As the Bush tax cuts are scheduled to expire automatically in a few weeks, some Republicans are urging their leaders to accept President Obama’s deal to allow tax rates to rise for the top 2 percent of earners, while looking ahead to the next budget showdown. The US will hit its debt limit in early 2013, and the GOP sees an opportunity to once again use the threat of default to force Democrats to concede to devastating cuts to entitlement programs along with more tax cuts for the wealthy.
Publicly, House Speaker John Boehner (R-OH) offered another deal to Obama on Tuesday night claiming to concede more than $800 billion in tax revenue — still without any tax increases. As more details of Boehner’s proposal emerge, the illusion of compromise has faded to reveal the same plan Republicans have pushed for all along. Here are 5 problems with the offer:
1) It will hurt the middle class. Refusing to raise taxes on the top 2 percent, the Republicans’ plan to raise more than $800 billion solely from closing loopholes would inevitably hurt middle class Americans. While they have not specified which loopholes they would close, Republicans would need to close off a huge range of deductions mainly employed by middle income earners, including, as Greg Sargent lists, “the write-offs for employee provided health insurance, interest from municipal bonds, and money invested in retirement plans, to itemized deductions for charitable contributions, state and local taxes, and mortgage interest payments.”
2) Skewed to help the rich. This new deal could also make the Bush tax cuts permanent for the top 2 percent of Americans, despite the pile of evidence that high-income tax cuts do nothing for the economy and exacerbate income inequality. The additional revenue Republicans are proposing would be consumed by maintaining these lowered tax rates.
3) Republicans will get everything they want. Boehner’s new offer is not actually a compromise; his plan to raise $800 billion in revenue without any tax increase is similar to former presidential candidate Mitt Romney’s proposal, right down to the impossible math. If the GOP holds the debt ceiling hostage, they can try to secure the spending cuts they’ve been after and lower tax rates through so-called tax reform.
4) Very painful cuts for Medicare beneficiaries. Boehner is hoping to pressure the president into conceding even more spending cuts than are already on the table. This includes “very painful cuts to Medicare,” as Sen. Bob Corker (R-TN) boasted. Medicaid and Social Security enrollees would also see their benefits gutted.
5) Gambling with America’s credit. Ratings agency Standard & Poor downgraded U.S. credit for the first time in history last year after Republicans brought the nation to the brink of default, even citing Republican intransigence on tax increases as a reason for the move. The fight to raise the debt limit also cost taxpayers $1.3 billion in 2011. With Republicans poised to pull the same shenanigans in the fiscal cliff talks, the US risks repeating history in 2013.