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Hullabaloo


Tuesday, July 30, 2013

 
Grand Bargains, good and bad

by digby

First the good news:
As fall approaches, White House chief of staff Denis McDonough has met frequently with Republican senators in the hopes of finding consensus on an overarching fiscal deal. But the two sides are stuck in the same-old tax-and-spending debate — Democrats want to raise revenue, while Republicans refuse.

The lack of progress underscores a growing belief in Washington: The long-sought grand bargain could very well be out of reach during the Obama presidency.

The negotiations come against the backdrop of a double dose of fiscal drama — Congress must act to continue government spending by Sept. 30, or a government shutdown could ensue, and the debt ceiling must be hiked or the country could go into default sometime this fall. 
A short-term solution to the country’s fiscal woes seems more likely, but even that may not happen.

Senators said Monday evening that a decision needs to be made: Should the two sides continue to focus on the grand bargain — a major reform of tax and entitlement programs — or instead on a much smaller goal of reforming the automatic sequestration cuts.
“We’re a sounding board for our conference, so our conference is going to have to be on board with whatever we do,” Sen. John Hoeven (R-N.D.) said Monday. “The administration still wants higher taxes. I’m telling you: That’s a problem. For our conference, that’s a problem.”

Sen. Saxby Chambliss (R-Ga.) said there are still “major hurdles” despite the pressure to reform entitlement programs and the Tax Code.

“I’m not too optimistic at this point that we’re going to get there,” he said.

Talks will continue this week, and there is still time to avoid a budget crisis, particularly as fall approaches and fear increases among GOP defense hawks about the deepening sequester cuts affecting the military.

Last week, McDonough, his deputy Rob Nabors and budget director Sylvia Mathews Burwell met twice privately with Senate Republicans, representing an uptick in talks after they had mostly stalled in June.
If the sequestration cuts to the military are finally starting to bite in a way that the administration and the congress can no longer mitigate or ignore, then it's possible they could finally come together to fix these automatic cuts. That was the original idea, after all.

It should strike everyone that the Village newspaper writes about it in these particular terms, however:
The long-sought grand bargain could very well be out of reach during the Obama presidency.
Unfortunately, it's entered the beltway lexicon now and we can expect it to be the holy bipartisan grail going forward. Thanks a lot.

Also, think about what it is that's reportedly holding up an agreement:
Republicans and the White House both agree on proposals to cut Social Security known as chained CPI, referring to reduced payments to beneficiaries because of how annual cost-of-living adjustments are calculated. And the two sides seem to be on the same page regarding reducing benefits that wealthy seniors now receive from entitlement programs, a proposal known as means testing.

But the White House wants new taxes in exchange for those entitlement cuts, something at which the GOP continues to balk. And Republicans have pushed for the two sides to agree on going beyond the typical 10-year budget projections and instead examine how much the budget picture will worsen over the next 30 years. But the White House is resisting a 30-year budget projection, believing the numbers are unrealistic.
I continue to be amazed that the White House thinks temporary tax hikes are a good "bargain" in exchange for making the elderly suffer. I guess they really do believe Democrats love taxes so much would do anything in order to raise them --- even destroy their own legacy. The good news is that Republicans hate taxes even more than Democrats supposedly love them. So far, that's good enough to keep this thing from happening.

But one cannot worry a little bit if somehow this new Grand Bargain is going to be folded into the old one --- after all, it cuts taxes:
“Obama wants to cut the corporate tax rate of 35 percent down to 28 percent and give manufacturers a preferred rate of 25 percent. He also wants a minimum tax on foreign earnings as a tool against corporate tax evasion and increased use of tax havens. The new twist is that in exchange for his support for a corporate tax reduction, he wants money generated by the tax overhaul to be used on a mix of proposals such as funding infrastructure projects like repairing roads and bridges, improving education at community colleges, and promoting manufacturing, senior administration officials said. Obama’s proposal would generate a one-time source of revenue, for example, by reforming depreciation or putting a fee on accumulated foreign earnings.”
As a stand alone, this seems fine to me. I don't think corporations need to have their taxes cut but if the GOP corporate tax cut plan (and that's basically what it is) can bring in enough pin money temporarily to do some investment spending, then maybe it makes some sense --- as long as they don't decide to sweeten the pot by throwing in the already agreed upon Social Security cuts.

Because if they do that, we're looking at the Grand Bargain that was set forth a long time ago, aren't we?

At the end of the day, are you really talking about over the course of your campaign some kind of grand bargain? That you have tax reform, healthcare reform, entitlement reform including Social Security and Medicare, where everybody in the country is going to have to sacrifice something, accept change for the greater good?"

"Yes," Obama said.

.



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