Fresh off the deal to avert the so-called “fiscal cliff,” Congressional Democrats are gearing up for the next round of budget negotiations. House Minority Leader Nancy Pelosi (D-CA) said yesterday that the fiscal cliff deal was “not enough on the revenue side,” with the caucus seeming to settle on $1 trillion as a goal for increased revenue this year:
Democrats say they want to raise as much as $1 trillion in new revenues through tax reform later this year to balance Republican demands to slash mandatory spending.
Democratic leaders have had little time to craft a new position for their party since passing a tax deal Tuesday that will raise $620 billion in revenue over the next ten years.
The emerging consensus, however, is that the next installment of deficit reduction should reach $2 trillion and about half of it should come from higher taxes.
Congressional Republicans, meanwhile, are trying to portray the fiscal cliff deal as the final word on taxes. “The tax issue is behind us,” Senate Minority Leader Mitch McConnell (R-KY) pronounced yesterday.
However, budget deals cut over the last year have already cut a substantial amount of spending. In fact, even with the revenue included in the fiscal cliff deal, there have been $2.50 in spending cuts for every $1 in revenue signed into law by President Obama. That ratio increases to 3 to 1 when reduced interest payments on the debt are included.
As Bob Greenstein of the Center on Budget and Policy Priorities noted, following the GOP’s all-cuts plan going forward would blow that ratio up to 5 to 1:
If this Republican view holds, then when all of the deficit reduction efforts are tallied together, spending cuts will outpace revenue increases by nearly 5 to 1 — hardly a balanced approach. If future deficit reduction comes through an even split of revenues and spending cuts, total spending cuts will still outpace revenue increases by nearly 2 to 1. (These ratio estimates do not include the effects of interest savings; if those savings are included, the share of savings that come from spending cuts rises further.)
On its current path, revenue will not get close to where it was the last time the federal budget was balanced.