The White House’s fiscal cliff proposal.
Obama to GOP: I’m done negotiating with myself.
"That’s what you’re really seeing in this “proposal.” Previously, Obama’s pattern had been to offer plans that roughly tracked where he thought the compromise should end up. The White House’s belief was that by being solicitous in their policy proposals, they would win goodwill on the other side, and even if they didn’t, the media would side with them, realizing they’d sought compromise and been rebuffed. They don’t believe that anymore.
Perhaps the key lesson the White House took from the last couple of years is this: Don’t negotiate with yourself. If Republicans want to cut Medicare, let them propose the cuts. If they want to raise revenue through tax reform, let them identify the deductions. If they want deeper cuts in discretionary spending, let them settle on a number. And, above all, if they don’t like the White House’s preferred policies, let them propose their own. That way, if the White House eventually does give in and agree to some of their demands, Republicans will feel like they got one over on the president. A compromise isn’t measured by what you offer, it’s measured by what the other side feels they made you concede."
The best idea in American politics: Kill the debt ceiling begins with a good explanation of Obama's opening bid, particularly relating it to the Budget Control Act of 2010.
"That gives the structure of the White House’s proposed deal an evident symmetry: Republicans won in 2010, and they leveraged that win to secure the roughly $1 trillion in cuts in the Budget Control Act. Democrats won in 2012, and they intend to leverage that win to secure the roughly $1 trillion in revenue from the expiration of the high-end Bush tax cuts. After that’s done, the White House is proposing another $600 billion in spending cuts and another $600 billion in tax increases. Add in the $1 trillion or so in expected savings from ending the wars, and you’ve got about $4.2 trillion in deficit reduction over 10 years. Add in the savings on expected interest payments and you’re at almost $5 trillion. Subtract the White House’s stimulus request, and you’re somewhere a bit north of $4.5 trillion. That’s their opening bid. "
"But that’s not all: There’s also a proposal to end debt-ceiling crises forevermore. The idea comes from a most unlikely source: Senate Minority Leader Mitch McConnell (R), who proposed in July 2011 to permit the president to unilaterally raise the debt ceiling unless Congress affirmatively voted to stop him. And even if Congress did vote to stop him, the president could veto, and then Congress would need to overturn his veto."
How Obama would cut Medicare spending in a deficit deal
Boehner’s new counterproposal. Boehner’s latest tax offer is $150 billion less than he offered in 2011.
"Boehner’s offer from a year ago was meant to be roughly equal to the cost of letting the high-income Bush tax cuts lapse in 2013. But because we measure these things in the “10-year budget window,” the revenue was measured from 2012-2021. Thus, the revenue target Boehner was trying to reach included 2012, which was a year when the tax cuts were expected to be kept in place. So though the offer was for a 10-year plan, he was really offering revenue equal to only nine years of letting the tax cuts lapse. That reduced the total revenue he had to raise. Now, since he has to pay for the expiration of the tax cuts for the full 10 years, a revenue offer equal to the cost of the high-income tax cuts needs to raise about $950 billion, not $800 billion."
Boehner tries to call a mulligan.
"It is not surprising that Boehner wishes he could go back in time and accept the president’s offer from 2011, or fight for the compromise Bowles outlined before the supercommittee. Those are, from his vantage point today, quite good deals. But elections have consequences, and the consequence of this election is that those offers are no longer on the table.
Instead, we are likely to see a slow process of Bowles-style, split-the-difference compromise. Boehner is now at $800 billion in revenues, and the White House is at $1.6 trillion. If the two sides end at $1.2 trillion, that would be about what most in Washington are expecting. Similarly, Boehner is at $900 billion in mandatory spending cuts, and Obama is at $600 billion. if the two sides end at $750 billion, that wouldn’t be such a surprise. "
Today in ‘fiscal cliff’: This is what progress looks like.
"President Obama says it’s “out of balance.” The Heritage Foundation says it’s “preemptive capitulation.” But the reactions on both left and right drive home the fact that House Speaker John Boehner’s proposal to stop the “fiscal cliff” marks some progress in the ongoing negotiations, ending the standoff that’s been casting gloom over Washington over the last few days."
