Obama Wants Debt Deal Today, Cuts Tomorrow
White House Wants a J. Wellington Wimpy Deal on Entitlements
“In my view it’s easier to get the votes for a bigger deal. For any deal there will still be painful cuts. A big deal that puts the country on a sound financial footing is a big accomplishment. Our view is the easiest thing to pass is, ironically, a bigger, harder package.”
-- Senior Democratic official talking to FOX News colleague Wendell Goler about President Obama’s decision to expand the scope of debt ceiling negotiations.
President Obama will propose to congressional leaders today a plan that trades an immediate increase to the federal government’s $14.3 trillion credit limit and increased taxes in exchange for a bouquet of immediate and prospective spending cuts and tweaks to entitlement and welfare programs, including Medicare and Social Security.
The White House caused a tsunami of speculation on Wednesday when the administration told news outlets that the president would seek a $4 trillion deal instead of the approximately $2 trillion plan that has been under construction in weeks of bipartisan talks led by Vice President Joe Biden.
Obama’s proposal, according to multiple outlets, will be to build on the $1.5 trillion already agreed upon (a mix of cuts and projected interest savings on the cuts) by getting Republicans to agree to his $400 billion tax-increase package (which includes lower tax deductions for individual charitable giving and higher taxes on business inventories).
The president would double that deal by then including lower payments to those who provide health care to senior citizens and poor people under Medicare and Medicaid and change the way cost of living adjustments for Social Security beneficiaries are calculated in the future.
This is a favorite move in Washington: the J. Wellington Wimpy. Politicians would always gladly pay you Tuesday for a deal today.
Obama relied on the Wimpy to get the deal done on his national health care law. Unable to find the money to fund a new entitlement, Democrats shifted much of the burden to the states in the form of expanding Medicaid. Still unable to do the deal without blowing the lid off the federal debt, Democrats simply decreed that their successors would have to cut $500 billion from Medicare, the popular program for senior citizens.
It was a bit churlish for Congress to do even as it was debating for how to continue to stave off cuts in Medicare handed down by their predecessors 15 years before – the so-called “doc fix.” But the health law had lingered so long that Democrats were desperate to clear the decks before the 2010 campaign season began in earnest. So they bequeathed huge cuts to a cherished program even as they rejected their inheritance of deferred fiscal obligation from the Clinton era.
What the president is floating now are more cuts to Medicare and new obligations for the already stressed out Medicaid system. The argument there being that the whole business has to be blown up anyway with the implementation of the president’s law, so shaving a hundred billion here or there is no biggie. Like the health law, the debt reductions can be based on projected savings, not current actions.
More tantalizing is the suggestion that the president would embrace a recommendation from his deficit reduction panel about the way cost of living increases for Social Security recipients are calculated. One could mean test colas – rich folks forgo COLAs – or have geographically specific increases – costs go up faster in Seattle than in Abilene.
This, of course, depends on the members of a future Congress allowing the electorally active seniors in their districts to take the blow for the current debt impasse. It counts on the fact that these lawmakers won’t find that circumstances have changed and unforeseen consequences have arisen.
Obama Democrats are right when they say that a bigger deal is easier to achieve than a smaller one. The bigger deal offers more budgetary penumbras and accounting gimmickry with which to find savings.
Note that the “mini deal” already agreed to by Republicans relies on some fudgy figures to begin with – cuts to out-year farm subsidies, projected savings from the Afghan troop reductions and the bounty of reduced future interest payments. A $4 trillion dollar deal offers twice as many places to hide as a $2 trillion deal and twice as many ways to defer current pain on the prediction that fiscal probity will reign supreme in the Washington of the future.
This $4 trillion gambit today represents a sixth bite at the entitlement apple by the president.
As A.B. Stoddard pointed out in The Hill today, Obama ignored his debt commissions findings in December, skipped the subject in his State of the Union address in January, issued a budget in February that glossed over the issue and took a second swipe at a budget in April but fell back on fuzzy figuring (a 12-year time frame and optimistic estimates). But the biggest bout of can kicking by the president came this spring when Obama sought an unconditioned increase in the debt limit, what he called a “clean” increase – no cuts now or ever in exchange for obliging taxpayers for $2.4 trillion in new borrowing.
Obama is hoping that by expanding the time frame and depending on the austere sensibilities of future Congresses, he can get a debt deal done quickly and simultaneously achieve two of his other goals, preserving spending on current stimulus projects and increase taxes on upper incomes.
