Lots of interest in the President’s deficit plan tomorrow. Media reports suggest that benefit cuts to entitlements in the form of the chained CPI (A number of folks have asked for a post on this which I’ll have up soon) or increase in the Medicare eligibility age are NOT in the plan.
I view this announcement as the President’s effort to add specificity to the framework he presented in April that called for $4 trillion in deficit reduction over 12 years. I figure that 12 becomes 10 years, they count something like $1 trillion of savings—all from spending cuts–from the Budget Control Act (that thing signed after the debt ceiling debacle) so they lean pretty hard on new revenues in tomorrow’s plan.
The White House already announced their “Buffett Tax” idea to raise revenue by adding a minimum tax rate for households with incomes above $1 million. Recall that Warren Buffett penned a recent oped for the NYT urging the Treasury to “stop coddling the rich” in the tax code. He may not be getting a lot of love at “the club,” but the argument broadly resonated and this rule would serve as a backstop to avoid situations where folks like him pay a smaller share of their income in taxes than everybody else (I like the idea…it’s like an Alternative Minimum Tax for millionaires…and it’s simple, which is very important—if your income’s over a mil, and your tax bill after all your special goodies and deductions as a share of your income is below some rate, then you have to pay the higher rate…bing, zap, zoom).
R’s are predictably jumping all over this and any other idea that involves revenue, which makes one wonder how much tomorrow’s announcement by the really matters. The question is: does it change the probabilities for the super-committee (SC)—does it increase the odds that they avoid gridlock and report out a plan?
Unlikely…so ask yourself this: would you rather have a lousy SC deal or take the automatic cuts (“sequestration”)? By “lousy” I mean anything without substantial revenues, something on the order of dollar for dollar (new cuts for new revs), and remember two things. First, we already gave about a trillion in spending cuts in round one (with no revs), and second, the automatic cuts are 50% on defense and exempt entitlements for the most part (there’s a 2% provider cut on Mcare). Seems like a slam dunk from where I sit.
So, I like where the President seems to be going with this…he’s clearly starting out on his side of the field and taking advantage of a pretty tough trigger that his team negotiated in the budget deal. And anyway, the main thing is that he stays on the jobs theme and doesn’t get swept back into deficit land.
Finally, I was there back in the day and some of the stuff being reported from the Ron Suskind book just doesn’t ring true. And the fact that some of the folks quoted are saying they were misquoted suggests that something’s wrong here. I can tell you that sure, the economics team argued a lot, but over substance, which is what happens when you put a bunch of such folks in a room together in the heart of the Great Recession. At the end of the day, we either hashed out a unified recommendation for the chief, or we’d agree to disagree and present him with numerous options.