If the American Jobs Act were just the bill described last night – one that would create millions of jobs and serve many of the country’s needs – that would be fine. But it’s not just that bill. The President was quick to address the idea that the bill would be “fully paid for,” and that he would lay out those items next week. Originally, the plan was to include the pay-fors in last night’s speech. The President was informed that this would not be a great idea and would substantially deflate progressives who generally liked the speech. So those items will come out “a week from Monday,” on September 19, according to the speech. But the President couldn’t help himself, and in one overlooked portion of the speech, he laid out what amounts to the grand bargain:
This approach is basically the one I’ve been advocating for months. In addition to the trillion dollars of spending cuts I’ve already signed into law, it’s a balanced plan that would reduce the deficit by making additional spending cuts; by making modest adjustments to health care programs like Medicare and Medicaid; and by reforming our tax code in a way that asks the wealthiest Americans and biggest corporations to pay their fair share. What’s more, the spending cuts wouldn’t happen so abruptly that they’d be a drag on our economy, or prevent us from helping small business and middle-class families get back on their feet right away.
Now, I realize there are some in my party who don’t think we should make any changes at all to Medicare and Medicaid, and I understand their concerns. But here’s the truth. Millions of Americans rely on Medicare in their retirement. And millions more will do so in the future. They pay for this benefit during their working years. They earn it. But with an aging population and rising health care costs, we are spending too fast to sustain the program. And if we don’t gradually reform the system while protecting current beneficiaries, it won’t be there when future retirees need it. We have to reform Medicare to strengthen it.
I’m also well aware that there are many Republicans who don’t believe we should raise taxes on those who are most fortunate and can best afford it. But here is what every American knows. While most people in this country struggle to make ends meet, a few of the most affluent citizens and corporations enjoy tax breaks and loopholes that nobody else gets. Right now, Warren Buffet pays a lower tax rate than his secretary – an outrage he has asked us to fix. We need a tax code where everyone gets a fair shake, and everybody pays their fair share. And I believe the vast majority of wealthy Americans and CEOs are willing to do just that, if it helps the economy grow and gets our fiscal house in order.
I’ll also offer ideas to reform a corporate tax code that stands as a monument to special interest influence in Washington. By eliminating pages of loopholes and deductions, we can lower one of the highest corporate tax rates in the world. Our tax code shouldn’t give an advantage to companies that can afford the best-connected lobbyists. It should give an advantage to companies that invest and create jobs here in America.
Every indication is that this would include an increase to the Medicare eligiblity age, a truly stupid policy that would increase overall health spending and just shift costs from the federal government to states and individuals. Medicaid gets a mention in there too, so I would expect another cost-shifting plan like the blended rate, which lowers federal participation in the program and either forces states cut back on the coverage for individuals, or the reimbursements for providers, which may lead them to stop honoring Medicaid. Maybe we also see something on Social Security like chained CPI, although notably, that didn’t get mentioned in the speech. There could be things like changes to military retirement plans in there too. This plan will be delivered to the Catfood Commission II for their consideration.
The point is that we’re back to a grand bargain, with stimulus now and austerity in the future, essentially mortgaging the children’s Medicaid or the grandchildren’s Medicare in exchange for job creation.
Let me just say this, however. The President tried to pass such a plan with John Boehner, and Boehner had to walk away because of the tax increases. There’s no indication that anything has changed on the Republican side on that question. In fact, the biggest story of the day on the deficit had nothing to do with the President, it was Jon Kyl trying to quit the Catfood Commission if further defense cuts were included.
Senator Jon Kyl of Arizona, one of the six Republicans on the panel, told a conservative group on Thursday that he was already pondering his potential exit.
“When we had our first meeting, the chairman asked, ‘Well, what do we think about defense spending?’” said Mr. Kyl, describing a meeting with the six Republican members. He was talking to a group gathered for a symposium called “Defending Defense,” a joint effort of the Foreign Policy Initiative, the Heritage Foundation and the American Enterprise Institute, all conservative groups. “And I said, ‘I’m off the committee if we’re going to talk about further defense spending.’ First we did discretionary spending in the budget act. Second, defense was half of that, even though it isn’t half the budget, obviously. And, third, we can’t afford anymore, and that’s what your defense secretary, past and current, and others, have said. So we’re not going there.”
So Kyl is ready to bolt, taking defense cuts off the table. I guess he doesn’t realize that defense cuts would be the CONSEQUENCE of him bolting, since they are part of the trigger in the event of no agreement. It shows the difficulty, the near-impossibility, of the Catfood Commission reaching agreement, no matter what the President offers.
Two things, however. Under the circumstances, the only way something passes the committee is if one or more Democrats undergo an epic cave and votes for a plan without any taxes or defense cuts, because I just don’t see the other side budging on that. And the President putting out a plan that Republicans can point to makes that more likely. It also gives a talking point that will last for decades: “Even liberal Barack Obama supported raising the Medicare age…” That will haunt Democrats for a long time, and may have immediate consequences.