He knows Democrats are getting desperate for a deal and would likely accept another J. Wellington Wimpy on entitlements to get the deal done. The New York Times warns of a liberal revolt, but we’ve heard that on everything from a government-run insurance option to the ever-expanding list of U.S. armed conflicts around the globe.
What he has to hope is that Republican leaders are growing alarmed enough that they will accept the cover of prospective cuts and do a deal.
But What About the Taxes?
“I have said from day one, we are not for tax hikes on the American people or businesses, and if the President wants to talk loopholes, we'll be glad to talk loopholes. We've said all along that preferences in the code aren't something that helps economic growth overall. But, listen, we are not for any proposal that increases taxes, and any type of discussion should be coupled with offsetting tax cuts somewhere else.”
-- House Majority Leader Eric Cantor talking to reporters about the state of negotiations.
Republicans, led by House Speaker John Boehner, are pushing hard on the idea of a business tax simplification as part of an overall debt deal.
While President Obama is looking to expand the arithmetic of the deal to take some of the hard edges off, the Republican plan is to use a tax deal to break through the current stalemate on debt talks, which have stalled at a $1.5 trillion increase in the government’s $14.3 trillion borrowing limit (hardly a year’s worth of debt).
The president wants higher taxes on corporate inventories and less deductions for high income earners – a package that would increase tax payments by more than $350 billion over the next decade. But Obama mostly talks about the penny ante items that smack of class resentment, like his frequent shots at private jets.
What Republicans are floating heading into today’s debt summit at the White House is a plan that would reach a grand bargain on Obama’s symbolic loophole closures, giving him the chance to claim victory after getting Democrats all whipped up on the subject of the corporate plutocracy. If it comes with a lower rate, the Republicans can avoid the wrath of all but the most fanatical tow-tax purists.
Democrats aren’t looking for a simplification and instead are seeking more payments, period. But they suggest that they might be enticed into a simplification deal if Republicans agreed to Obama’s new taxes on the rich and agreed to let tax rates on the wealthy spike in 2013 when the current rates expire.
Those things aren’t going to happen. But Boehner sees an avenue toward a potential big win on corporate taxes. To get through the current time crunch, the work could even be shifted onto a bipartisan congressional panel to come up with a recommendation for a guaranteed future vote.
But this current round of bargaining may not allow for such a loop-de-loop. Just as Obama looks to speed the plow by offering some shady areas in which Republicans can seek refuge on future cuts, Boehner is looking to offer Democrats some cover on reducing tax rates.
Despite the improved working relationship between Obama and Boehner – rounds of golf, secret White House visits – there simply may not be time to figure out such a plan.
The choice then would be whether Obama could accept shoving the deal into September with a temporary extension, setting up a high-stakes showdown over the 2012 budget and the debt limit or whether both sides opt to try to grind out a $2 trillion deal.
Plucky Plouffe Talks Smack on 2012
"It's going to be a very close, competitive election … a street fight for the presidency."
-- Senior White House Adviser David Plouffe talking to reporters at a breakfast hosted by Bloomberg News.
Senior White House Adviser David Plouffe was all bravado at a reporter breakfast on Wednesday as he slammed Republican frontrunner Mitt Romney and predicted a four-step path to victory for the president in 2012.
He promised a “street fight for the presidency” and corrected reporters who wondered how the president could simultaneously reassure anxious independents and reenergize his base, which has grown listless from years of missed expectations.
Plouffe’s lines reflect the return to aggressive pushback by the White House, including a new Twitter trawler whose job it is to go around and smack down anti-administration sentiments on the Internet.
This may prove problematic for the president, who has exiled his re-election team to Chicago to avoid the unseemly juxtaposition of having campaign and governance side by side. But that also means that he is without the presence of his most important consigliore, David Axelrod.
Where Axelrod is seasoned by long service in the political trenches of Chicago, Plouffe is freshly imbued with the belief in transformative political victory from 2008.
And Now, A Word From Charles
“[Suspected foreign terrorists detained and questioned on Navy ships are being released] into their own country or released anywhere to take up the fight against us. That is a scandal, because the only reason that these have all except one now been released is because this administration will not allow the use of Guantanamo. That's pure ideology, and it is something the administration has to answer. How can you release these terrorists to fight against America again when you have a facility in which you can try them in a military court and have them secure from attacking Americans.”
-- Charles Krauthammer on “Special Report with Bret Baier.”
***Today on “Power Play w/ Chris Stirewalt”: Rep. Phil Gingrey, R-Ga., Democratic consultant Debbie Dingell and Washington Times Columnist Charles Hurt. Tune in at 11:30 am Eastern at http://live.foxnews.com/ ***