2009 could be 1929

President Obama could make a down payment on a post-partisan grand bargain and fiscal responsibility by doing what President Reagan did with then-House Speaker Tip O’Neill (D-Mass.): naming a bipartisan commission to address the enormous financing issues of Social Security and Medicare.

The choice facing the president and Congress may be a grand bargain to fix the economy or a “lost decade” of recession similar to what plagued Japan in the 1990s, or a depression that could rival that of the 1930s. Everyone in official Washington must understand the immensity, gravity and severity of the risk that threatens the economy.

Our economic nightmare today will cause a fiscal nightmare tomorrow. All stimulus programs fall short. The banking bailout will require far more money. The calamity of the auto industry continues. Money is hoarded. Layoffs are skyrocketing. Confidence is shattered and public outrage mounts at rapacious compensation of some of the very players who did the most to cause the crisis.

Neither party can honestly believe it fully understands the crisis. Neither party can claim legitimate confidence that its policies will end it. Both the crisis of cash and the crisis of confidence are contagious, and the contagion is spreading across the nation and around the world while business as usual continues in Congress and layoffs rise and foreclosures climb by the hour.

There is an understandable but deadly sense of denial and delusion in Washington, where party-line votes continue. Officials parade to the television cameras with talking points and spin; armies of pundits and operatives parade to the 24-hour cable news with vapid attacks that are divorced from the reality of American economic life and ignorant of the magnitude and danger of our economic crisis.

A global depression is possible. A lost decade of recession is possible. This need not happen. With the right policy decisions and the restoration of confidence, America could grow again this year. With the wrong decisions and the continued collapse of confidence this contagion could overwhelm us all and be condemned by historians for a hundred years.

Let’s do the grand bargain to fix the American economy. Democrats allowing and Republicans offering Potemkin votes on amendments destined to fail are empty Kabuki dramas and no substitute for the strong actions and shared responsibility that our crisis demands.

President Reagan and Speaker O’Neill were right in their time. Obama would be right in ours to forget the politics of Social Security and Medicare, do the right thing and stabilize them with a bipartisan commission. This would reap enormous savings and enhance consensus for stronger stimulus this year.

The president could build relationships as Reagan had with Tip and President George H.W. Bush had with Dan Rostenkowski, then the chairman of the Ways and Means Committee. He could invite all members of key committees to Camp David retreats.

The president could bring into the process former Republican White House Chiefs of Staff James Baker, Howard Baker and Ken Duberstein and reach out to idea-based Republicans such as Jack Kemp and Newt Gingrich. Tom Daschle is an advocate for patients, consumers and taxpayers and a bridge to bipartisanship who has reached out to Republicans on healthcare.

We can avoid an economic Armageddon, but only if both parties understand that the dangers are extreme and time is short.

Budowsky was an aide to former Sen. Lloyd Bentsen and Bill Alexander, then chief deputy majority whip of the House. He holds an LL.M. degree in international financial law from the London School of Economics. He can be reached at brentbbi@webtv.net and read on The Hill’s Pundits Blog.