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Tag Archives: deficit ceiling

Carney: Obama Still Wants a Grand Bargain

White House Press Secretary Jay Carney today said the “Grand Bargain” between President Obama and House Speaker Boehner remains on the table, and that discussions between White House and congressional officials continue.

“It’s never been off the table,” said Carney, who spoke during a morning briefing. “If there is the political will to make it happen, it could happen before August 2nd.”

Carney seemed to be giving in to all GOP demands – suggesting that possible tax increases could be developed after spending cuts are passed – except for one: the president’s political team has apparently decided it must have a debt extension beyond Election Day 2012 and may plunge the country into a default crisis if it doesn’t get it.

Said Carney:

What a compromise looks like is pretty clear: significant deficit reduction; a mechanism by which Congress would take on the tough issues of tax reform and entitlement reform; and a lifting of the debt ceiling beyond — into 2013 so that we do not have the cloud of uncertainty that is hanging over our economy right now and getting darker and stormier as every day passes for another three months, four months, five months, six months, 10 months.

A “mechanism” – perhaps a commission – is a step back from the White House demands of just last week that specific tax increases be included in the heart of the deal.

Carney said the Boehner bill, which only extends the debt ceiling until the end of the year, will never pass the Senate. White House officials are suggesting that the legislation will Steal Christmas because the debate would start all over again during the holidays.

“The debt ceiling debate would ruin Christmas,” White House political adviser David Plouffe said today on MSNBC.

Boehner continues to round up votes to try to pass his bill. A vote is expected tonight.

Meanwhile, Carney started setting the stage for the potential blame game to come, emphasizing that it’s the job of Congress to raise the debt ceiling and that failure to do so will be its fault, not Obamas.

It is a matter of due diligence and responsible governance that Treasury will, if we approach that date, as we get closer to that date, explain how it would manage a situation that would be created by the failure of Congress to act and would create a situation where for the first time in our history we have lost our borrowing authority and risk default.

We in Washington, and in particular in this case Congress, controls our fate as regards whether or not we will lift the debt ceiling and allow the United States to continue to pay its — its bills and meet its obligations. Well, and Congress has a way of waiting until the last minute to do the right thing. We remain confident that it will.

Boehner and Reid Spit Out Competing Proposals

Just to keep you up to date, both House Speaker John Boehner and Senate Majority Leader Harry Reid have put their plans on the table. The White House has fully embraced the Reid plan.

Here’s a short summary, courtesy of the Washington Post, of Boehner’s . . .

Boehner’s plan includes an immediate increase in the debt ceiling of up to $1 trillion that is paired with $1.2 trillion in cuts to discretionary spending over the next decade. A new, joint House-Senate committee of 12 lawmakers would then be mandated to to come up with another $1.8 trillion in deficit savings over 10 years by Christmas, receiving fast-track powers to guarantee up-or-down votes on their legislative product should they produce a plan that wins at least seven votes in their special committee.

If such a plan were approved, President Obama early next year would then be able to request up to $1.5 trillion in new borrowing authority, which Congress would only be allowed to block by a super-majority vote of disapproval.

And Reid’s . . .

Aides have said it would include cuts of up to $1.2 trillion over the next decade to government agencies, including the Pentagon. Democrats had previously offered to accept those savings, as well as about $200 billion in cuts to non-health direct-payment programs, such as farm subsidies. People familiar with the months-long search for a debt-reduction compromise said that hitting such a large target without raising taxes or cutting entitlement programs would probably require Reid to rely heavily on savings from ending the wars in Iraq and Afghanistan — a figure budget analysts said could easily amount to more than $1 trillion over the next decade.

Here’s part of the statement White House Press Secretary Jay Carney on Reid’s plan.

Senator Reid’s plan is a reasonable approach that should receive the support of both parties, and we hope the House Republicans will agree to this plan so that America can avoid defaulting on our obligations for the first time in our history. The ball is in their court.

Deficit Discussions Continue but Endgame Not in Sight

President Obama and House Speaker Boehner continued to hold out hope for a sweeping deficit reduction deal, but the formula for finding something Senate Democrats and House Republicans can agree on remains elusive.

Speaking with the Republican caucus this morning, Boehner reportedly told lawmakers that something must pass by Wednesday in order to avoid breaching the debt ceiling.

My understanding is  Boehner, House Minority Leader Nancy Pelosi, and other congressional leaders are set to meet with Obama at the White House at noon or early in the afternoon, but I don’t have this confirmed.

