President Barack Obama would support a short-term extension of the debt limit if Democrats and Republicans reach agreement on a broader deficit-cutting deal but need more time to move it through Congress, White House Press Secretary Jay Carney said Wednesday.
The White House later clarified that the extension would only be for a few days. Like the Libya effort was only going to last a couple of weeks?
Obama is now pushing the “gang of six” plan which, as David Dayen points out, consists of a bunch of vague recommendations that would need to be fleshed out after the plan passes. Can you say “pig in a poke?”
Back to Politico:
The president has repeatedly told congressional leaders that he would veto any short-term debt extensions, saying once that the country is not a “banana republic” that can live in constant fear of default.
Carney said the president’s position on that point has not changed.
“We are not wavering on the president’s absolute assertion that he won’t sign a … series of provisions that temporarily or in a limited fashion raise the debt limit,” Carney said, because it is bad for the economy and sends the wrong signal to the world.
Obama would not sign an extension “without an agreement on something big, a firm commitment on something big,” Carney said.
Yeah, right. Let’s face it. The President is a wimp, and the Republicans know it.
Jamie Dupree at the AJC has a nice brief summary of the ‘Gang of Six Details’. I know you’re as tired of the debt ceiling drama as I am but given that every one seems willing to sell us regular folks out, I think we need to keep on top of it. That, and I’m getting damned close to cashing out all my money market funds and buying Loonies. I kid you not. I’d invest in a nice cash crop at this point if I could. Pork Bellies any one?
So this is the overriding goals which basically are in keeping with the Cat Food Commission. These, again, come from the so-called Gang of Six.
* Slash our nation’s deficits by $3.7 trillion/$3.6 trillion over ten years under CBO’s March 2011 baseline, or $4.65 trillion/$4.5 trillion under the original fiscal commission baseline (which used the President’s 2011 budget request as the starting point for discretionary spending).
* Stabilize our publicly-held debt by 2014.
* Reduce our publicly-held debt to roughly 70% of our economy by 2021.
* Impose unprecedented budget enforcement.
Here’s some more strategic principles that include the approach to Social Security. The so-called spending caps principle is also included.
The plan uses a two-step legislative process: (1) an initial bill that makes immediate cuts; and (2) a process for a second bill to enact comprehensive reform and put our nation on a stable fiscal path. The plan would:
Immediately implement aggressive deficit reduction down payment
* Cut deficits by $500 billion.
Dramatically cut discretionary spending
* Cut nonsecurity and security discretionary spending over 10 years.
* Maintain investments that encourage economic growth, strengthen the safety net for those who truly need it, and preserve a strong national defense.
Carefully strengthen the solvency of our most important entitlement programs
* Spend health care dollars more efficiently in order to strengthen Medicare and Medicaid, while maintaining the basic structure of these critical programs.
* Fully pays for SGR (the “doc fix”) over 10 years.
Fundamentally reform our tax code
* Reduce marginal income tax rates and abolish the $1.7 trillion Alternative Minimum Tax.
* Encourage greater economic growth.
* Enhance the competitiveness of American businesses and workers against global competition.
* Reform spending through the tax code to eliminate investment distortions and tax gaming.
* Change the debate about taxes in America from rate levels and carve outs to competitiveness, fairness and growth.
* If CBO scored this plan, it would find net tax relief of approximately $1.5 trillion.
Strictly tighten the government’s budget processes
* Impose spending caps and security/nonsecurity firewalls.
* Sequester accounts at the end of the year to recoup any excessive spending by Congress.
* Restrict the use of emergency designations that circumvent the spending caps.
* Prevent Congress from exceeding the caps by requiring a stand-alone resolution subject to a 67-vote threshold, in order to isolate that vote to increase the deficit from any other policy items.
Reform Social Security for future generations
* Ensure 75-year solvency of Social Security and provide for a decennial review of the program to ensure it remains solvent.
* Reform Social Security on a separate track, isolated from deficit reduction – any savings from the program must go towards solvency.
