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The Democratic Strategist

Political Strategy for a Permanent Democratic Majority

Memo From Third Way: The Four Fiscal Fantasies

Editor’s note: We are pleased to present this memo from Third Way.
An earlier post in TDS criticized the characterization of The Center for American Progress in a Washington Post op-ed that was written by the authors of this memo. In response, Third Way requested that we publish the full memo on which the op-ed was based and which they feel presents their argument in a more substantive and nuanced way. We are happy to comply.

Memo from Third Way: The Four Fiscal Fantasies
TO: Interested Parties
FROM: Jon Cowan, President; and
Jim Kessler, Senior Vice President for Policy
RE: The Four Fiscal Fantasies

Democrats are at a crossroads. There is growing pressure on the party from many
liberal advocates to curtail further efforts at long-term U.S. fiscal reform. They argue that any real entitlement changes should be shelved for at least the remainder of Obama’s presidency, thus relegating a grand bargain to the J.C. Penney sales bin.
They note correctly that our short-term fiscal situation has improved, that there
has been a welcome pause in health care cost inflation, and that our economy still has far too many un- or under-employed. Thus, their alternative: a return to the agenda of Obama’s early first term when the economy was in free-fall–another round of massive spending on job-creating investments, new and expanded entitlements, continued high deficits, and a substantial tax increase.
A portion of this argument is now moot: a large-scale grand bargain died with the
fiscal cliff deal, which eliminated the main forcing mechanism–we won’t soon again
see trillions of dollars of tax breaks expire and automatic spending cuts to
discretionary defense and domestic programs occur on the same day. Without these hammers, a grand bargain has about as much life as the Monty Python parrot.
But just because we aren’t likely to see one large fiscal deal does not mean that
Democrats should stop pursuing fixes to our safety net programs. In fact, the liberal case is built on four fiscal fantasies that we describe below. If Democrats heed this policy advice and walk away from fixing entitlements, it will be a catastrophic policy and political mistake–for the party, the middle class, and the country’s future.
Read the full memo HERE:
Below are two interesting critical responses to the Third Way memo:
Dean Baker
Jon Chait

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