Watching the flames

TAPPER: Does the White House have a position -- have you had a chance to review the Gang of Six plan beyond the general support for principle -- its principles that the president discussed yesterday?

CARNEY: Well, what I would say is that -- again, as I said yesterday, it represents significant broad support along the lines of the approach the president took. There are -- as we look at the provisions within it, and as you know, the -- there was some level of detail provided, and more coming. You know, it's possible we may not agree with every aspect of their approach, but the issue here isn't which piece of paper will be the final piece of legislation because that -- you know, that's going to be up -- if the decision is made that we're going to take a bipartisan approach, that we're going to take a balanced approach, the framework that the president put forward, that the Gang of Six has now put forward, that Simpson and Bowles commission has put forward and others -- you know, are all available to create a process that produces a piece of legislation that we believe a majority in Congress would support, and certainly the American people would support and the president would sign, the details of that, obviously, would have to be worked out.

But the frame here -- savings out of the tax code, savings out of -- from entitlement reform, significantly reduced nondefense discretionary spending, reduced defense spending that's done in a waythat protects our national security -- this is the way to go about it. And that's how you get to the 3.5 trillion (dollars) and above savings over 10 years that we've talked about and that the Gang of Six is talking about.

So as long as there's political will, the details -- there's enough substance out there now for a package to be crafted.

And I think -- I would note that one of the things that either Speaker Boehner or his spokesperson said last night was that there was some similarity between what the Gang of Six had put forward and what the president and the speaker had been talking about when they were looking at the possibility of achieving a grand bargain. So, again, that's the -- that's the -- you know, we agree with that assessment. And if the will is there, we can get down to negotiating the details.

All in all, it looks a lot like the Simpson-Bowles plan, which was pretty much the point of the exercise. A few weeks ago, I wrote a column arguing that, in retrospect, the Simpson-Bowles plan was a pretty good deal: It was more balanced on both the spending and the tax side than the president's April deficit-reduction proposal. I think that it is, if anything, truer now than it was then, and truer in this bill than it was in that bill. This bill, for instance, appears to jettison the Simpson-Bowles recommendation that tax revenues be capped at 21 percent of GDP.

It's become quite clear that a big deficit bill will be more balanced than a series of small bills. It would also be nice to get deficits off of the agenda for awhile so the political system could do other things. And though this doesn't get much attention, you can get more actual reform in a big bill — think of the difference between overhauling the tax code and simply raising rates slightly, or the difference between changing how Medicare pays doctors and simply cutting benefits — than you can out of a small bill, which ultimately means you're making better policy. So though there's lots to argue with in this bill, and lots that I, personally, would like to change, I don't think there's much doubt that it's far better than what Congress is likely to do — or not do — if it fails.

• Lower marginal tax rates so that they fall in 3 brackets: one at 8-12%, one at 14-22%, and one at 23-29%;
• The elimination of the alternative minimum tax, which would cost $1.7 trillion;
• Reform but not elimination of the really big tax expenditures, like charitable deductions, the employer health care deduction and the mortgage interest deduction;
• Revenue-neutral corporate income tax reform;
• And yet a grand total of $1 trillion in net revenues, on top of the $800 billion built in from the assumption of the end of the high-end Bush tax cuts.

If it seems too complicated, that’s because it probably is. Only the mother of all accounting tricks could lead to this tax reform penciling out. It’s far easier to just let the Bush tax cuts expire, all of them, and reach the $4 trillion deficit target that way. Now maybe there are some things that, piece by piece, you could substitute out in exchange: defense cuts for middle-class tax cuts, for example. But that’s essentially PAYGO. Just sticking to the CBO baseline, rather than this opulent tax reform plan that makes no sense in reality, seems preferable. And besides, even rich GOP donors are telling their leadership that they want their taxes increased.

The line is but a simple plot of the inflation-adjusted, median weekly earnings for full-time workers. The median worker, to remind you, is the person right in the middle of the wage scale. So think of this as a proxy for the middle-class wage.

It’s falling in real terms.