Jake Tapper has a tick-tock on the debt limit negotiations that matches most of what I’ve seen before, so I thought I’d lay it out:
President Obama has proposed possible tax increases that all together total more than $400 billion over the next decade, Democratic officials with knowledge of the deficit negotiations said today, with a goal of roughly $2 trillion in total reductions, most of which would be obtained by spending cuts.
But last week, Republicans participating in the talks – Rep. Eric Cantor, R-Va., and Sen. Jon Kyl, R-Ariz. – indicated that “we are now getting down to the crunch time” and “this would have to be kicked upstairs to the leaders” of their respective caucuses, House Speaker John Boehner, R-Ohio, and Senate Minority Leader Mitch McConnell, R-Kentucky [...]
Increasing general tax rates was never on the table, the Democratic officials said.
I think I’ve put down these numbers before, but just to be clear, what we have here is a deal with $1.6 trillion in spending cuts and $400 billion in revenue increases, through closing loopholes, not increases in tax rates. That’s a 4:1 ratio of spending to revenue, and I’ve actually heard something a bit higher, more like 5:1. And this is what Republicans rejected, even though it looks substantially similar to their initial proposal on a spending to revenue ratio.
Tapper lays out the tax changes (all numbers based on a ten-year window):
• Closing a corporate jet tax break: $3 billion (which is almost nothing, so that and some other tax breaks that sound bad are clearly part of a populist ploy to paint Republicans in a bad light)
• Changing carried interest so investment fund managers pay the same tax rate on their income as everyone else: $19 billion
• Ending fossil fuel subsidies for the oil and gas industry: $45 billion
• Ending the LIFO (last in/first out) accounting loophole for businesses: $60 billion
• Capping itemized deductions for individuals who make over $200,000 a year or families who make over $250,000: $290 billion
That actually comes to $417 billion.
In exchange there are $1 trillion in discretionary spending cuts, including the Pentagon budget, $200 billion in reduction to mandatory federal spending (including Ag subsidies and reducing federal employee pensions), and $200 billion in cuts to Medicare and Medicaid. Now, you could make up that $200 billion simply by allowing Medicare to bargain for prescription drugs and by reforming dual eligibles – that gets you right to $200 billion – but there’s no indication on the specifics.
The spending side actually comes to $1.4 trillion, so there are probably some extras to get it to $1.6 trillion. The chained CPI change would add about $300 billion, so that’s in the ballpark. Remember, that’s both an effective tax hike and a Social Security benefit cut – the Social Security part doesn’t effect the deficit, and that takes up about $100 billion, for a difference of $200 billion, or what you would need to get to $1.6 trillion.
And by the way, this is just a “down payment” on a broader deal that cuts $4 trillion over ten years, all told.
The LA Times reports that Republican leaders would take this deal in a second, but they fear their maximalist base. That maximalist base is the only thing standing between us and a deal that would significantly harm the economy in the near term and do violence to the safety net in the long term. Republicans would get 5/6 of a loaf in this deal, as well as a win on the philosophical idea that austerity is somehow a good proposition during a jobs crisis.
But Republican leaders also probably figure that they can win everything just by holding out a bit longer.
Bear in mind that G.O.P. leaders don’t actually care about the level of debt. Instead, they’re using the threat of a debt crisis to impose an ideological agenda. If you had any doubt about that, last week’s tantrum should have convinced you. Democrats engaged in debt negotiations argued that since we’re supposedly in dire fiscal straits, we should talk about limiting tax breaks for corporate jets and hedge-fund managers as well as slashing aid to the poor and unlucky. And Republicans, in response, walked out of the talks.
So what’s really going on is extortion pure and simple. As Mike Konczal of the Roosevelt Institute puts it, the G.O.P. has, in effect, come around with baseball bats and declared, “Nice economy you have here. A real shame if something happened to it.”
And the reason Republicans are doing this is because they must believe that it will work: Mr. Obama caved in over tax cuts, and they expect him to cave again. They believe that they have the upper hand, because the public will blame the president for the economic crisis they’re threatening to create. In fact, it’s hard to avoid the suspicion that G.O.P. leaders actually want the economy to perform badly.
Republicans believe, in short, that they’ve got Mr. Obama’s number, that he may still live in the White House but that for practical purposes his presidency is already over. It’s time — indeed, long past time — for him to prove them wrong.
Of course, if fully stymied, Obama could always go back to the Constitution. There is a safety valve here.