With a Nov. 23 deadline looming for lawmakers to settle on a plan to shrink the federal deficit by at least $1.2 trillion over the next decade, some members of the panel want to postpone decisions on what role tax increases might play in boosting government revenue:
Under this approach, the panel would decide on the amount of new revenue to be raised but would leave it to the tax-writing committees of Congress to fill in details next year, well beyond the Nov. 23 deadline for the panel itself to reach an agreement. That would put off painful political decisions but ensure that the debate over deficit reduction stretched into the election year.
"There could be a two-step process that would hopefully give us pro-growth tax reform," Representative Jeb Hensarling of Texas, the top Republican on the panel, said Sunday on the CNN program "State of the Union."
Translation: The deficit panel would offer broad guidelines for deficit-reduction. But it would allow the House Ways and Means Committee and the Senate Finance Committee to decide exactly how much tax revenue to raise.
Democrats on the committee have proposed a plan that would generate
But that resistance has softened, with Senate Republicans recently signaling that they would accept $250 billion to $300 billion in net tax increases over 10 years. More specifically, that plan would entail eliminating tax deductions in return for cutting the top tax rate to 28 percent, rather than allowing it to return to the Clinton-era level of 39.6 percent (in other words, preserving the Bush-era tax cuts). Corporate tax rates also would decline.
Yet even with that opening in negotiations, serious doubts remain about whether the committee can reach a deal in time. The real deadline is Nov. 21, when the panel must send its plan to the Congressional Budget Office for evaluation. Failing to strike an agreement would trigger $1.2 trillion in automatic spending cuts to government programs and defense. As one Capitol Hill staffer told Politico on the chances of producing an agreement:
"I don't hold out a lot of hope," said a senior Democratic leadership aide, on the outlook for the House-Senate panel. "People are talking, but it's not going anywhere."
With the committee seemingly deadlocked, legislators under pressure to do something (anything) about the deficit may prefer to temporize rather than accept the automatic spending hits. The obvious problem -- next year's national elections. If partisan disputes over fiscal policy are bitter now, they will be doubly so in 2012.
After all, the
Politics aside, there are ways to curb the deficit and spark the economy. Here's how the The American Prospect's Robert Kuttner would do it:
End the Bush tax cuts for the wealthy. Restore the estate tax. Add two new top brackets for millionaires taxing capital gains and dividend income as the same rate as salary income. Close loopholes that allow U.S. corporations to avoid taxation by booking income overseas. Add a financial transactions tax.
Presto, $4 trillion over 10 years, without increasing taxes on the bottom 99 percent. That's about the sum that austerity-mongers in both parties want for deficit-reduction.
Sensible. And wholly unlikely under the present dispensation in Washington. Of course, there's another way to -- do nothing. According to the Congressional Budget Office, under current law the federal deficit will fall from 8.5 percent of GDP this year to 6.2 percent in 2012. If lawmakers were to keep on doing nothing over the next decade, the budget gap would continue declining to just over 1 percent of GDP by 2021.
Seems like something Congress could handle.