"On spending and entitlements, it’s not entirely clear what Boehner is asking for, aside from a $900 billion target, as simply raising the Medicare age, for instance, wouldn’t save nearly enough money. But the few details that Republican aides offered—notably, on background—have already prompted some signs of movement on the Democratic side. Despite earlier calls by Democrat leadership to take Social Security out of the discussions entirely and leave Medicare and Medicaid largely intact, House Democratic Whip House Steny Hoyer (Md.) told reporters Tuesday morning that Boehner’s proposals to limit the growth of Social Security benefits, raise Medicare premiums for the wealthy, and raise the Medicare eligibility age are a part of the negotiations."
The GOP’s bizarre ‘doomsday plan’.
"Republicans are seriously considering a Doomsday Plan if fiscal cliff talks collapse entirely. It’s quite simple: House Republicans would allow a vote on extending the Bush middle class tax cuts (the bill passed in August by the Senate) and offer the President nothing more: no extension of the debt ceiling, nothing on unemployment, nothing on closing loopholes. Congress would recess for the holidays and the president would face a big battle early in the year over the debt ceiling. Two senior Republican elected officials tell me this doomsday plan is becoming the most likely scenario.
Today, the New York Times adds more detail, including this quote from Rep. Michael C. Burgess (R-TX): “There’s always better ground, but you have to get there.” In this case, the “better ground” is exchanging the threat of a congressionally induced recession for the threat of a congressionally induced global financial crisis. That’s better ground?"
"Meanwhile, Republicans will be threatening not just to take us over the fiscal cliff, which will already have happened, but to trigger a financial crisis by breaking through the debt ceiling. And they will be doing all of this after having lost an election. And for what? Because they want deeper Medicare cuts that they refuse to publicly specify? "
Today in ‘Fiscal Cliff’: If the GOP folds on taxes, what would Dems give up in return?.
"Democrats won’t compromise on tax hikes for the wealthiest 2 percent of Americans. And there are signs that this hard-line strategy may be working: Today, Sen. Tom Coburn (R-Okla.) became the latest Republican to say that he’d be open to increases in marginal tax rates to raise revenue.
It isn’t the first time that Coburn, a Gang of Six member, has bucked GOP orthodoxy on taxes. But he joins the growing ranks of conservatives who say that it’s not worth the fight on upper-income tax rates, signaling that Republicans may ultimately concede the issue to Democrats.
As that reality has begun to sink in, there’s been a lot more talk about about how Republicans can best position themselves and what they might demand in exchange for increases in tax rates, assuming that they have lost that battle. That raises the question of what Democrats would be willing to concede in return."
There are other plans on the table too:
Bill Clinton’s people brought down the deficit once. Now they’re trying to do it again..
"On Tuesday, CAP unveiled a tax reform plan written by a rogue’s gallery of Clinton vets, including former treasury secretaries Robert Rubin and Larry Summers, deputy treasury secretary Roger Altman, White House chief of staff John Podesta, commerce secretary Bill Daley and others. Summers and Daley, as well as report co-author and CAP president Neera Tanden, all held high-ranking posts in the Obama administration.
The $4 trillion deficit-reduction plan the group came up with raises $1.8 trillion in new revenue through tax reform, $1.5 trillion through enforcing existing budget caps, and $485 billion in cuts to Medicare and defense spending. It adds $400 billion in stimulus and infrastructure investments meant to help growth. If implemented, that proposal would get debt-to-GDP down to 72 percent in 2022, or about where it is today. The importance of that measure is highly questionable, but insofar as one wants deficit reduction, the plan accomplishes that goal. The Medicare and defense cuts come from existing CAP plans, but the tax stuff is all new."
11 shocking, true facts about Simpson-Bowles.
"An important fact to keep in mind in the coming days: “The Bowles plan” that Speaker John Boehner endorsed is not the same as “the Simpson-Bowles plan.” Indeed, it’s not even the plan supported by its apparent namesake, Erskine Bowles, who insists that he was simply sketching out the evident middle ground between the members of the supercommittee.
