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Tuesday, December 4, 2012

Republicans Finally Make an Offer

     It's not a terribly good offer and it leaves out any idea if the numbers it presents are real, but it's an offer. This is an improvement over the previous stance of demanding Obama and the Democrats make all the proposals they want but wanted the Dems to ask for them.

    As Greg Sargent notes:

     "At least this puts Republicans on the record asking for something, which beats demanding that Dems propose every unpopular part of the deal. However, the key to whether this is a real offer or not is on the revenue side."

     http://www.washingtonpost.com/blogs/plum-line/wp/2012/12/03/boehners-offer-a-start-but-its-still-unclear-whether-its-real/

     So that is something. To do anything you have to actually make a proposal. As E.J. Dionne noted yesterday the GOP was acting before like this could be a deal achieved by "Immaculate Conception" in which they didn't even have to state what they wanted and the Democrats would read their minds and make these proposals for them.

     Which is not to say that this is a good deal by Boehner and friends. It calls for raising the retirement age for Medicare by 2 years-which will be phased in over time, and a cut in Social Security via a change in the way benefits are indexed to inflation-through "chained CPI."

     They also are claiming they will raise $800 billion in tax revenue through: you guessed it,  cutting unspecified deductions. The buzzwords about "cutting loopholes" sounds nice as it always has since Reagan made them ubiquitous in public debate. However, when we actually get into what might be cut, it becomes much less attractive. The GOP certainly doesn't want to talk about cutting the mortgage interest deduction-though this is the most obvious "loophole."

     Not only did the GOP insist that rates can't go up but they actually want to further cut tax rates for the rich while at the same time raising taxes on them through cutting deductions. It is tall enough order to achieve $800 billion in new revenue through cutting deductions alone; the GOP has actually made it an even tougher lift by trying to cut rates at the same time.
 
     As Josh Barro says, this Boehner plan is still not really a proposal but rather just a set of headline numbers without specifics.

     "The letter says Republicans want to cut $900 billion from mandatory spending and $300 billion from discretionary spending, but they don't say what or how they want to cut. The letter nods toward a proposal sketched out by Erskine Bowles, the cornerstone of which is a gradual increase in the Medicare age, but it lacks specifics."

      http://www.bloomberg.com/news/2012-12-03/what-s-wrong-with-the-republican-fiscal-cliff-counteroffer.html

      So any claims that both the President and Boehner made unreasonable demands should be dismissed as the President's proposals did offer some specifics on how we get there.

     "Last week, the President put forward a reasonably specific list of policies. He didn't just propose to raise $1.6 trillion in new revenue and cut $400 billion from mandatory spending over ten years. He proposed specific changes to tax rates and deductions to produce the new revenues, and the entitlement cuts are laid out in his budget (most of the savings come from reductions to Medicare provider payments). Republicans didn't like those proposals, but this letter is not responsive to them."

     The Obama White House was rightly unimpressed by this offer. However, it was still progress in that they have offered something, though without specifics and of course, it's not an acceptable proposal.

     There is a sense, however, that a deal is in the works, and that this is all part of the process in getting it done. Obama and Boehner are communication behind the scenes. A Politico piece last Friday suggested that the skeleton of the deal has been worked out for months-and yes, the Bush tax cuts do go up. There will also be other tax hikes on the rich through a higher capital gains and dividends rate, and a raise in the inheritance tax back to 45%.

      The main thing Obama is likely to give on is the rise in the age of Medicare eligibility-this will be phased in over decades. The GOP Social Security cut won't be in it as Dems note that it doesn't drive the deficit and any deal with SS should be brokered separately.

      Obama's proposal that the debt ceiling be eliminated was a great idea. It may not happen here though at a minimum the Dems will demand that the GOP raise the limit here and may begin a conversation about making changes that will take away the ability to use this as "leverage" as Boehner, puts it, every few months.

       There is also a sense that the GOP will cave on tax rates and knows it will but has to put up a fight first. Essentially they can't give in too quickly for the benefit of the conservative base.

         http://www.washingtonpost.com/blogs/plum-line/wp/2012/12/04/the-morning-plum-gopers-expect-to-cave-on-tax-rates-for-rich/

    

    

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