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December 01, 2012

Fiscal Slope: Time to Go to Conference on Taxes?

Posted in: Uncategorized

Time for a conference?

Mitch McConnell laid out his wish list for the endgame in the fiscal slope negotiations, and it’s basically the kinds of social insurance benefit cuts that the White House offered up in 2011 (which is again a reminder why you don’t offer those up as a bluff, because they will come back to haunt you), in exchange for revenue without a tax rate increase.

Mr. McConnell (R., Ky.) said bipartisan agreement on higher Medicare premiums for the wealthy, an increase in the Medicare eligibility age and slowing cost-of-living increases for Social Security could move both parties closer to a budget deal that averts the so-called fiscal cliff, the combination of spending cuts and tax increases that start in early January unless Washington acts.

In return for the support of Democrats, he said, Republicans would agree to include more tax revenue in a budget deal, though not from higher rates.

“Those are the kinds of things that would get Republicans interested in new revenue,” Mr. McConnell said.

At least we’re getting specific now. Cut benefits through means-testing (which to acquire any kind of revenue must dip well into the middle class, since there’s already means-testing on the wealthy in Medicare), raising the eligibility age and reducing future Social Security cost of living adjustments. And instead of raising rates, cap deductions, i.e. Mitt Romney’s tax plan. In response, the White House laid down a marker: “A senior administration official said the White House would make no new offers until Republicans changed their opposition to raising top tax rates.”

That’s what we call an impasse. McConnell doesn’t have much power in this debate – Obama and John Boehner will negotiate the deal – but he probably speaks for the general Republican viewpoint here. And what Congress could opt for in this time of impasse is that benchmark of negotiating – the conference committee.

See, it turns out that the House and Senate have already passed tax bills. The House’s bill extends the Bush-era tax cuts fully for a year. The Senate bill only extends the rates on the first $250,000 of income, and increases the top rate on dividend and capital gains from 15% to 20%. The Senate bill also maintains three stimulus-era tax breaks, expansions of the child tax credit and the Earned Income Tax Credit, along with a tax credit for college tuition. And both bills patch the alternative minimum tax for 2012, so it won’t hit middle-class families (this is an annual ritual in Washington).

That covers a healthy amount of the tax provisions expiring at the end of the year. And as it’s a tax bill, it could be a vehicle as a catch-all for how to avoid the fiscal slope, at least on the tax side. That’s technically against the rules, but Congress can certainly waive them. So the House and Senate could just appoint conferees, and move forward with an actual negotiation, instead of these negotiations through the media.

The advantages of going to conference committee include the fact that the finished product returning becomes non-amendable (though it can still be filibustered in the Senate). You can fast-track the conference report onto the floor without going through the committee process. And most important to me, you can provide some transparency in these negotiations that has been lacking. Conference committees are often pro forma processes, with the real work going on behind the scenes, but members of the conference committee still have to vote on any changes, in public view.

A conference committee will at least create a forum for the debate in public rather than in cloistered back rooms.

Photo from Senator Mark Warner under Creative Commons License.


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