The Simpson-Bowles plan — which Erskine Bowles does actually support — occupies strange territory in Washington: Almost every politician professes to admire it, almost none of them are willing to vote for it, and almost none of its supporters know what’s in it. So here, with an assist from the Center on Budget and Policy Priorities, are a few facts to keep in mind about the Simpson-Bowles plan. And while you’re reading this list, remember: Simpson-Bowles is a centrist proposal."
Here are the three that really jumped out at me:
"2) There are a lot of tax increases in Simpson-Bowles. $2.6 trillion over 10 years, to be exact. That’s more than President Obama ever proposed. It’s way more than the Republicans have ever proposed. It’s $1.8 trillion more than in the “Bowles plan” that Boehner is proposing. Think about that: To follow the Simpson-Bowles recommendation on taxes, you’d have to take the $800 billion Boehner is proposing and then raise taxes by more than the $1.6 trillion Obama is asking for."
"8) Simpson-Bowles cuts security spending by $1.4 trillion, not including drawing down the wars. That’s far deeper than what’s in the law now, far deeper than anything the White House or the Republicans have proposed, and deeper, I believe, than the sequester cuts that so many think would devastate the military."
"9) The Social Security changes. Simpson-Bowles makes three main changes to Social Security. It increases the taxable maximum on income to 90 percent of all income, which raises $238 billion over the next decade. It uses a different measure of inflation to slow cost-of-living adjustments. It raises the retirement age to 68 in 2050 and 69 in 2075"
A few things to keep in mind when you hear all these plans.
I think Ezra Klein is the only journalist that writes (and interestingly) about budget baselines, but that's exactly what he does in The GOP’s hidden budget advantageRaising Medicare’s age: Saves feds $5.7 billion, costs you $11.4 billion.
" If the Medicare age were raised, the thinking has gone, the 3.3 million 65- and 66-year-olds would still be guaranteed access to health coverage through the tax subsidies. The lowest-income seniors — those earning less than 133 percent of the federal poverty line – would qualify for Medicaid.
That’s the upside. Health care economists see a number of downsides, too. For one thing, Medicare tends to be a pretty efficient program. Its costs have grown slower than private health insurance plans. The Center for Budget Priorities and Policy estimates that, while the federal government would save $5.7 billion, the rest of the health care system would end up spending $11.4 billion more to provide those same benefits."
The reality of tax reform: Less charity, smaller homes, higher state taxes. "The term ”base-broadening, rate-lowering tax reform” has the advantage of vagueness: No one knows what it means. But the practical definition, at least the one that’s emerging in the ongoing “fiscal cliff” negotiations, is tax reform that limits itemized deductions among high-income taxpayers. And as former OMB director Peter Orszag points out, 90 percent of the value of those deductions comes from just three categories: “taxes paid (mostly state and local taxes), home-mortgage interest and charitable contributions.” So when we say “base-broading, rate-lowering tax reform,” here’s what we’re really saying: Tax reform that’s paid for by cutting tax breaks for charities, homes, and state and local taxes."IMF: Budget cuts hurt growth a lot. But tax increases barely matter..
"A new study (pdf) by the International Monetary Fund raises a further warning flag for fiscal cliff negotiators in the U.S. In what it bills as the first-ever study of its kind, the fund analyzed decades of data on the world’s major industrialized countries to estimate how changes in government spending or revenue affect economic output."
"Given current circumstances, with a U.S. economy that is growing but still trying to make up lost ground from the 2008 crisis, a one dollar change in government spending could knock as much as $1.80 in output from the economy – what fund researchers called a “statistically significant…and sizeable” outcome.
One brighter spot that could also influence negotiators: the growth impact of a tax hike is estimated to be negligible. The list of measures that automatically become law absent an agreement include both spending reductions and tax increases. While the spending cuts would comprise a heavy drag on growth, the fund paper suggests that a one percent rise in tax revenue would knock just 0.1 percent from gross domestic product."
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