"Cliff" notes 12/3
In case you were wondering about what's in the "Bowles Plan" (as opposed to the Simpson-Bowles proposal) Talking Points Memo lays it out:
Bowles called for $800 billion in new revenue, without resorting to using “dynamic scoring,” but not specifically from raising tax rates. He proposed raising the Medicare eligibility age, and changing government tax and spending formulas to use so-called chained CPI, reducing benefits in programs like Social Security and raising tax revenues over time by hastening workers ascent into higher tax brackets as they climb the income ladder. He proposed $300 billion in further cuts to discretionary spending, $600 billion in cuts to health care programs, and $300 billion in other mandatory spending programs, but did not spell out entirely how the cuts should be designed.
This comes from a congressional hearing in the fall of 2011 in which Bowles testified that he thought the above was a "balanced approach." At the time the Republicans scoffed at the idea they would ever agree to raise taxes any way, any how, but they've cleverly evoked Bowles' name (a name that's repeatedly been floated to replace Geithner as Treasury Secretary )as cover for their proposal to cut the living crap out of well ... everything.
The GOP’s offer provides no further specificity about those cuts either. It is silent on how to raise $800 billion in revenue, other than to call for closing loopholes and lowering marginal rates. It says nothing about when the higher taxes would kick in.
“This is by no means an adequate long-term solution, as resolving our long-term fiscal crisis will require fundamental entitlement reform,” the letter reads. “Indeed, the Bowles plan is exactly the kind of imperfect, but fair middle ground that allows us to avert the fiscal cliff without hurting our economy and destroying jobs. We believe it warrants immediate consideration.”
It's true that Bowles proposed this --- he was among a whole bunch of Very Serious Democrats (including the president) who put these cuts on the table repeatedly in 2011. But he disavowed his proposal today, saying circumstances have changed. (I'm hopeful he's talking about the circumstances of Democrats winning the election, but who knows?)
He explained at the time that cutting Medicare was logical since we now have Obamacare. A lot of people seem to think this makes good sense, but I honestly cannot believe that anyone would talk about raising the age for Medicare eligibility because an untried, untested, hugely controversial new program will supposedly make it all ok. That's just daft in my opinion. And from what we're seeing with states rejecting Medicaid dollars and refusing to create the exchanges, it should be unequivocally off the table for the foreseeable future. It's not as if it will ever be easy to lower the age again and even that would come on the heels of a hell of a lot of suffering among people who worked their whole lives in anticipation of having their medical care covered once they got old and sick. It's appalling that anyone would play and experiment with them before anyone has the vaguest idea if Obamacare is going to work. You simply cannot take health care away from people, particularly at this age, without knowing that the replacement will be adequate. And we do not know if it will be adequate.
The White House responded to the GOP offer with this:
“The Republican letter released today does not meet the test of balance. In fact, it actually promises to lower rates for the wealthy and sticks the middle class with the bill. Their plan includes nothing new and provides no details on which deductions they would eliminate, which loopholes they will close or which Medicare savings they would achieve. Independent analysts who have looked at plans like this one have concluded that middle class taxes will have to go up to pay for lower rates for millionaires and billionaires. While the President is willing to compromise to get a significant, balanced deal and believes that compromise is readily available to Congress, he is not willing to compromise on the principles of fairness and balance that include asking the wealthiest to pay higher rates. President Obama believes – and the American people agree – that the economy works best when it is grown from the middle out, not from the top down. Until the Republicans in Congress are willing to get serious about asking the wealthiest to pay slightly higher tax rates, we won’t be able to achieve a significant, balanced approach to reduce our deficit our nation needs.”
So the public kabuki is still all about the taxes. Let's hope there's more discussion behind the scenes because as dday pointed out, it is about a lot more than that. He quoted this from Jonathan Karl about the so-called Republican Doomsday Secnario:
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.
Karl says that the sequester could get delayed for a year as part of the House GOP doomsday scenario. But either way, this would put Democrats in a tough spot. They would lose the tax leverage after having won that battle. They would see an economic slowdown from the end of extended unemployment benefits, the payroll tax cut and possibly the sequester. And they would have to battle over a debt limit increase without the tax rate discussion to fall back on.
Yeah well, I've been screaming about that hollow victory for a couple of years now and I'm highly suspicious that there are people on the Democratic side who would be perfectly willing to be backed into this corner. They've demagogued the deficit into a crisis worthy of an invasion from a foreign planet at this point so whether the cuts come as a result of a Grand Bargain or a series of "showdowns" doesn't really matter. There is a tremendous amount of pressure to gut "entitlements" from a whole bunch of center and center right elites to do it. The biggest challenge for the White House would be how to frame this as a part of their vaunted "balanced approach" and I'm not sure it would be that easy. I'd be very interested to see if the Republicans are willing to give them that.
This actually shows some recognition that the fiscal slope is not solely a tax discussion. Even if you solve the tax puzzle, there are lots of other moving parts. Republicans learned that the debt limit gives them real leverage as long as the President doesn’t resort to the Constitutional option, using the 14th Amendment to essentially render the debt limit moot. I’d almost guarantee articles of impeachment in the House in that event.
If the President doesn’t go that route, and he doesn’t direct his Treasury Secretary to mint a $1 trillion platinum coin, then you have a situation where House Republicans have the power to control events, and Democrats have serious needs – a debt limit increase, restoration of extended unemployment benefits, etc. The Republican position may be unpopular, but if they’re willing to press the issue, they can force through many of their priorities. The increase in top marginal rates will soon turn into a hollow victory on partisan grounds.
Anyway, grain of salt on all of this. They're posturing in public and dealing in private and we really can't know what's up from these reports. I continue to believe that the baseline for negotiations is the 2011 debt ceiling agreements, with the major hang up being the tax rates. I still suspect that everything we're seeing is in service of making that happen in a way that the Republicans can stomach. Seriously hoping I'm wrong.