The Democratic offer of a “grand bargain” on the deficit, including Medicare benefit reductions, was soundly rejected yesterday by Republicans. The GOP members of the catfood commission offered their own plan, which predictably consisted of all spending cuts. We’re on a path to gridlock, because Republicans just won’t agree to tax increases. However, the points of agreement are cause for worry. First of all, chained CPI is alive:

Officials also said a Democratic proposal on Tuesday and the GOP counter-proposal 24 hours later both included a provision to slow the annual cost-of-living increases in future Social Security benefits, suggesting it could become part of any compromise that might emerge.

I guess Republicans haven’t figured out that chained CPI increases taxes, too.

This is one of the points of agreement in the competing plans, so it could come into play in any final band-aid agreement. And so could cuts to Medicare and Medicaid, present in both plans. The major difference is that the Republican offer doesn’t include revenues and the Democratic offer does. You can see a scenario where the revenues get put off and a couple Democrats reluctantly go along, and the recommendations go to the floor of Congress.

The important thing I see is the dissension among the Democratic members of the committee:

There were signs of Democratic dissension one day after Sen. Max Baucus, D-Mont., outlined a proposal on behalf of his party’s negotiators that included changes in large government benefit programs.

According to several officials, he called for $1.3 trillion in increased tax revenue over a decade, and $1.3 trillion in spending cuts. Another $1 trillion in savings would come from the presumed reduction of Pentagon costs in Iraq and Afghanistan and $500 billion more from a reduction in interest costs resulting from declining deficits [...]

Several Democrats said during the day that the presentation had the support of a majority of the six Democrats on the panel, leaving the impression that at least one, and possibly two, of the party’s lawmakers had not signed on. They also stressed that Obama has previously endorsed each of the proposals they made, including the one to adjust the government’s calculation for inflation in a way that curtails the growth of benefit programs.

Others suggested that Rep. James Clyburn, D-S.C., a member of the party’s leadership, and Rep. Xavier Becerra, D-Calif., had not agreed to support the recommendations.

You have the makings of a war between the White House and the House Democratic caucus. Jim Clyburn isn’t just some backbencher, he’s number 3 in the leadership in the House. If he’s not on board with this plan, you can bet that Nancy Pelosi isn’t either.

And why would she be? All the way back in the spring, the Democrats had a path back to the majority in the House. Paul Ryan put forward his disastrous and unpopular Republican budget, and Democrats were making minced meat of it. They won a House race in upstate New York in traditional Republican territory. They started to take a lead on the generic Congressional ballot. Even today they have an advantage in a multitude of House races against freshman Republicans, who are extremely unpopular.

And then along comes this plan to cut Medicare and Medicaid and Social Security, on a bipartisan basis, ruining whatever advantage Democrats had over Republicans on the signature issue. So bye-bye majority. Yeah, I’d be pissed off myself. That’s why you have House Democrats speaking so forcefully.

“I don’t want to hear Democrats suggesting that we have those types of cuts in Medicare,” said Rep. Charlie Rangel (D-N.Y.), former chairman of the Ways and Means Committee. “I hope that’s not true.”

Rep. Jan Schakowsky (D.Ill.), co-chair of the Congressional Task Force on Seniors, echoed that warning.

“The very idea of reducing benefits … is unacceptable,” Schakowsky said. “I’m not against making Medicare more efficient [but] I am absolutely, unequivocally opposed to cutting benefits.”

Depending on the final deal, enough Republicans could reject it (because it doesn’t set fire to poor people or something) that House Democrats would have leverage with their votes. If so, it will be a question of whether enough of them manifest this outrage into votes against the bargain.