Taxes, including tax rates, are going up. But what about spending cuts?

Image Credit: Marc Nozell (Flickr) (CC BY 2.0)

Image Credit: Marc Nozell (Flickr) (CC BY 2.0)


Sources familiar with the Obama-Boehner talks confirmed that Boehner proposed extending low tax rates for everyone who has earned less than $1 million, and rates would rise for wages above that. Obama wants that threshold set at $250,000.

Under current law, the 35 percent top tax rate is scheduled to expire on January 1, and would automatically go to 39.6 percent – where it was during the Clinton administration.

Boehner also has increased to $1 trillion his figure for total revenue, compared to Obama’s figure of $1.4 trillion. The balance of a 10-year deficit-reduction plan would come from spending cuts.

So we are talking $500 billion in revenue (on a static analysis basis) from tax rate  hikes — good luck with that — and another $500 billion from some sort of base broadening. Not sure where capital gains and dividend taxes stand. If the increases could be kept to 20% — including the Obamacare tax — that would be a significant accomplishment for the House GOP.

Boehner has made a tremendous concession here. Will President Obama to do the same on spending, particularly entitlement reform? Now I don’t expect the president to suddenly endorse premium support Medicare reform. But some incremental reforms could be very helpful. AEI’s Jim Capretta outlines a few to encourage cost-sharing, choice, and competition:

First, in general, Medigap plans and employer-sponsored retiree coverage should not be allowed to fill in entirely Medicare’s cost-sharing. In an FFS insurance model, that’s commonsense.

Second, the [Accountable Care Organization] “shared savings” program should be explicitly expanded to foster competition among ACOs through beneficiary choice. Instead of the automatic enrollment system now in place, beneficiaries should be given the option to enroll in an ACO of their choosing. And, as an incentive to do so, they should be allowed to share in the savings from ACO cost-cutting.

Third, to provide even more incentive for enrollment in cost-effective care, the reform should allow secondary insurance to provide more favorable cost-sharing for beneficiaries who get their care from an approved integrated system (that could be an ACO model or perhaps even more aggressively managed models). This would give the beneficiaries even stronger financial incentives to forgo unmanaged FFS and would create within Medicare something like an “in-network” and “out-of-network” structure, much like what many private employers have in place today.


7 thoughts on “Taxes, including tax rates, are going up. But what about spending cuts?

  1. Let’s see a principled proposal from the GOP on the cuts.

    It’s silly for them to say that Obama needs to provide the cuts they have in mind.

    Obama is not a mind-reader. The GOP needs to get in the game. They’ve spent 4 years talking about spending – a good part of which they themselves approved.

    so let’s hear from them on what they think needs to be cut.

    These guys are feckless. what happened to principled fiscal conservatives? they’re totally AWOL today.

    they talk the talk “we have a spending problem’ but they do not “walk the walk”.

    • “It’s silly for them to say that Obama needs to provide the cuts they have in mind.”

      Then how about Obama agree to spending cuts in principle, Larry? Is that too much responsibility for your hero to muster up? I know he’s only the President of the United States, but he’s now got the “flexibility” he wanted. Is he only going to use that for surrendering to the Russians?

      “Obama is not a mind-reader.”

      So even you don’t think he has much interest in actual spending cuts. He’ll just wait to see whatever the GOP puts together and perhaps give it a looksie. But he’s the one always jabbering on about a “balanced approach.” We know he wants to tax the productive, where’s the other side of the ledger from the loafer-in-chief, Larry G? His tax hikes will amount to a rounding error in proportion to the yearly trillion dollar plus deficits he runs up every single yr of his presidency.

      • The GOP is the one who wants cuts and they say they want specific cuts.

        Put them on the table and let Obama come back with a response.

        it’s pretty stupid when the GOP has spent the last 4 years saying we have a spending problem and now the cat has got their tongue on specifics.


        if they really wanted to make Obama’s “balance” look bad – then get it on the table.

        otherwise they are as feckless as they are blatherbutts.

        • “Put them on the table and let Obama come back with a response.”

          Thus far, Obama hasn’t agreed to them even in principle.

          “The GOP is the one who wants cuts and they say they want specific cuts.”

          Once again, Obama is the President of the United States and has been for the past 4 yrs. He’s the one talking about a “balanced approach. ” His past 2 budgets have garnered exactly ZERO votes in Congress. Not even a single Democrat was willing to vote for Obama’s ruinous spending. I know he’s pathetic and a loafer, but just once you could try to hold him to the same standard you hold the GOP. As I said, he has his flexibility and won’t face the voters, how about he use it for something that won’t harm America just once?

          • won’t face the voters? What do you call the election guy?

            The GOP has spent 4 years blathering that we have a spending problem.

            Is Obama supposed to read their mind?

            We know what is going on here.

            The GOP is not man enough to step up and actually name the cuts. They’re hiding.

            What’s Obama supposed to do?

            Ask them “do you want this one? or that one?
            what cuts do you want?

            They can’t name the cuts they want?

            Obama names the revenue he wants… if he played the GOP game he’d say ” you gotta guess how much revenue I want”.

            these guys are feckless.

            They should be forthright enough to tell the American people want they want cut and let Obama deal with that but when you are as gutless as the GOP is these days.. they all go hide in the closet.

            Mr. Reagan would have had no trouble naming the cuts.

  2. If you were President Obama, why on earth would you suggest significant spending reductions? The Republicans will just cave in as usual and you can make a phone call to Chairman Ben and tell him to crank up the presses.

  3. Republicans DID submit a budget to the Senate. Harry Reid just stuffed it.
    If we are to return to the Clinton era income tax rates, we must also return to the 20% capital gains rate (scheduled to go up astronomically); that’s where much of the revenue came in to Clinton in his last 3 years in office.

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