Don't Give Up Hope on a 'Grand Bargain' Just Yet

Is it too optimistic to believe Democrats and Republicans can come together on deficit reduction and tax reform?

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I am an optimist, maybe a bit of a Pollyanna to tell you the truth. I am a glass-half-full kind of guy. Sure, I have my cynical side—who wouldn't after spending so much time around this town!

But one thing I have learned is that political people can surprise you, they can end up doing what is right and pragmatic a lot of the time. When we expect impending doom, as we did in December with the fiscal cliff, we can see agreement result.

Hopefully, we will experience a similar development when it comes to a "grand bargain."

[See a collection of political cartoons on the budget and deficit.]

The latest moves by President Obama and Congress to enter into a dialogue on what is needed to provide stability and common sense to our economy may just work.

The consensus across the board is that our economy is getting stronger. Today's job numbers were a welcome boost—236,000 jobs and a drop in the unemployment rate to 7.7 percent.  Even with the revised numbers for January (down) and December (up), there was a positive growth of 26,000 more jobs.

Home construction is up and 48,000 general construction jobs were added last month.

But one thing Congress and the president know is that the sequester and Washington gridlock are likely to do real damage to the economy and a future recovery. 

[See a collection of political cartoons on the economy.]

The Congressional Budget Office predicts that we will lose 750,000 jobs in 2013 if nothing is done to work through our sequester problem. Assuming we calculate that from March on—even I can do that math—we lose an average of 75,000 jobs a month for the next 10 months that we otherwise would have gained.

That is a real hit to real people. That is fewer workers paying taxes, fewer people spending in the economy, more hardship for the middle class.

Importantly, it is also more uncertainty for American businesses, who still have over $2 trillion sitting on the sidelines that could be invested in growing the economy by growing their businesses. The CBO estimate is that the sequester will cost .6 of a point on our economic growth.

But, imagine if we come together, enough Republicans and Democrats, on a grand bargain that reforms entitlements, cuts spending, and also reforms the tax code to get more revenue. 

[See a collection of political cartoons on Congress.]

What is really on the table? Hopefully, a lot.

For the Republicans, entitlement reform means a change in the cost of living for Social Security, means testing, cuts in healthcare costs down the road. It may include raising the retirement age. For Democrats, it is tightening the tax code to make sure the wealthy who are seeing their portfolios soar pay their fair share of taxes and hedge fund managers don't get unfair breaks. And oil companies and those who ship jobs overseas don't get huge tax write-offs, either.

These are not all easy for many to give in on—not easy to swallow for advocacy groups or strong believers. But the hope is that there are enough members of Congress who want to see progress and want to stabilize our economy.

The political and policy moves by both sides are showing flexibility and openness and a spirit of cooperation. My hope is that this process will go forward and in the coming months we can all declare victory. That is the optimist in me coming out!

  • See a collection of political cartoons on sequestration and the fiscal cliff.
  • Read the U.S. News debate: Has Obama Exercised Enough Leadership in Dealing With Republicans in Congress?
  • Check out U.S. News Weekly: an insider's guide to politics and policy.