WH, Senate Dems "caving" on budget demands

So say Chuck Todd et al at NBC, who collectively say that not only has Barack Obama and Harry Reid lost this particular game of chicken, they’ve stalled out on the side of the “deserted highway.”  The $33-billion reduction figure is, after the cuts in the last two CRs, almost exactly what House Republicans first proposed at the start of the 112th Session of Congress.  Not only has the White House failed to threaten any vetoes on the cuts, they also have apparently conceded on the “no riders” requirement, too:

If the current Washington fight over spending was a game of chicken, the Obama White House would already be pulled over on the side of the road, as House Republicans continue to barrel down the deserted highway. The fact is, the White House and Senate Democrats keep caving, while House Republicans — at least publicly — have yet to budge an inch. The latest development, as Politico reports, is that the administration has agreed to an overall cut of $33 billion, which is near the number that the House leadership originally proposed (before the Tea Party caucus forced it to go higher). And now the White House appears to be backing away from its demand that no riders be attached to the deal. Press Secretary Jay Carney said there is no veto threat from the White House on a deal that contains ANY riders, as was originally the position.

Allahpundit covered the Politico piece last night, so be sure to read more of his analysis.  The sudden shift from Democrats — surrender, according to NBC — comes at a curious time, though.  Howard Dean had begun drumming up support for a government shutdown rather than agreeing to cuts, arguing that voters would blame Republicans for insisting on spending cuts that amount to, er, 2.0625% of the projected deficit this year and 0.88% of the overall budget.  Those rotten 98 Percenters did this! would be the presumed rallying cry, although as my friend John Hinderaker points out, the SuperSize Me argument isn’t likely to work:

If we use the Big Mac extra value meal analogy, a $33 billion cut in the federal budget represents the equivalent of ordering the meal; eating the Big Mac; drinking the Coke; and eating 85 out of 87 french fries. Then you take the 86th fry, bite off one sixth of it, and put the remaining 5/6 of one fry back in the box, along with the 87th fry. Is that a substantial cut? No.

True enough.  But if we want to take the analogy to its next logical step, then a $61 billion cut — which is the bare minimum that Tea Partiers have demanded — would simply mean eating half of the 86th fry rather than one-sixth.  In other words, it’s not going to make a lot of difference if fiscal sanity is the end game for these budget battles.

The end game has to be entitlement reform, and that won’t start until Congress clears the FY2011 budget off the table.  Democrats, though, have other ideas about how to deal with overwhelming increases in entitlement spending, and hope the cave on cuts this year gives them an opening for … guess what?

Senate Democrats are discussing plans to introduce tax policy changes that they say would raise federal revenues and broaden the budget debate beyond discretionary spending cuts.

Democrats feel they have been boxed by Republicans into a debate over cutting discretionary spending, which accounts for a mere 12 percent of the federal budget.

That’s actually incorrect.  Non-security discretionary spending accounts for about 12% of the federal budget; overall discretionary spending covers more than a third of annual federal spending.  The problem is that both Republicans and the White House have exempted security spending from the red-pen treatment as a means of political posturing on budget cuts.  Without that, the amount of discretionary spending left to target drops to about $450 billion, or just a little more than a quarter of the annual deficit.

For this reason, some Republicans have proposed trimming defense spending as a means to build credibility on entitlement reform and social-service spending cuts.  Democrats have the same idea for tax hikes:

Democratic lawmakers said they will be in a stronger position to offer tax increases after agreeing to between $30 billion and $61 billion in discretionary spending cuts for the rest of 2011.

“We Democrats have demonstrated that we’re willing to make these cuts; we’ve gone over halfway. Are they being so unreasonable to say we can’t raise any revenues?” said the senator.

They want to add a “millionaire surtax” as well as new corporate taxes on overseas operations, both of which the administration has rejected, although not enthusiastically.  The latter would drive American multinationals to relocate overseas in order to retain their competitiveness on the global stage, and the former would chill investment into the American economy.  But Democrats are betting that a little class-warfare populism will win in 2012, even if it utterly failed in 2010.

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