Parties Draw Their Lines in Deficit Reduction Fight

Posted October 27, 2011 at 5:48pm

The first exchange this week of Democratic and Republican proposals for the Joint Committee on Deficit Reduction revealed a truth as daunting as it is obvious: The major roadblock to any deal will be taxes.

When Democrats unveiled their plan in a closed-door meeting Tuesday, they proposed a sweeping $3 trillion framework that would include $1.3 trillion in revenues. On Wednesday, Republicans proposed a more modest package of nearly $800 billion in revenues.

The breakdown of the offerings and how the parties plan to hit their targets shed light on the complication of negotiating a deal with revenues and how each party is gearing up for the fight.

As the super committee hurtles toward its Thanksgiving deadline, each party is likely to dig in on its negotiating strategy, and the frameworks served as the baseline for the parties.

The Republican revenue plan, according to sources familiar with the talks, would include approximately $200 billion in premium increases and other fees for Medicare; $200 billion in other mandatory savings, including spectrum sales and reducing agricultural subsidies; $150 billion in individual tax reform; $50 billion in corporate tax revenue; and $40 billion in savings from enacting the chained Consumer Price Index, which would change the way the government measures inflation.

Of the $150 billion in individual tax reform, much of the projected savings would come from phasing out exemptions and lowering rates, an idea that Rep. Chris Van Hollen told Roll Call in an interview this month he was pushing colleagues to embrace.

“I’ve had conversations with other members of the committee on this issue,” the Maryland Democrat said at the time. “I do think it’s fair to say that this is an idea that could gain bipartisan support.”

Although the Republican approach includes some bipartisan carrots — the chained index, for example, has been touted by Members of both parties and leadership — the overall package was panned by Democrats, who believed their Tuesday proposal was made in better faith.

The basic outline of their plan is simple, though currently lacking in details. The Democrats would ask for a $300 billion down payment upfront in revenue raisers, sources say, followed by a guarantee for about $1 trillion in future tax code reform. The Democratic proposal would instruct the House Ways and Means Committee and Senate Finance Committee — chaired by super committee members Rep. Dave Camp (R-Mich.) and Sen. Max Baucus (D-Mont.), respectively — to overhaul the tax code.

Democrats believe that a 1-1 ratio of cuts to revenues is not only a sound way to achieve long-term fiscal stability, but is fair, given that the first phase of the Budget Control Act already asks for $900 billion in cuts.

Although many lawmakers and aides both inside and outside the powerful panel have remained mum about its workings, taxes are getting people to talk.

“Republicans are choosing a pinky swear with Grover Norquist over real solutions,” one Democratic aide said. “Their offer is a joke. Democrats came to the table with an offer that had serious skin in the game for both parties.”

Of course, Republicans don’t see it that way. They believe their plan gives a more specific outline of where tax savings are coming from, not just the amount, which provides more of a platform to find common ground.

Speaker John Boehner, twice party to one-on-one negotiations with President Barack Obama, firmly opposed the Democratic plan.

“I do think it’s time for everybody to get serious about this,” the Ohio Republican said today at his weekly news conference. “When I see news reports of some of what was put on the table, Democrats wanting $1.3 trillion worth of tax increases — this is the same number that was in the president’s budget, the same number that I don’t know if they’ve found any Democrats in the House or the Senate to vote for. So, I don’t think it’s a reasonable number.”

Moreover, Republican sources indicated it would be dangerous to pursue a numerical goal without a specific idea of where and how tax savings would be achieved.

After its two big private sessions to outline proposals Tuesday and Wednesday, the full super committee met this morning, and it is unlikely to meet again until next week. Committee Democrats also met on their own Wednesday night and this afternoon, while the panel’s Senate Republicans met Wednesday afternoon, a gathering that included a phone call with Minority Leader Mitch McConnell (R-Ky.).

The issue of taxes and revenues will be brought to the forefront in a very public way when the super committee holds its next public hearing Nov. 1. The witnesses for the hearing will be Alan Simpson, Erskine Bowles, Alice Rivlin and former Sen. Pete Domenici (R-N.M.), all authors of broad, bipartisan deficit reduction plans that included tax reform.