So as you’ll recall, having already agreed to large reductions in domestic discretionary spending to resolve the appropriations lapse fight at the beginning of the year, President Obama and GOP congressional leaders agreed to the super committee/trigger process to obtain further deficit reduction. If the super committee fails to agree, the trigger will be pulled and then there’s going to be an ensuing political fight over who’s to blame for that and who has the better vision for the long-term. That, I think, is the correct context into which to place the deficit reduction plan the president is proposing today. It’s not so much a negotiating position as it is a fall-back. If the super committee deadlocks, and we just need to head into Election Day 2012 with two different visions, this is the one the White House intends to run on.
What’s in it?
Well, $1.5 trillion of it is higher taxes. About half of that is the expiration of the “rich people only” portion of the Bush tax cuts. The rest comes from closing loopholes and for the proposed new millionaire’s minimum tax so that high-income individuals won’t be paying lower marginal rates than the middle class.
Then you have about $1 trillion in war savings as the fighting winds down in Iraq and Afghanistan.
Last, you have the domestic spending element. That includes changes worth $248 billion to Medicare and $72 billion to Medicaid which the administration is promising fall on providers rather than patients and don’t involve any deep changes to the basic nature of the programs, There are also some other domestic spending cuts, worth about $200 billion, whose exact nature I don’t quite understand at this point [see update below].
For a while now, I’ve been saying that the simplest approach to the medium-term deficit would simply be for the president to say, “I will veto any bills that increase the deficit relative to the current law baseline.” There’s a virtue to simplicity. This proposal is considerably more complicated than my idea, but the complications overwhelmingly result from making the policy more leftwing than my proposal would have been. This would give us a much more progressive rate structure of the tax code, and trim federal health care programs in a thoughtful way. By the same token, there’s no real chance of implementing this idea. Yet as a statement of vision it sets up the contrast with the opposition quite clearly. House Republicans want to repeal Medicare in order to make tax cuts for the rich affordable, President Obama wants to tax the rich in order to make Medicare affordable. Some critics will focus on the relatively small changes to federal health care programs here, but the President is essentially doing what progressives have been urging him to do for months — abandoning the strategy of pre-compromising, and planting his flag in a way that draws strong contrasts.
I’m now up to speed on the “other” cuts, which are as follows:
— $33 billion from agriculture subsidies.
— $42.5 billion from Federal employee retirement benefits, on both the civilian and military side.
— $4.1 billion from the disposal of unused government assets.
— $92.2 billion from restructuring government operations and reducing government liabilities.
— $77.6 billion from improving Federal program management and reducing waste and abuse.
I’m not 100% clear on how “restructuring government operations” is different from “reducing waste.”