How the 2014 elections tip prospects for a 'grand bargain' on US deficits

If President Obama wins a second term, a top White House aim is to work with Congress to strike a “grand bargain,” a massive debt-reduction deal that would shore up the government's finances for the next decade or more.

Members of Mitt Romney's presidential transition team, too, recently said a grand bargain would be a goal of their man's first term in office. 

But any deal Mr. Obama or Mr. Romney strikes – if either can get one at all – may be shaped in important ways by ... you guessed it, lawmakers looking ahead to Election 2014. At least a dozen senators facing reelection that year may well size up their options this way: vote for legislation that contains some politically explosive provisions and face fury from certain constituents, or risk the nation’s credit rating and continued economic malaise by punting pressing fiscal issues down the road once more.

At the center of any deal would be nine Democratic senators from red and purple states, and five Republicans in conservative states who might see a primary challenge if the debt-reduction package includes tax hikes.

How this group acts will do much to shape what either president can achieve. If Romney wins the White House, and even if Republicans also manage to seize control of the Senate, he would still have to attract enough Democratic senators to get the vote total for a GOP-shaped grand bargain to 60. The same holds for Obama, assuming a Republican-led House and a slim Democratic majority in the Senate. 

Republicans face antitax backlash

Many independent economists and budget analysts insist that the US needs to reduce debt by $4 trillion over the next decade to stabilize its financial situation for the long term. Getting to that number would almost certainly require both parties to surrender cherished ground. For Republicans, that boils down to one word: taxes.

If Obama is president, he has vowed to veto any extension of the Bush-era tax rates for annual household incomes over $250,000. If he prevails, those higher taxes on the wealthy would boost government revenue by almost $1 trillion over 10 years. That $1 trillion number fits snugly into the formula, offered by several bipartisan panels, of roughly $3 in spending cuts for every $1 in higher tax revenues as the way to reach $4 trillion in debt reduction.
 
If that $1 trillion in new taxes is part of any eventual deal, there are five GOP senators up for reelection in 2014 who potentially could vote for it. Two – Sens. Saxby Chambliss of Georgia and Mike Johanns of Nebraska – are members of the “Gang of Eight,” a bipartisan group of senators looking to flesh out a grand bargain-esque agreement in backchannel talks. Three others – Sen. Lindsay Graham of South Carolina, Sen. Lamar Alexander of Tennessee, and Sen. Susan Collins of Maine – have supported bipartisan deals in the past.

But what's the risk that the GOP's base of antitax adherents would revolt, perhaps targeting those incumbent senators for primary challenges? Pretty good.

Adam Brandon, a spokesman for the tea party group FreedomWorks, says he “wouldn’t take anyone off the table” as potential targets for a 2014 GOP primary challenge if conservatives perceive they’ve been betrayed, including minority leader Mitch McConnell of Kentucky and Sen. John  Cornyn (R) of Texas. FreedomWorks put its muscle behind the ouster of Sen. Bob Bennett (R) of Utah in 2010.

Still, each of the five GOP senators is a political survivor, say strategists with conservative groups who would be in the thick of potential primary challenges. It may be difficult to find a viable primary challenger in any of those races and almost impossible in the case of Senator Collins, whose standing in Maine may be insurmountable.

But some, like Senator Graham, are already seeing stirrings of a primary challenger, “grand bargain” or not.

“If you’re looking to the horizon of 2014, you know, the sun may rise over South Carolina,” sais Chris Chocola, president of the fiscally conservative Club for Growth, at a Monitor-sponsored breakfast with reporters in September.

Sal Russo, a conservative strategist allied with Tea Party Express, one of the largest tea party groups, says a broad insurgency from the right, tied to fury over tax hikes in a "grand bargain," isn’t out of the question.

“If [conservative votes] see that raising taxes is part of the solution, they’re going to have a lot of problems in 2014,” he says.

Still, vulnerable Republican lawmakers might be able to find a way to finesse a deal so that the party’s conservative base isn't calling for their heads afterward, says Mr. Russo.

“If you get into some of the loophole-closing and how that revenue is used, can you get to a gray area that might leave people muttering but not fire-hot?” he wonders. “That would be interesting to see.”

Could 2014 be a Democratic “bloodbath”?

For Republicans, the sticking point is giving ground on taxes. For Democrats, it's making changes to entitlement programs, such as Medicare, that increase the age of eligibility or scale back benefits. If that were to happen as part of the debt-reduction deal, it could mean a "bloodbath" for Democratic incumbents up for reelection in 2014, say GOP activists.

“I think 2014 will be a real bloodbath for the Democrats if they stayed in power, because the next two years America faces some serious fiscal problems,” says Russo. “And there is no easy way out.”

That cocktail of entitlement changes and tax increases can’t look enticing to six Democratic senators running for reelection in states certain to be carried by Romney and three others who sit in battleground territory.

The red-state Democrats include Sens. Mark Begich of Alaska, Mark Pryor of Arkansas, Mary Landrieu of Louisiana, Max Baucus of Montana, Tim Johnson of South Dakota, and Kay Hagan of North Carolina. Democratic senators in purple states are Mark Udall of Colorado, Jeanne Shaheen of New Hampshire, and perhaps even Al Franken of Minnesota.

Then there's Sen. Mark Warner (D) of Virginia, also up for reelection in 2014, who long ago cast his lot with the grand bargain crowd as a champion of bipartisan deficit-reduction and as a leader of the Gang of Eight.

So what will those Democratic senators do when presented with a deficit-reduction plan that could put their political careers in peril?

Some will balk at Obama’s grand bargain dreams, predicts Grover Norquist of Americans for Tax Reform, who has persuaded most Republicans in Congress to sign his group's pledge never to raise taxes. That means they will punt on any tax increases or deep entitlement reforms until after 2014, when Democrats will have set their sights on a target-heavy list of Republican senators up for reelection in 2016. And that means no grand bargain.

“It’s the Democrats in the Senate who are going to spend the next two years trying to convince you that they’re moderate and reasonable and not the problem, because if they are [seen as] the problem,” Mr. Norquist says, “at the end of 2014 the Republicans will have 60 votes” in the Senate.

That need not be the case, says Stan Collender, a former Democratic budget aide now at Qorvis Communications. Democrats, if they can summon a little Washington moxie, could hang in for a grand budget deal. They could benefit from what Mr. Collender calls the “look, Ma, no hands!” theory of budgeting: Let Congress’s terrible policymaking be your political friend.

By letting the Bush tax cuts expire as scheduled at year’s end and then reinstating only the cuts for households with incomes of less than $250,000, Democrats could claim to have voted for a tax cut and dare Republicans to vote against them. Republican senators held firm on a similar vote in the Senate earlier in 2012, but Collender says Republicans may not be so steely when an actual tax increase is on the line.

That strategy is no slam dunk for Democrats. But it may be the political quirk that makes the policy negotiations work.

And if it doesn’t? Well, there are many ways to game out a grand bargain, and Washington has a way of turning up surprises. Just look at this election year.

Republicans “went into this [2012] cycle and everybody was thinking, ‘oh my goodness, this is going to be the best cycle of all time,’ ” said one veteran Republican operative who was granted anonymity to candidly address his party’s chances at the polls this year. “And now we’re hoping to gain one to two [Senate] seats.”