Republican "fiscal cliff" proposal

by Linda Beale

Republican “fiscal cliff” proposal

House republican leaders have sent a letter to President Obama with their “fiscal cliff” proposal, which the Republicans cast as a “fair middle ground” and a “balanced framework for averting the fiscal cliff.”  Id.  Republicans object that the administrative proposal has is unbalanced, because it has “four times as much tax revenue as spending cuts” (under a Republican claim that the Administration shouldn’t count already enacted spending cuts that were part of the Administration’s original proposal as part of the bargain).  And of course the Republicans don’t like the idea of any stimulus measures being included in the deal or the proposal to finally do away with our arcane and unnecessary debt ceiling mess, which invites games of chicken that have no point.  They claim that they are merely supporting the Bowles-Simpson plan, which of course they are not since they are refusing all tax rate increases.

The letter is written rather confusedly and is therefore somewhat ambiguous on exactly what it is offering as a concrete proposal.  One has to conclude that it isn’t a concrete proposal but actually merely puffery that restates the position that the GOP wants lots of entitlement cuts, no military cuts, and no tax rate increases (but might go along, maybe, with some unspecified “loophole eilmination” for the nonce).  It appears to propose the following:

  • $900 billion in cuts to mandatory spending including Medicare and Medicaid spending over the next decade 
    • The Republican letter, of course, tries to assume the mantle of “preserving and protecting” social welfare programs even while they reach out to reduce, eliminate or privatize them, when it suggests that perhaps the Republicans will return to the Budget Resolution that offered a voucher plan for limiting Medicare benefits (and hoped to buy off current seniors and those nearing retirement by promising them benefits under the current program). The Republican proposal referred to claims to “reform” Medicaid by offering “flexibility” that cuts $800 billion from the program over 10 years!  Although admitting that the election makes pursuing those kinds of harsh reforms “counterproductive”, the Republican leaders promise to “continue to support and advance them.”
  • $300 billion in cuts to other discretionary spending over the next decade
  • $200 billion in cuts to Social Security benefits (by revising the method of calculating cost of living increases, which would also apply to keep the tax brackets from rising as fast and for adjustments to government pensions)
  • $800 billion in new revenue–achieved through “pro-growth tax reform that closes special-interest loopholes and deductions while lowering rates” (but of course without mentioning just what loopholes and deductions would be removed).  The letter goes on to declare that the Republican leaders will not agree to higher tax rates, asserting that their position is to “protect small businesses and our economy”.

Let’s assess this so-called “proposal.”

Lowering rates is absurdity at this point:  no reasonable person should vote for a proposal to lower US tax rates even more than they already are.  Lowering rates while eliminating deductions or loopholes doesn’t work any better:  immediately after such a bill is passed, the lobbyists will be back on the floor.  First they’ll demand a temporary extension while markets “adjust” (mostly bulls..t).  Then they’ll demand that the temporary provision be made permanent to provide “certainty” to markets and businesses.  Then they’ll demand enhancement of the loophole to broaden it, since they say such provisions will incentivize job creation. Etc.  This is an old story that never plays out the way the lobbyists promise.  Congress shouldn’t fall for it again.  Because the next ploy will be–oh, let’s broaden the base by removing these new old loopholes and then we can lower rates even more.  The only thing that is likely to happen in this ploy is that the top rates go down for the wealthiest taxpayers, who pay less and less.

Cutting the various safety net programs is equally absurd.  Especially in a time of continuing difficulty, especially for vulnerable populations like the elderly, poor, laborers with inadequate pension and health care possibilities after retirement and other large groups in our population.  There is no reason to cave to the GOP’s forty-year campaign to reduce, privatize or eliminate social welfare programs:  let the gradual onset of taxes and sequesters take place in January, and then ask them to pass a tax cut to benefit those in the middle and lower-income groups.

The letter ends with an oxymoronic statement that essentially states that if the Obama administration will cave to these GOP demands, they are “ready and eager to begin discussions about how to stucture these reforms.”  They go on to suggest that President Obama has taken actions to “undermine good-fith effrorts to reach a reasonable and equitable agreement.”

That’s bunk, boys.  If the GOP is going to play this game this way, the administration should not attempt any kind of short-term resolution.  After the Bush tax cuts are repealed once and for all by operation of existing law as of January 1, it will be much easier to discuss what reasonable tax cuts should be enacted to protect the middle class rather than the wealth of corporate managers and owners.  And once there is a first start on the reduction of the military budget, we can move on to reduce it even more.  Action can be taken to stave off problems that would be caused by any of the provisions in early 2013.

cross posted with ataxingmatter