Jonathan Chait, who just a couple days ago was doubting the existence of a grand bargain on the deficit, today comes out with his hair on fire about the grand bargain on the deficit being negotiated in the Senate.

Jonathan Weisman has a great story today breaking the outlines of the bipartisan deficit agreement being discussed behind closed doors. We can’t draw too many conclusions from the report because the agreement is in flux, and its translation via Weisman is probably imprecise. Those caveats aside, this looks like Democrats are giving the game away on the revenue side:

The Senate group’s working plan calls for placing separate caps on security and nonsecurity spending, and missing a budget target in one area would not trigger mandatory cuts in the other. The spending targets would follow proposals laid out by the deficit commission, which recommended cutting discretionary spending by $1.7 trillion through 2020. Lawmakers on the spending committees would draft legislation to meet the targets. But if they were not met, automatic, across-the-board cuts would go into effect.

The tax-writing committees would be given two years to overhaul both the individual and corporate tax codes, with general instructions to close tax breaks and minimize or eliminate tax deductions while lowering tax rates. The committees would be given a target for additional revenues to be raised by the new code. The deficit commission’s version of tax reform would net $180 billion in additional revenues over 10 years.

Chait goes on to say that this deal calls for ten times as much spending cuts as revenue increases, and that this would be a horrible deal for Democrats (to say nothing of the country).

It would. But where has Chait been? This isn’t a surprise at all. The Obama budget has a mix of 2/3 spending cuts and 1/3 revenue. The Republican budget has all spending cuts and is almost impossibly cruel. Bowles-Simpson’s ratio, I believe, was 3/4 spending, 1/4 revenue. Split the difference and you’re up to 5/6 or 7/8 spending cuts. That’s not appreciably different than what’s coming out here. Democrats have always created severe imbalances in these “grand bargain” deals in favor of spending cuts, maybe because they think that’s what can pass or something, maybe because they (or more to the point, their wealthy donors) prefer spending cuts.

I’d love to see just one Democrat come out and say, “You know, just letting the Bush tax cuts expire completely would solve the entire medium-term deficit issue. And we wouldn’t even have to pass anything. Were the Clinton-era tax rates so burdensome?” But to date, that hasn’t happened. So you get these monstrously bad spending-heavy “grand bargains.”

In fact, if you take a look at a comparison between spending cuts in the Obama budget and the cuts in the Republican continuing resolution – not a perfect comparison, but the best data we have – you see plenty of areas of agreement. The cat food commission leadership has come out of the woodwork to push their agenda, too. And with the three-decade campaign to demonize government spending finally paying off, combined with the three-decade campaign to demonize taxes, Democrats have been either beaten into submission or elected on a different platform than their constituents believe.

It wasn’t so very long ago that many economists and even some White House officials were talking about the need for more government spending to address the continued unemployment crisis and preclude a double-dip recession.

The idea, backed up by solid economic theory and decades of evidence, was that if the government spent more money, then at least in the short-run it would create jobs and stimulate growth.

But in today’s Washington, expressing that idea is enough to get you labeled an unserious person. White House and Republican leaders both insist that spending cuts are what the economy needs right now. Their disagreements are over whose cuts make more sense and who’s really willing to make the necessary “tough choices.”

The laws of supply and demand haven’t changed. Nothing has happened to suddenly put Keynesian economic theory in doubt. There is still an entirely plausible argument to be made that government spending cuts are absolutely the last thing this economy needs. So why has the conventional wisdom done a 180?

The answer is that politics has trumped economics.

It’s not a given that there will be any grand bargain, incidentally. John Boehner sounds pretty doubtful, and Harry Reid is still adamant about protecting Social Security. And they are the two Congressional leaders. So maybe nothing happens. But if it does, of course it will be tilted toward massive spending cuts. That’s what everyone in Washington agrees on. Maybe not the rest of the country, but everyone in Washington.

David Dayen

David Dayen