Not a moment too soon, the Gang of Six has resurfaced in the U.S. Senate, breathing new life into hopes for a bipartisan "grand bargain" on deficit reduction.
Even if Eric Cantor were abducted by aliens, there's no way that Congress could pass the Gang's elaborate plan to solve the debt crisis before Aug. 2. But the Gang's resurgence, with growing support from GOP senators, adds to mounting public pressure on House Republicans to end their self-isolating intransigence on taxes.
Several weeks ago, the Gang looked moribund after a key member, Senator Tom Coburn (R-Okla.), went on walkabout. To their immense credit, however, Gang leaders Mark Warner (D-Va.) and Saxby Chambliss (R-Ga.) persevered, got Coburn back in the fold, and unveiled their new plan before 46 Republican and Democratic senators this week. President Obama, who has stood strangely aloof from the Gang's efforts to find common ground, pronounced the new package "consistent" with his views.
The new blueprint, like the original, is based on the Bowles-Simpson fiscal commission plan. It envisions two steps: First, an immediate, $500 billion "down payment" on deficit reduction; followed by more comprehensive reform. Altogether, the Gang calls for $3.7 trillion in debt reduction over the next decade. That's about what budget experts say is necessary to first stabilize, then start shrinking, the national debt.
Another Gang leader, Sen. Kent Conrad (D-Mont.), said today there is talk on Capitol Hill of using the $500 billion cut to win a short-term extension of the debt limit. That could give lawmakers more time to hammer out a permanent solution to the fiscal crisis that includes both increased tax revenues and entitlement reform.
The Gang's revised plan proposes deep cuts in Medicare and other health spending, while -- sorry Rep. Ryan -- apparently maintaining the structure of Medicare and Medicaid. It would achieve about $1 trillion in savings by capping domestic spending, including defense, over the next decade. These cuts are way beyond cosmetic.
The new plan also embraces the fiscal commission's key proposal on tax reform. It would raise around $1 trillion over the next decade by closing tax loopholes, using the savings both to dramatically lower income and corporate tax rates, and reduce the deficit. Spared are tax credits for low-wage workers and families with children. More affluent taxpayers will welcome the Gang's call to abolish the Alternative Minimum Tax.
The fiscal commission achieved a political breakthrough when Republicans senators embraced tax reform, and some Democrats agreed to cut Social Security benefits for affluent retirees and raise the retirement age. Here the new blueprint disappoints. Basically it punts to the Senate Finance Committee, which is charged with drafting a plan to assure Social Security's solvency over the next 75 years. The Gang also says efforts to reform Social Security should only take place "on a separate track... any savings from the programs must go toward solvency." This may placate liberals, but could alienate conservatives who suspect Democrats aren't really serious about entitlement reform.
The big question, of course, is whether the Gang's plan could ever get through the House. For starters, it violates the Tea Party's prime imperative -- that revenues can be raised for no other purpose than cutting tax rates. Moreover, Ezra Klein reports that it also appears to assume the expiration of the Bush tax cuts for the wealthy. If House Republicans won't yield on taxes, don't expect House liberals to deal on entitlement reform.
Still, a lot depends on how the debt limit battle plays out. New polls show voters are more likely to see Republicans as standing in the way of compromise than Obama and the Democrats. If things get really ugly -- if the federal government can't pay salaries or mail benefit checks on Aug. 3 -- such suspicions could quickly turn into a furious backlash.
In any case, the Gang's initiative illuminates a growing rift between House and Senate Republicans, both on taxes and negotiating tactics. By saying, in effect, "Hell no" to balanced proposals to cut deficits, House Republicans are forfeiting a rare opportunity to get Democrats to swallow huge, multi-trillion-dollar cuts in federal spending. Apparently, real conservatives prefer big government to tax hikes.
On the other side, progressives aren't likely to get a better offer than the one Warner and company are offering. No one knows this better than President Obama, who's been beating his head against the wall of GOP recalcitrance for weeks. And that's why, once the debt limit is raised, he ought to throw in with the Gang of Six.
This item is cross-posted at Progressive Fix.