Last week reports of competing proposals began to emerge from behind the closed doors of the Joint Select Committee on Deficit Reduction, one unveiled by some of the panel's Democrats and another put forward by its Republicans. Although neither plan has been made public, this much seems reliable: the Democratic proposal makes more benefits cuts and provides less in revenues than earlier bipartisan deficit reduction plans, and Republicans were quick to reject the offer. If the reports are accurate, that would make this just the latest episode when Democrats put themselves on record favoring cuts they should not agree to, without enough revenues for a fair and sustainable deficit reduction plan. It would also be the latest installment of the Republicans' unyielding protection of those at the very top of the income scale at the expense of the rest of us.
Spending Cuts in the Democrats' Plan: Reportedly, the plan presented by Senate Finance Chair Max Baucus (D-MT) included $1.3 trillion in spending cuts in addition to the $900 billion in appropriations cuts already agreed to. The proposed spending cuts are causing anger and disappointment among many advocates. The cuts include $475 billion from Medicare and Medicaid, $425 billion from other mandatory programs, and $400 billion from discretionary programs (annual appropriations), according to an analysis by the Center on Budget and Policy Priorities. The cuts to Medicare are said to include $200 billion in beneficiary cuts. Since most Medicare beneficiaries have relatively low incomes (half have incomes below $21,000), higher payments or reduced services will compromise older people's ability to cover their health care and other needs.
A big part of the mandatory spending cuts comes from cutting Social Security benefits over time by reducing the cost of living increases based on inflation calculations. This change (a proposal called the "chained Consumer Price Index (CPI)") would shrink Social Security payments more and more over the coming decades; someone now 65 would receive $1,400 a year less when they reached age 95 than they would if the calculation did not change. Many groups concerned about seniors, including the National Committee to Preserve Social Security and Medicare, oppose this reduction in inflation adjustments. Other cuts in this category are likely to include reductions in farm subsidies and cuts to federal employee retirement benefits, but the full details are not known.
Little is known about the Democrats' proposed additional $400 billion in discretionary programs, although some accounts inspired hope that there would be additional military savings beyond what will be achieved in the appropriations cuts already scheduled over the next decade.
Republican Proposals to Cut Spending: Republicans on the Joint Select Committee countered with their own plan, at least 70 percent of which were spending cuts.
CQ reported that the Republicans also included the chained CPI, estimated to save $185 billion by reducing Social Security benefits. In addition to Medicare and Medicaid cuts, the Republican plan also is likely to cut food stamps (Supplemental Nutrition Assistance Program, or SNAP) and other nutrition programs.
The Democrats' Revenues Plan: The Democratic proposal included $1.3 trillion in new revenues. However, not all the sources of the revenues would be specified. CQ reported that several hundred billion dollars in new revenues would be listed as a first step, but that the rest would be identified in a second step as tax-writing committees came up with a tax reform plan. Some Democrats had discussed forcing Congress to act on the second stage by including automatic tax increases affecting the highest earners that would be triggered if no agreement on tax reform generating the required new revenue were reached. It is not known whether the plan included such triggers. Without such a mechanism, the ultimate amount of new revenues could of course be far less than the $1.3 trillion called for.
In addition, the proposal includes job creation initiatives. These are almost certain to include tax reductions (extending employee payroll tax cuts that would otherwise expire and certain incentives for businesses). These tax reductions will make the net increase in revenues smaller.
The Republican Revenue Proposals: Almost none of the $640 billion in new revenues discussed by the Republicans on the super committee come from new taxes. Some would come from higher co-payments and premiums for Medicare, which would increase the negative impact on Medicare beneficiaries of modest means. There would be higher user fees and revenues from sales of broadband spectrum.
What's Ahead: The Joint Select Committee must propose a plan to Congress by November 23. If Congress can vote on it by December 23, debate will be limited, with no filibuster or amendments possible. That kind of up or down vote offers an important opportunity to raise the revenues our country needs to get our finances back on course without undermining our critical priorities or hurting the most vulnerable among us. But it also creates a dangerous threat if the plan does not include new revenues.
Congress must walk away from any deal that hurts low-income and vulnerable people and that does not include substantial revenues and military savings. Democrats cannot keep putting cuts on the table that will hurt low-income people, only to see their package rejected by the Republicans, who are likely to adopt every spending cut proposal but little or none of the revenues. We know exactly what will happen if no deal is reached; automatic budget cuts will go into effect, threatening funding for education, housing, job training, and many other services people need. But those will not kick in until January 2013. It would be better to fight these cuts over the next year than to agree to reduce Medicaid, Medicare, Food Stamps/SNAP and Social Security benefits now.