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Who Will Win The Supercommittee?

When two implacably opposed sides negotiate an agreement, often it's because they disagree on what the agreement means. The supercommittee plays this role in the debt ceiling deal. Tasked with finding $1.8 trillion in deficit reductions, or else triggering cuts to spending concentrated in defense, Democrats think they'll get a balanced solution and Republicans think they'll just roll the Democrats again. Here's former GOP staffer Keith Hennessey laying out the Republican view:

There is a simple Republican counter strategy available:
  • Speaker Boehner and Leader McConnell appoint to the Joint Committee six Members who will not raise taxes.

  • These six Republicans call the President’s bluff, and tell their Democratic counterparts they are willing to reject a deal that includes tax increases, even if that deal means the trigger will cut defense deeply. They deny the six Democratic Members of the Committee negotiating leverage from the difference between a triggered 10% cut in defense and an 8% cut in nondefense discretionary spending. “This is going to hurt you almost as much as it’s going to hurt me, so I’m not giving you anything to avoid it.”

  • These six Republicans encourage everyone to cooperate to get most (all?) of the $1.5 T in deficit reduction from the Big 3 entitlement programs: Social Security, Medicare, and Medicaid. They are the cause of our long-term fiscal problems and they are so big and growing so rapidly that you can save lots by changing them. ...

This means that all Republicans need to do is call the President’s/Democrats’ bluff on tax increases, threaten to allow the pain of the trigger hit both sides, offer $1.5 T of entitlement spending cuts, and wait.

You'd call that bluffing, except that liberals also seem to expect their side to roll over as well. Matthew Yglesias argues that it's follow to assume that health care and defense lobbyists, facing huge cuts in the event of failure, will lobby Republicans to compromise:

[H]ow about this scenario. First, Republicans refuse to agree to more revenue. Second, Democrats refuse to agree to a no-revenue deal. Third, lobbyists for the defense and health care industries get nervous. Fourth, lobbyists for the defense and health care industries remember that they are high-income people who don’t want to pay taxes. Fifth, executives at defense and health care industries remember that they are high-income people who don’t want to pay taxes. Sixth, executives at defense and health care industries start lobbying Democrats in swing districts, red states, or in which key weapons manufacturing or certain hospitals are major industries. Seventh, Democrats fold.

This scenario certainly wouldn't shock me. On the other hand, I suspect the recent negotiation has conservatives a little too giddy about the prospects for more hard-line negotiating, and liberals too depressed about the same. The supercommittee negotiation will be different than the debt ceiling negotiation in two important ways. First, the "trigger" of cuts to defense and Medicare is far less frightening to Democrats than the trigger of exploding the U.S. economy. Democrats succeeded in excluding programs for the poor from the trigger, specifically to make the cost of gridlock bearable.

Second, it's worth recalling that the Obama administration did insist that large entitlement cuts could be part of the budget deal only if Republicans agreed to higher revenue. Obama did hold that line. Agreeing to cut entitlements without new revenue would be crossing a different line, and it would represent a massive defeat for Democrats, as well as a political debacle.

It's also worth noting that the Republican position is, on its face, totally absurd. That position holds that no additional revenue at all can be considered. If we take them at their word, Republicans would turn down a compromise offering one dollar in higher taxes in return for a trillion and a half in entitlement cuts. That's obviously an extreme case, but what about cutting a few billion in oil company subsidies? A couple hundred billion in other loopholes?

That sets up the same contrast that existed during the debt ceiling showdown -- Republicans defended a vastly less popular position. Raising taxes for the rich and closing corporate tax loopholes is popular, even to a degree among Republican voters. Cutting entitlements is unpopular, even among Republicans. Democrats won the public opinion fight but couldn't press their advantage simply because they were terrified of a failed negotiation. In this instance, the Obama administration set the terms of the negotiation specifically so that failure would not terrify them.

They certainly might cave again. And Republicans probably won't agree to anything passable. But I do see gridlock or a deal with a reasonable level of revenue as more likely than another total Democratic cave in.