Best of budget - combining Tea Party and Occupy

Likewise, House Republicans were badly burned by their intransigence over the payroll tax cut last December. The GOP cannot afford to again be seen risking economic growth in favor of ideological purity over the role of government and debt. 

So each side is beginning to learn - slowly, haltingly (witness the GOP primary process) - that there are costs to following their most extreme elements on tax and budget issues.

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Yet no one has figured out the more positive corollary - how to harness the immensely valuable political space the Tea Party and Occupy movements have each created to help the economy and create jobs. There is reason to believe whoever captures this terrain will be the decisive political force on the economy in Washington for years to come.

The GOP and Tea Party contend that cutting government spending will help the economy in the short- and long-run. Whatever the merits of this argument, the emphasis on debt reduction has created political cover for many in Congress to support small changes in entitlements, which can accrue huge budgetary savings over time. These savings will go a long way toward reducing the debt, as leading bipartisan proposals by Simpson-Bowles and the Bipartisan Policy Center’s Domenici-Rivlin have shown.

Meanwhile, Democrats and the Occupy movement believe that dealing with income inequality is the key to economic growth. Again, merits aside, the Occupy movement has convinced many Americans that the decline of the middle class is corrosive to our national strength, and must also be addressed, in part by raising taxes on the wealthy, and by using revenue to invest in economic growth. 

In addition, both parties and their movement activists now claim to embrace tax reform to clear away special interest provisions that allow companies and individuals to game the system. The current code is not only unfair and inefficient, both sides agree, it also hinders US economic competitiveness - a message both the Obama Administration and the Romney campaign echoed in corporate tax proposals last week.

Finally, polls show that a majority of Americans view the central concerns of both the Tea Party and Occupiers as legitimate. Yet the supposedly brash new breed GOP cowers from the likes of Grover Norquist and Crossroads GPS; and fearless Democrats quake in their boots at the approaching footpads of the AARP and other interest groups. 

This should create the perfect stage for a third party candidate to wield profound influence, even greater, perhaps, than Ross Perot did in 1992. The right independent could take full advantage of the populist political space each party has created on the debt, tax reform and economic growth, appealing to the uneasy in both parties and to increasingly alarmed unaligned voters with a message of shared economic opportunity and American revitalization.

But picking the best ideas from right and left may still not be enough, either to actually address the underlying U.S. unemployment problem or to inspire the kind of enthusiasm a third party must generate. As Joseph Stiglitz and others have noted, high long-term U.S. unemployment is largely the result of the somewhat inevitable decline in U.S. manufacturing jobs in a global economy (just as the underlying unemployment problem in the Great Depression was an inevitable reduction in agricultural employment). The problem is therefore structural, as we have known to some degree since the 1980s, and cannot be addressed in the long run by fiscal and monetary approaches alone.  

Instead, investments in education, technology, and infrastructure to create demand in and skills for the now-dominant information and service sectors are needed, just as it took demand from World War II to lower unemployment by creating a more robust industrial sector.

A carefully structured budget deal can create the opportunity to do this, and begin to get America back to work. And while recent employment numbers are encouraging, they are far short of the millions of new jobs needed to create a robust job market and broader prosperity. Expiration of the Bush tax cuts and other provisions at the end of the year creates the perfect opportunity for such a deal - although a truly transformative deal is more likely not in a lame duck session, but next year under a newly elected Congress and President.

Eventually, someone will break America’s seemingly intractable partisan gridlock, in which the major parties are unable to capitalize on the good ideas of even their own partisans. This may well require a credible third party run. Or, who knows? Perhaps President Obama or the Republican nominee will surprise us.

Paul Bledsoe is senior advisor at the Bipartisan Policy Center. He was Press Secretary of the Senate Finance Committee from 1993-1995 under Chairman Daniel Patrick Moynihan.