Last week Senator Charles Schumer (D-NY) made news by proposing a “reset” of FY11 appropriations negotiations.  He suggested substituting savings from Medicare and Medicaid and tax increases for the cuts being negotiated in discretionary spending.

Congress appears to be on track to enact this week another short-term extension to prevent the government from shutting down.  This three week continuing resolution (CR) would, according to the House Appropriations Committee, cut another $6 billion in spending.

The Schumer Maneuver

Senator Schumer is focusing on the aggregate amount of budgetary savings proposed by Republicans.  He points out that any given amount of deficit reduction is easier to achieve if you start discussions with a larger share of the total budget pie.

Ongoing CR negotiations are about how and how much to cut from the projected $663 B of nondefense discretionary spending this year.  This encompasses much of what we think of as the federal government, including everything from the FBI, federal prisons, Homeland Security, health research, most education spending, the FDA, most foreign aid, financial regulators, national parks and the Environmental Protection Agency, the Labor Department, a lot of veterans’ spending, and a lot of our transportation infrastructure spending.

In comparison, Medicare is $492 B this year after netting out premiums paid by beneficiaries.  Federal Medicaid spending is $274 B this year.  These two programs alone cost federal taxpayers $766 B this year.

Social Security is even bigger than Medicare or Medicaid, and almost as big as the two combined:  $727 B of spending this year.

Senator Schumer also included potential tax increases in his proposed reset.

In one respect, Senator Schumer is right:  it’s easier to cut any fixed amount of money out of a larger slice than to cut it out of a smaller slice.  If you’re willing to add tax increases to the mix (I’m not), then deficit reduction can be spread across an even broader fiscal policy base.

Senator Schumer is also correct that, if Republicans try to cut only the nondefense discretionary wedge, and if they propose to leave entitlement spending untouched, then they are rearranging deck chairs on the Titanic.  Because the Big 3 entitlements are on autopilot and are projected to grow faster than the economy, unchecked growth in these programs will after a few years overwhelm any enacted savings in the appropriations wedge.  And don’t forget defense/security spending, which can also be trimmed.

Senator Schumer also makes a fairness argument:  it is unfair, he argues, to concentrate all the pain of deficit reduction in one part of the budget.  He argues that the current negotiations should be expanded to include Medicare, Medicaid, farm programs, and tax increases.  He (and his allies) also attack Republicans for refusing to accept this expansion now.

Senator Schumer is once again a vanguard for Democratic strategy.  With this maneuver he attempts to wrap around to the right of Congressional Republicans on deficit reduction.  Since Republicans have not yet proposed any deficit reduction from the biggest parts of the spending problem, and since he says he is willing to negotiate on those areas, he (is trying to) trump the appropriations-cutting Republicans, while at the same time arguing for less pain from a part of the budget that he likes.  His goal is to protect appropriations programs from cuts, and so he proposes to expand the discussions to include other policy areas where he is more willing to accept pain.

Had this argument come from the President, Republicans would be in a box.  Had the President proposed specific Medicare and Medicaid savings, and argued for enacting them in lieu of Congressional Republicans’ cuts to nondefense discretionary programs, he could have matched their spending cut rhetoric while mounting a stronger defense of programs he favors.

While clever, the Schumer Maneuver is so far failing for four reasons.

  • Neither the President nor, it appears, Democratic Congressional leaders are backing him up.  The President punted on proposing significant changes to entitlement spending, and is publicly leaning against expanding the scope of the CR negotiations.
  • Senator Schumer is trying to change the already difficult short-term appropriations negotiations.  Those involved in the negotiations don’t want to make their own job harder by adding more subject matter to the mix.
  • Sen. Schumer weakens his own argument by taking Social Security off the table.  It’s hard to credibly argue that we should focus on bigger wedges of the pie while simultaneously exempting the biggest wedge from the discussion.
  • House Republicans say they intend to propose entitlement savings as well.  If they carry through with this, they will one-up Senator Schumer and neutralize his argument.  He wants entitlement savings instead of appropriations savings.  If they follow through, House Republicans will propose entitlement savings in addition to appropriations savings.  This wipes out Schumer’s attempt to be for more deficit reduction than Congressional Republicans.

Then again, Senator Schumer is smart and strategic.  It’s possible he offered this proposal knowing it had little chance of success.  Doing so would allow him to justify voting against an appropriations compromise, should one occur, without forfeiting a deficit-reduction argument.

Republicans have so far largely ignored the Schumer Maneuver.  I suggest they publicly address his suggestion by saying, “Senator Schumer is right – we need to reduce entitlement spending.  We should not, however, cut one part of the budget so that we can spend more in another.  We need to cut spending throughout the budget.  We’re going to continue cutting appropriations now.  We’ll get to entitlements next.”

And then they need to follow through.

(photo credit: Center for American Progress Action Fund)