Kent Conrad can be forgiven for feeling a sense of budget disaster déjà vu.
As chairman of the Senate Budget Committee, Conrad is presiding over a federal deficit of $1.5 trillion and accumulated debt of $14 trillion.
“The irony here is we’ve got a $14 trillion debt, we’ve got a $1.5 trillion deficit, and all of the focus has been on a $4 billion, two-week extension and a $60 billion package of additional cuts. I mean, what’s wrong with this picture?” says Conrad, who has been a key player in the stopgap negotiations between Congress and President Obama to raise the debt limit and avoid a government shutdown.
The challenge of fixing this mess is daunting, and will be the capstone to Conrad’s lengthy congressional career; he announced in January that he won’t seek re-election to a fifth Senate term. The irony is that a similar budget mess—one by several magnitudes less severe—almost prompted Conrad to retire two decades earlier.
Conrad was an idealistic, young freshman senator running as a deficit hawk from North Dakota in 1986 when he made an agonizing campaign pledge. He had promised voters that if federal spending and borrowing continued to explode, he wouldn’t try for a second term.
By early April 1992, it was clear that Conrad, a junior member of the Senate Budget Committee, had failed to make a dent in cleaning up the fiscal mess. The deficit was topping an astronomical $290 billion and the national debt had reached an unimaginable $4 trillion. Conrad, a conservative Democrat, was popular back home and had raised a huge war chest. But he felt he had no choice but to keep his promise and drop out of his reelection race.
“That was an incredible time for Lucy and me,” Conrad recalls, referring to his wife, Major League Baseball lobbyist Lucy Calautti, who’d managed his first Senate campaign. “I’ll never forget, as long as I live, waking up and telling her, ‘I can’t do it.’ ”
But a twist of fate allowed Conrad to stay. North Dakota’s octogenarian senior senator, Quentin Burdick, died in September 1992, and Conrad seized the day and won the special election to replace him, giving the young senator a chance to resume his labors to stop credit-card splurging in Washington.
He’s got one last shot at success; the 62-year-old Conrad announced recently that he won’t re-up when his current term runs out in December 2012, and his story seems unlikely to end happily ever after.
This past week, the Democrat-controlled Senate agreed with the Republican-controlled House to fund the government until March 18—a deadline that will likely require a second extension, at least, if a shutdown is to be averted. Meanwhile, Conrad and five other Senate deficit hawks—a bipartisan conclave known as “The Gang of Six”]—have been meeting behind closed doors, negotiating against the clock, in an attempt to plot a politically plausible course toward budgetary discipline. Conrad refuses to talk about the Gang’s discussions. “We all agreed going forward that we’re just not going to comment about our deliberations, because it can kill the baby in the crib,” he explains. (The Republicans involved—including Oklahoma’s Tom Coburn—also take risks, having drawn fire already from conservative anti-tax activists like Grover Norquist).
“I am focused on a long-term agreement that not only deals with domestic discretionary spending, but also a comprehensive fiscal plan,” Conrad tells me, adding that success is hardly assured. “I don’t know. It should happen,” he says. “Any rational person would conclude that everything’s got to be on the table—that you have to have deficit reduction in the range of $4 trillion over the next ten years, and you’ve got to deal with entitlements, you’ve got to deal with revenue, and it’s got to be comprehensive.”
At the moment, “we are borrowing 40 cents of every dollar we spend,” Conrad points out. “Spending is the highest it has been in 60 years as a share of GDP [gross domestic product]. Revenue as a share of GDP is the lowest it’s been in 60 years. If that doesn’t tell us something, I don’t know what it would take.”
How did it all go so horribly wrong?
“What happened? I think we all know what happened,” Conrad tells me. “George Bush came in, promptly put in place massive tax cuts—which I opposed—that disproportionately benefited the wealthiest among us, and then launched the war in Iraq—which I also opposed—which is going to wind up costing us between two and three trillion dollars. Then, at the end of the Bush administration, we went to the brink of financial collapse.”
And the root cause of the catastrophe?
“I think it is human nature,” Conrad says. “If you go to the American people and ask them, they will tell you that they want to get the deficit under control. If you go to the next level and ask them, OK, do you want to change the entitlements? No. Do you want to touch defense? No. Do you want to increase revenue? No. They say they want to cut spending, but if you start asking them about specific cuts, they reject all of them except one—foreign aid. That’s less than 1 percent of the budget. So Congress and the White House are basically a reflection of the American people. And absent strong leadership—starting with the previous president, and including this president—to convince people of the need to deal with these issues, it’s human nature to put off unpleasant decisions.”
Equally disappointing, Conrad says, was the decision of five of six House members on Obama’s National Commission on Fiscal Responsibility to vote against the group’s deficit-reduction proposals, essentially scuttling the effort. A majority of the 18-member body—including five of six presidential appointees and five of six senators (Conrad among them) had supported the plan, which included controversial measures to raise revenue and limit popular programs such as agricultural subsides and the mortgage interest deduction. But they fell three votes short of the supermajority required to send the package to Congress.
“We cut almost $600 billion in entitlements, we put in place a trillion dollars of revenue, and then we got interest savings from the balance, so we had combined savings of $4 trillion over 10 years,” Conrad says. “Judd Gregg [the ranking Republican on the budget committee until he retired last year as New Hampshire’s senior senator] and I worked for three years to get a commission, and we served on it, and 11 of the 18—which is more than 60 percent of the commissioners—agreed to the proposals. Usually 60 percent carries the day here. Not in this case, because the hurdle had to be higher in order to get agreement to have a commission in the first place.”
Not even Obama supports the deficit-reduction remedies offered by his own commission—not publicly, anyway—and remains enthusiastically noncommittal. Conrad, who endorsed Obama in the 2008 Democratic primaries, defends the president’s arm’s-length stance.
“Honestly, because of the way things are in this town, what would happen if he did [endorse the commission’s plan] is that House Republicans would then be immediately slashing it,” he says. “So it is probably better that he holds back and lets this begin in the Senate. If he went out and said, ‘I endorse the commission plan,’ that would probably hurt our effort.”
But doesn’t he feel let down by Obama’s performance?
“No,” Conrad insists. “I think he will be given very high marks in history for averting what could have been a financial collapse. And I will also give credit to Bush at the end of his administration for the steps he took with TARP [the Troubled Asset Relief Program, aka the Wall Street Bailout], and beginning the rescue of the domestic automobile industry. But Bush will be given low marks for what he did to put us in the position of financial collapse.”
In January, when Conrad announced his retirement plans, he argued that now he would be free to focus on the deficit without the distraction of a campaign. So I ask him the obvious question: What makes him think that he can accomplish in the next two years what he wasn’t able to accomplish in the last 24?
“But we did accomplish it in the 1990s!” he replies, harkening back to that brief shining moment—in fiscal years 1998, 1999 and 2000—when the government was running a surplus. “We got back on track, through the collective decision-making of Congress, the president and the Federal Reserve. I was very actively engaged in that effort. There were many players, and I’d put at the head of the list President Clinton, who did a brilliant job.”
But given how things have turned out, isn’t Conrad jaded?
“I’m really not, if ‘jaded’ means, do I lack hope, do I think it’s not possible to do?” he says. “Look, it’s been done—in the ‘90s. I’m working every day on this effort. So I remain optimistic.”