Super Cat Food Commission may have reached a DealPosted: November 15, 2011
There are nine days left until November 23rd and automatic spending cuts that are supposed to punish deadlock. Our economy is weak. Exactly how much recessionary pressure will the austerity pogrom inflict on the country? Exactly how much will the unemployment rate go up and the economic growth go down when we do the exact opposite thing that all accepted and proven economic theory would have us do? Well, there’s hints at a deal. Get ready for a double dipper!
The panel needs seven votes on a deal to force at least $1.2 trillion in deficit reduction over the next 10 years. Sen. Pat Toomey (R) of Pennsylvania last week broke with his party’s anti-tax pledge to propose some $300 billion in new tax revenues. Democrats are said to be on the verge of a counterproposal, as early as today, to include new cuts in entitlement spending likely to offend their party’s base.
Tax increases and entitlement spending cuts = decreases in aggregate demand = decreases in prices and wages and decrease in economic growth/GDP/Income = more unemployment. Exactly who are they pleasing with this policy? Themselves? Their Wall Street Overlords? The Grinch?
Based on what we do know, however, both sides are playing big time budget baseline games. When they talk taxes, Republicans start by assuming the 2001/2003/2010 tax cuts will all be extended indefinitely. From there, they talk about cutting rates across the board and reducing tax preferences (perhaps with some cap on these breaks). All of this, it is reported, would boost revenue by a few hundred billion dollars over 10 years.
Sounds promising. But by starting by extending the Bush era tax cuts, the Rs would reduce revenues by $4 trillion compared to what would happen if Congress simply lets them expire as scheduled a year from now. So, Republicans would add $4 trillion to the deficit before cutting a paltry $200-$300 billion. In anyplace but Washington this would add up to another $3.7 or $3.8 trillion in red ink. Here, it counts as deficit reduction. Worse, even those dollars appear to result from presumed economic growth rather than policy changes. The wonders of dynamic scoring!
Democrats are playing their own games. While Politico reports this morning that they are proposing $400 billion in Medicare and Medicaid cuts (most of which would come out of the hides of doctors, hospitals, nursing homes, and other providers), the Dems also start by assuming a fix to the ongoing battle over Medicare reimbursements to physicians. Straightening out this mess could cost as much as $300 billion over the next 10 years. The Ds do say they’d pay for the fix—but with money from the drawdown of troops from Iraq and Afghanistan. This money is fiscal pixie dust, since the troops are already coming home and those funds were never going to be spent.
If the built-in assumption is indefinite extension of those reckless Bush tax cuts, we might as write the nation off as a banana republic right now. This is especially true when you consider what will be downsized in response to rewarding the rich for moving jobs overseas, gambling in the Wall Street Casino, and not expanding business here because the economic outlook will continue to be glum. There are a few hints on what has to go in order to extend these indefensible tax cuts. What will the Dems trade in order to get some tax revenues placed on the table?
Democrats aren’t offering to simply take the GOP at their word. Their plan is to make any cuts to programs like Medicare and Social Security part of a trigger that would only be pulled if and when Congress passes hundreds of billions of dollars in new revenue.
Multiple Democratic aides confirm their strategy hasn’t changed: Dems will only support this sort of two-step tax reform process if there are serious revenue guarantees and the deal includes a trigger to make sure the revenue materializes.
If that sounds a little Rube Goldbergish to you, it is. But both parties have basically agreed that the Super Committee wouldn’t have enough time between its launch and its deadline to write a full overhaul of the tax code. So Dems are privately insisting that any future promised revenue come with more than a promise. If the GOP can’t deliver the votes for it, then the safety net cuts they want disappear. That’s not to predict that they’ll stick with this demand until the bitter end — for liberal groups, vigilance is key.
Ever heard of out of sight, out of mind? If the Repubs delay the tax details and the Dems still try to eek something out, how will this work? Follow that link to a bunch of other links with this short intro.
As the panel’s Nov. 23 deadline approaches and doubts about its ability for success persist, a new approach is emerging in which the panel may opt to postpone politically difficult decisions by deciding the amount of new revenue their deficit-reduction plan would require, but leaving specifics to Congress’ tax-writing committees to fill in next year.
So is this a deal or a punt?
It seems that K Street isn’t giving up on keeping all the lights lit on the tree for their special interests. This doesn’t bode well. The meat may get thrown out while the fat and grizzle are still on the plate.
And 125 companies and groups made another pitch to the super committee on the importance of setting aside additional unlicensed spectrum for new technologies like ultra-fast Wi-Fi.
Google, Hewlett-Packard, Microsoft and others said they worry that if the panel gives the Federal Communications Commission authority to conduct incentive auctions, that the FCC’s move last year to open up the spaces between television channels for unlicensed use could be derailed.
“We urge Congress to give the FCC the flexibility to preserve TV band spectrum for unlicensed super Wi-Fi devices and deliver innovation to American consumers and economic growth to our nation,” they wrote in the letter to the co-chairs of the super committee, Rep. Jeb Hensarling, R-Texas, and Sen. Patty Murray, D-Wash.
Yup. That’s so much more important than feeding hungry children, creating jobs, and fulfilling our obligations to seniors. It seems that most people will have to search out the bags of dry food while a whole lot of businesses that don’t seem to be able to function without subsidies will still be dining on fancy feast.