Again, quickly running down the deficit-reduction framework as it stands:
–$1 trillion in cuts in discretionary spending over 10 years
What does that mean? It refers to the non-entitlements in the budget: defense and non-defense programs where dollar amounts are appropriated every year. On the non-defense side, it’s transportation, education and training, child care, housing assistance, health research, energy.
From a jobs perspective, a lot of infrastructure and investment in stuff like clean energy comes out of this part of the budget.
–A bipartisan committee (6 R’s, 6 D’s) must identify another $1.5 trillion in cuts; entitlements and tax increases can be on the table, though Speaker Boehner claims his R’s will not countenance any new revenues, and I’m prone to believe him. Assuming the committee agrees on the cuts, it reports out by Thanksgiving and their proposal gets a fast-track procedure—up or down vote by the end of the year.
–But if the committee fails to report out or Congress won’t enact their cuts, a spending-cut-only trigger kicks in, with cuts split 50/50 between domestic and defense spending. This sequester, as it’s called, would exempt “Social Security, Medicaid, unemployment insurance, programs for low-income families, and civilian and military retirement. Likewise, any cuts to Medicare would be capped and limited to the provider side” according the White House.
Those are welcome exemptions, but man, I don’t see how you get $1.2 trillion (that’s the savings required if this part triggers) after you’ve already taken $1 trillion out of discretionary and still maintain those exemptions. I predict they’ll be a lot of pressure to violate this part of the deal.
Now, here’s a wrinkle a commenter asked about. Again, from the White House fact sheet: “If the Committee does not succeed in meaningful balanced deficit reduction with revenue-raising tax reform on the most well-off by the end of 2012, the President can use his veto pen to raise nearly $1 trillion from the most well-off by vetoing any extension of the Bush high income tax cuts.”
Here, the White House is saying they have a fail-safe to get revenues in the deal. If the committee gets to the trigger stage without revenues, they’ll go after the high-end Bush cuts.
OK, but those cuts were presumably going to sunset anyway, so on one hand, no new revenue there relative to what we expected. And what if the committee does come up with cuts (unlikely, but just sayin’)…then does the administration punt on the high end sunset?
So it’s no replacement for a balanced sequester, one that required both cuts and new revenues. On the other hand, given the tenor of the times, expected or not, it would be an accomplishment to finally see the sun set on those tax cuts.
The President spoke on the pending deal tonight, ending with this:
“[The deal allows us to] turn to important business of doing everything we can to create jobs, boost wages, and get this economy growing faster. That’s what American people sent us to do and that’s what we should focus on in months ahead.”
I agree. It’s about time.
But he also bragged that “these discretionary caps will put us on track to reduce non-defense discretionary spending to its lowest level [as a share of GDP] since Dwight Eisenhower was President.”
Why is that a good thing? Why are 1950s levels (relative to GDP) of investment, infrastructure, and research in medicine and innovation so damn optimal?
And with all this incessant emphasis on deficit reduction, it’s going to be extremely tough to convince people that we actually might need to spend some money right now, in the short run, to help get this economy out of neutral.
There’s a lot of cognitive dissonance out there…stay tuned.