There’s more bullet points over there that you may want to check out. I agree that Social Security Reform should be kept on a separate track. Right now, it’s not the priority problem at all. The rest are just broad strategical approaches. The detailed plan follows these. The details are called an ‘aggressive’ plan and you’ll see that’s exactly so.
Here’s some of the details on Social Security.
* Consider Social Security reform, if and only if the comprehensive deficit reduction bill has already received 60 votes.
* Reform must ensure 75-year solvency of the program and provide for a decennial review to ensure it remains solvent. Any savings from the program must go towards solvency, not deficit reduction.
* If Finance fails to report Social Security reform meeting the instructions, allow a group of at least five senators from each party to introduce a resolution with recommendations that meet the committee’s instructions.
* Bar substitute amendments that worsen the solvency of Social Security.
* Combine any qualifying Social Security reform bill that receives 60 votes on final passage to the comprehensive bill at the desk before being sent to the House as a single bill.
* Vitiate the vote on the deficit-reduction bill if the Social Security reform bill does not receive 60 votes.
Here’s some of the highlights from the deficit reduction plan. I am putting another one that impacts Social Security first. You can find information on the chained-CPI in my previous post here.
* Shift to the chained-CPI (a more accurate measure of inflation) government-wide starting in 2012, along with the following specifications for Social Security: (1) exempt SSI from the shift for five years, and then phase in the shift over the next five years; and (2) provide a minimum benefit equal to 125% of the poverty line for five years. (According to CBO, the shift to chained-CPI would result in the annual adjustment growing, on average, about 0.25 percentage points per year slower than the current CPI.)
Here’s some of the discretionary spending cuts to departments.
* Finance would permanently reform or replace the Medicare Sustainable Growth Rate formula ($298 billion) and fully offset the cost with health savings, would find an additional $202 billion/$85 billion in health savings, and would maintain the essential health care services that the poor and elderly rely upon.
* Armed Services would find $80 billion.
* Health, Education, Labor, and Pensions would find $70 billion.
* Homeland Security and Government Affairs would find $65 billion.
* Agriculture would find $11 billion while protecting the Supplemental Nutrition Assistance Program.
* Commerce would find $11 billion.
* Energy would find $6 billion and may propose additional policies to generate savings that would be applied to the infrastructure deficit or to reduce the deficit.
* Judiciary would find an unspecified amount through medical malpractice reform.
* Require the Finance Committee to report tax reform within six months that would deliver real deficit savings by broadening the tax base, lowering tax rates, and generating economic growth as follows:
* Simplify the tax code by reducing the number of tax expenditures and reducing individual tax rates, by establishing three tax brackets with rates of 8–12 percent, 14–22 percent, and 23–29 percent.
* Permanently repeal the $1.7 trillion Alternative Minimum Tax.
* Tax reform must be projected to stimulate economic growth, leading to increased revenue.
* Tax reform must be estimated to provide $1 trillion in additional revenue to meet plan targets and generate an additional $133 billion by 2021, without raising the federal gas tax, to ensure improved solvency for the Highway Trust Fund.
There’s more details on the cuts over at the AJC article. I think it looks like tax reform is a major part of this. Please note that the top bracket is being adjusted downward and would be extremely generous to rich people. Even if the Bush tax cuts sunset, this really reduces the progressivity of our tax system and I have a major problem with that. Rich people use up more government services than normal people and these days, most of their money comes from nonproductive sources like capital gains from wherever and whatever activities. Certainly, earning money off of products that cause lung cancer or companies that go abroad and set up production in plants where suicide by workers is the norm isn’t exactly a productive use of capital. If they feel morally unaffected by those investment decisions, that’s all well and good, but I don’t think the US treasury needs to subsidize people who create extraordinarily high social costs. It’s estimated that one pack of cigarettes creates between $40 -$70 of public health costs that are borne by tax payers, just as an example. Again,I don’t think we should be subsidizing investments in businesses with huge costs to society.
Look for more information as the details are released.