vote against a large tax cut and some modest entitlement changes.

One example of this strategy would be to combine a much larger payroll-tax holiday with an increase in the standard deduction. This would provide a substantial tax cut for everyone who works, but the effect would be progressive since payroll taxes represent a larger share of income for low- and middle-income workers than for high-income workers. As with the structure in place for the current payroll tax cut, general revenue would backfill the Social Security and Medicare Part A trust funds, so that the programs would not be harmed by the tax cut.

Raising the debt limit and waiving the immediate spending cuts associated with sequestration will undoubtedly require entitlement changes. The question becomes whether the House Republicans accept the more modest entitlement changes discussed during the negotiations over the debt limit in 2011, or try to demand something more dramatic and problematic, such as block-granting Medicaid. The Administration would do well to aggressively combat the more radical proposals during the lame-duck session, lest it find itself boxed in unnecessarily in early 2013.

That is Citigroup Vice Chairman Orszag's idea of a brilliant Obama Administration performance in the post-election clash. Obama offers cuts to Social Security, Medicare and Medicaid and proposes more tax cuts (including the payroll tax that pays for the "entitlements" they will cut, uh, modestly). And then he tells the Republicans, hey, I just dare you to vote against Social Security cuts and tax cuts!

The idea of payroll tax reductions in which the funds are replaced by general revenue reinforces the Obama Administration and other opponents of Social Security in trying to make it look like a "welfare" program that increases the federal budget deficit. They call these payroll tax cuts temporary, but it's looking already like they are effectively permanent and that Social Security/Medicare now have to be partially funded by general revenues. A real victory for the anti-Social Security side.

It's really striking how Orszag frames Social Security, Medicare and Medicaid as programs that it's obvious that have to be cut. The idea of preventing cuts doesn't even enter into the picture. Orsazg's with these guys on those programs:

This is Orszag's ideological fig leaf for why Democrats should not even pretend to enact progressive reforms they use to get elected:

Instead, major legislation is more likely to succeed on a partisan basis. But that’s only possible in the rare instances in which one party wins the political trifecta — the White House, the House of Representatives, and close to 60 votes in the Senate. Furthermore, a party that uses those rare moments of political supremacy to enact significant legislation on a partisan basis will typically suffer enough backlash to destroy the temporary dominance. [my emphasis]

I will say with a high level of confidence that the Republicans do not view their role with such strategic timidity. So it only works one way. When the Democrats win, they say to their base, golly gee, we can't really get much done even when we control the White House and both Houses of Congress. When a Republican like George W. Bush gets into office even after losing the election, he treats it like a wide mandate and goes for what the Reps want. And the corporate Dems tag along because, you know, they have to be civil and bipartisan and avoid the partisan rancor and yadda, yadda.

And what does the Citigroup Vice Chairman think the Democrats should aim for?

So what can be done? We can take on the problem on three different levels: encouraging less polarization in the population, increasing the number of moderates in Congress, and finding ways to govern effectively given a smaller number of moderates in Congress.

A lot of the article is about how to get more corporate Democrats ("moderates") elected so that the Democrats can make more great deals like forcing the Republicans to accept tax cuts and benefit reductions in Social Security, Medicare and Medicaid.

Tags: 2012 election, barack obama, grand bargain, medicaid, medicare, social security