By Charity Yodis

WASHINGTON (MNI) – Former U.S. Treasury Secretary James Baker
Tuesday said he is “far from certain” that the United States will be
able to reach a ‘grand bargain’ between Congress and the White House on
tackling the nation’s massive deficits.

In a speech given as part of a lecture series at the Wilson Center,
Baker, who served as Treasury Secretary under Ronald Reagan and then
Secretary of State for George H.W. Bush, attributes his stance to the
current polarization of American government.

“I’ve seen what happens when you have a divided government, and
when you have this divided government in the midst of this very, very
angry zero sum political environment we’re in,” he said.

“It is quite possible,” he warned, that the result of the upcoming
November elections could be another period of partisan politics.

Democrats and Republicans must come up with a deficit-reduction
plan before the end of the year in order to avoid severe spending cuts
mandated by the 2011 Budget Control Act, otherwise known as the
sequester.

The sequester will automatically enact $1.2 trillion in cuts over
the next nine years split between defense and non-discretionary spending
if an agreement is not reached.

President Obama has declared his preference for a grand bargain
that would reduce the U.S. deficit by $4 trillion over the next ten
years.

Despite Baker’s uncertainty about Congress reaching such a grand
bargain, he said the American people must push for one. He added that in
order to achieve a grand bargain, a proposal must include both raised
spending cuts and revenue increases.

However, that type of proposal would only work with a safeguard
that includes up-front spending cuts and a cap on expenditures, Baker
said.

“You got to have an upfront payment of expenditure cuts,” he said.

“It is quite critical if you expect to bring Republicans to the
table to negotiate this, that there be a substantial down payment in
terms of expenditure cuts,” he continued.

He also endorsed the Simpson-Bowles plan and suggested an
enforcement mechanism such as a constitutional budget amendment but did
not provide specifics about what form the constitutional budget
amendment should take.

However, he said an amendment is “not going to happen” given the
current political climate, and so people will have to settle for
short-term legislation.

During Monday night’s presidential debate, President Barack Obama
told GOP challenger Mitt Romney that he did not propose the sequester
and “it will not happen.” Romney countered that rather than making cuts
in military spending, he would increase it by at least 4% of U.S. GDP.

Baker did not suggest that cuts in defense spending should be off
limits when it comes to the grand bargain. When asked if defense
expenditures should be exempt, Baker replied that “everything has to be
on the table.”

** MNI Washington Bureau: 202-371-2121 **

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