Thursday, November 11, 2010

The Bowles/Simpson Term Sheet

I don’t have anything insightful to say about the economic wisdom of the deficit-reduction plan jointly issued by Erskine Bowles and Alan Simpson. I’m more interested in understanding the complicated political game that the people entrusted with the leadership of bipartisan policy commissions are obliged to play. Presidents appoint them when they’re confronted by a policy problem that everyone acknowledges stands in need of a solution in the not-too-distant future, but is too hot politically for the party in power to address on its own.

Presidents count on their chairmen to come up with a preliminary term sheet for a complicated political negotiation that does at least two things:  first, it must look intellectually serious enough to liberal and conservative elites to be broadly recognized as a genuine effort to confront the problem; and second, it must lay out terms that are sufficiently attractive to a sufficient number of political players on both sides of the partisan barricades to make room for them to hammer out a comprehensive policy that each side prefers to the status quo.

The 2001 President’s Commission to Strengthen Social Security failed the first test because the liberal intelligentsia never bought into the idea that private social security accounts had much to do with the solvency of the Social Security fund. The Iraq Study Group Report failed the second test because it didn’t come up with a comprehensive policy that hawks inside and outside the Bush administration preferred to the status quo.

It will take some time to determine how promising the Bowles/Simpson proposal is as a framework for a bipartisan agreement. But you have to be impressed with the job they’re doing so far as ambassadors to the conservative and liberal intelligentsia. As Jonathan Chait reports, the Bowles/Simpson plan has received favorable notices from National Review, the Center for American Progress, and the New York Times and the Washington Post editorial pages. That’s all the more remarkable when you survey the preliminary reactions of politically connected economists—from the right, Greg Mankiw loves the sounds that Bowles and Simpson are making while Paul Krugman dismisses their proposal out of hand from the left. It looks like Bowles and Simpson are trying to keep the neo-Keynesians who’ve been driving the liberal side of the debate over monetary and fiscal policy away from the negotiating table.

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