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.
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Repuiblicans are selling the idea that everyone in the country has a chance to be successful if they can get the tax burden and the size of government reduced.
The debt ceiling could have been addressed a long time ago, but the Democrats have found a new exciting negotiating tool - CRISIS - The big push on crisis policy making started with the Democrat controlled congress in 2007, when they merrily along claiming Fannie and Freddie were just fine... all the way until it wasn't. - CRISIS- Throw a trillion bucks into the Potomac.
Now they may well cause the a default on the debt ceiling and they have convinced their blind followers that the GOP will be blamed when interest rates skyrocket and more people loose their jobs and homes.
With that in mind, the GOP is using their crisis to negotiate with them to get you a tax break, a break for your children's debt and a more stable economy.
But that works against Democrats' perception of what is in their best interest.
When Obama took office he declared that the wars would be in the budget for the Americans to see. No more hiding. So now they accuse him of ratcheting up the budgets. Get real. The costs of war are real. Bush refused to tells us that . He just hid them. Now we are trying to face them and you get all excited because they were "Obama's fault"??
Deal with the situation. Don't just retreat and accuse. We need revenues to pay for the wars. The people who are making big bucks on war should be taxed for it. The Bankers who were bailed out BY US should be taxed to get that money back into circulation.They are still not lending it to Americans. It is all in bonuses and speculation. Tax the bonuses and speculation.
That is the crisis. The money has been leaking out of the economy to the greedy hands of the wealthy who know how to hide it. If the GOP get their way, our government does nothing but pass legislation for the corporations to make us all their slaves for less than minimum wage.
You say, "it violates the Tea Party's prime imperative -- that revenues can be raised for no other purpose than cutting tax rates."
I am trying to understand what that means. Do you mean 'raised for discussion?' Otherwise I don't know how one would raise and cut the same thing at the same time.
I believe the Tea Party is pushing fiscal responsibility, something that has been absent from the federal government for decades. Fiscal irresponsibility is what got main stream Americans off the couch and onto the protest circuit.
I consider myself to be a Tea Party supporter and I am not against raising income taxes. I believe every who earns an income should treated equally under the law. So, if you want to have income taxes at all everyone should be paying the same rate. This would mean the vast majority of federal income tax revenues would still come from the rich, but it would be fair as they earn more. I am not rich and I paid about $9K in taxes last year. If I had made $200K and paid at the same rate (15%), my taxes would have been $30K without deductions.
A flat and fair tax is necessary.
How so?
The cause of "unemployment and stagnating middle class incomes" is caused by debt and deficits along with other factors, such as banks reluctance to loan money when the government demonizes and is promising to pound them if they make a profit. Better to to wait.
The deficits add to the debt and the debt (money we owe) causes inflation. The US dollar has lost 25% of its value in the last ten years and that is the reason oil and then gasoline costs so much. It was around a dollar per gallon in 2000, around $2.00 when Obama took office, but now costs $3.60 per gallon. This cause everything else to cost more. Businesses have to save where they can or go bankrupt (where everyone loses their job), so they lay off workers and certainly look very hard before hiring new employees. And that is especially tough when you realize that the government is going force you to buy sky-high priced health care insurance for current and new employees and pound you if you make a profit. It makes better business sense to hold back as long as possible.
I have to disagree again. The tax cuts cuts brought us out of a recession and created 8.5 million jobs, grew the GDP, increased paychecks, and raised more in income taxes.
Partisans will argue that there were no net jobs created under Bush, but they are counting the numbers after the congress changed hands the numbers started falling in late 2007. Look it up, President Bush's unemployment rate averaged below 5% for most of his presidency and went up to about 7.5% in late 2008.
Unemployment did not go up to 12% until Obama had the reigns for a while and after their stimulus plan.
"the Bank-caused Great Recession"
The recession was allowed to happen against the advice of the Bush administration on at least 8 occasions and as late as the middle of 2007. The response from Senate and House Democrats was 'everything is fine' and refused to do anything about it. They knew that since Bush was president, he would get the blame, not them. In 2007 before the mortgage meltdown, the House Banking Committee Chairperson, Mr. Frank, said the Fannie Mae and Freddie Mac were "stable" and in "fine shape".
So who are you blaming? Who is the president blaming? Who are the Democrat's willing accomplices in the legacy media blaming?
I guess the Democrats know who is supporting them, ay?
“There is more rate reduction in our policy proposals, in our plan, than there is elimination of tax expenditures. Period,” he said.
And Crapo said what extra revenue that comes in will be from economic growth spurred by lower rates and the simpler tax code that the gang of six envisions."
-http://www.rollcall.com/issues/57_11/Tax-Issues-Could-Derail-Gang-of-Six-207532-1.html?zkMobileView=false
Second, he argues the Gang of Six Proposal wouldn’t raise taxes. It would raise revenue by reducing many tax rates and flattening the tax codes, he says.
“I’m aware of the attack that this raises taxes,” Crapo says. “If you do the calculations, the total amount of tax relief exceeds the tax revenue. It’s a very big step toward a three-tiered, much flatter tax.”
-http://www.inlander.com/spokane/blog-3634-idaho-sen-mike-crapo-and-gang-of-six-member-tells-.html
Another source:
"The study’s main finding is that nearly every state and local tax system takes a much
greater share of income from middle- and low-income families than from the wealthy. That
is, when all state and local income, sales, excise and property taxes are added up, most state
tax systems are regressive."
-http://www.itepnet.org/whopays3.pdf
A recent editorial by Americans for Tax Reform (ATR) in USA TODAY titled Opposing view: Just say no to higher taxes
http://www.usatoday.com/news/opinion/editorials/2011-07-04-opposing-view-debt-limit-taxes_n.htm
speaks volumes regarding the Obama administration’s misjudgment with the Fiscal Commission.
Demands for the Commission arose from the 2008 book/movie I.O.U.S.A. highlighted: the Leadership, trade, savings and budget deficits; the first three being the most middle class relevant and root causes of the budget deficit, the tip of the iceberg. The ATR’s pledge signers (not permitted to negotiate in good faith) limit the focus only to spending, throwing middle class relevant deficits under the bus and allow ATR to be the Puppet Master of a deficit shell game.
Completely eliminating the AMT, which for now mostly falls on the wealthy, and reducing top rates isn't exactly encouraging in my view. Add the territorial tax system for corporate taxation (allowing corporations to escape taxes for all the profits they make overseas), the chained CPI (which not only reduces benefits, but also appears to raise taxes regressively), and vague calls for Social Security reform and Medicare reform on top of the above and we could have a disaster waiting to happen.
We are best advised not to include the Gang of Six agenda in a debt reduction deal. From what I can tell it is atrocious (and horribly vague) policy that threatens to do even greater damage to an already vulnerable middle class.