Meanwhile, The Senate rejected the House Cut Cap and Balance bill by 51-46. The measure would have placed caps on spending before raising the debt ceiling and would have forced Congress to pass a balanced budget amendment.

Obama is speaking right now at a town hall meeting at the University of Maryland, as you can see below.

Senate Plan Appears to Raise Taxes by About $2 Trillion

President Obama is about to pull off the biggest coup since a wooden horse with 30 Greek soldiers inside of it rolled into Troy.

Not only is he going to get a badly needed political boost by transforming himself overnight from a deficit increaser into a responsible, adult, deficit slasher, but he’s going to secure legislation from Congress that would raise taxes at least $2 trillion over ten years.

And Republicans are all set to go along!

The “Gang of Six” deficit reduction deal is being advertised as a $1.5 trillion tax cut. That’s how it will be sold. Well, it is on paper. But do you live on paper?

"Pay up, suckers!" photo by Keith Koffler

The $1.5 trillion tax cut is true only if you assume current law, which says that the Bush tax cuts are going to expire at the end of 2012 and the alternative minimum tax (AMT) will not be adjusted for inflation, as it routinely is every year, and that it will instead reach further into the middle class.

So let’s distinguish current law from current policy. Current policy is the taxes you pay now – including the Bush tax cut and an AMT that has been adjusted for inflation so that it hits fewer people.
Lets look at current law, under which taxes are already slated to go up.

Based on estimates I’ve seen from the Congressional Budget Office and the Congressional Research Service, I would put the ten year tax increase resulting from not renewing the Bush tax cuts – and letting all the rates rise – at about $2.8 trillion.

The tax increase that would occur were AMT not adjusted for inflation amounts to about $700 billion.

So adding the two together, current law states that taxes are going to increase by about $3.5 trillion. Thats what’s scheduled to happen to you.

The Gang of Six Plan estimates that it would cut taxes from current law by about $1.5 trillion. So now the current law increase would be only $2 trillion. And since that’s the new plan, that’s what you’ll get.

THIS PLAN WILL RESULT IN TAXES GOING UP BY $2 TRILLION. Is that what Republicans were sent to Washington to do???

Even House Majority Leader Eric Cantor (R-Va.), the supposed leader of the tax cutters, says he wants to take a look at this.

I assure you, between National Economic Council Director Gene Sperling, OMB Director Jack Lew, and Treasury Secretary Tim Geithner, Obama has some of the smartest liberal economists around. They know exactly what’s going on here.

My assumption is that Republicans who are falling into line behind this plan don’t. Or they expect you won’t figure it out.

Here’s What Your Leaders are Discussing

There’s been remarkably little detail out there about the substance of the deficit reduction negotiations, so I thought I’d point you to a piece by Keith Hennessey. Hennessey, who blogs at keithhennessey.com, appears to have some of the specifics.

He doesn’t source it, but I trust his information because Hennessey has contacts all over the place, having served as the National Economic Council Director to George W. Bush and as a senior adviser to Sen. Trent Lott (R-Miss.) when Lott was Senate GOP leader.

First, a note on the state of journalism. Reporters are focusing almost entirely on the politics of the discussions, the outbursts, the struggles – the big football game.

My experience is that people want to know what’s actually going on too. It now apparently takes an economist with no journalism experience that I know of prior to establishing his blog to ferret out the details, while actual reporters provide their expert “analysis,” like a bunch of ESPN talking heads at halftime.

Hennessey REPORTS  that the Biden groups has come up with $1.7-$1.8 trillion in spending reductions, including about $200 billion to Medicare and Medicaid and another $220 billion in miscellaneous mandatory program spending.

The widely ridiculed $2 billion in discretionary savings next year would get to about $1 trillion over ten years because it would set the “baseline” lower for spending and then increase by only two thirds of inflation, multiplying the effect.

Of course, future Congresses could always change this. And Hennessey notes that $195 billion of the Medicare and Medicaid cuts “comes from traditional cuts in how much the government pays a doctor, hospital, or other health provider for a given service.”

Wait ’til their lobbyists get ahold of that one. For example, the doctors’ Medicare fee cuts mandated by the 1997 Balanced Budget Agreement never actually occur.

Add on $300 billion in interest savings. We only get to $2 trillion plus – a number bandied about – if you include new taxes.

Obama would do all this as well as cut projected Medicare benefits in ways Hennessey describes, add some more discretionary cuts – I assuming a big chunk from Defense – and tax the “rich.”