Pethokoukis, Politics and Public Opinion

The House Republicans make their counteroffer

House Speaker John Boehner

“Your move,” say the House GOP:

House Republican leaders have made a counteroffer to President Obama in the fiscal cliff negotiations, proposing to cut $2.2 trillion with a combination of spending cuts, entitlement reforms and $800 billion in new tax revenue.

The leaders delivered the offer to the White House on Monday with a three-page letter signed by Speaker John Boehner (R-Ohio), Majority Leader Eric Cantor (R-Va.), and four other senior Republicans, including Rep. Paul Ryan (R-Wis.), the party’s just-defeated vice presidential nominee.

Republican officials said the offer was based on a proposal outlined by Erskine Bowles, the former chief of staff to President Bill Clinton, in testimony last year before the congressional “supercommittee” on deficit reduction. That offer is distinct from the widely-cited Simpson-Bowles deficit plan released two years ago. [via The Hill]

But when you include the Budget Control Act savings plus war savings — as Obama does — this is at least a $4 trillion plan, probably more. And a few more details from Politico:

The proposal, unveiled by senior GOP aides Monday during a briefing in the Capitol, assumes $800 billion in fresh governmental revenue through tax reform, $600 billion in health savings and changes to CPI, a formula that determines benefits across the government. There’s also $600 billion in other savings, split evenly between mandatory and discretionary spending.

That $800 billion from tax reform seems like a lot, but it is in the ballpark as a recent White House memo explains

Consider the example of a $25,000 cap on itemized deductions, which some claim would raise in the range of $1 trillion or more from high-income households:

  1. Limiting the cap to those with incomes over $250,000 leaves only $800 billion in revenue. A $25,000 cap that applied to all households would raise taxes by an average of $2,400 on 17 million households with incomes below $250,000 ($200,000 for singles). Treasury estimates show that about 40 percent of the revenue from such a cap would come from these households. Thus, the amount of revenue that could be raised from taxpayers making more than $250,000 is only about $800 billion.
  2. The need to phase in a cap to avoid a “cliff” reduces revenues to around $650 billion. In practice, it would not be possible to impose a $25,000 cap on itemized deductions beginning at an income threshold of $250,000. Doing so would create an immense “cliff,” where someone whose income rose to $251,000 could suddenly owe thousands of dollars more in taxes. Accounting for a realistic phase-in reduces the revenue from households above $250,000 by about 20 percent, to about $650 billion.
So Obama gets his revenue from the “rich,” while the GOP get spending cuts and entitlement reform. I would think the Rs could sell this plan to America while also dinging Obama for being punitively fixated on raising marginal tax rates. After all, the Rs have made a compromise on taxes, one that also addresses the real problem — spending.
UPDATE: TPM’s Brian Beutler has the details from the Bowles testimony reference above:

At a hearing before the deficit Super Committee, former Clinton White House Chief of Staff Erskine Bowles argued that the Affordable Care Act should allow Democrats to accept raising the Medicare eligibility age, because it creates a system of subsidized, guaranteed private health insurance for people who don’t qualify for government programs like Medicare and Medicaid. …

Bowles included the proposal in a rough proposal he laid out for committee members that, combined with the cuts Congress has already passed, would total $3.9 trillion in deficit reduction.

“If you look at where I understand the two sides now stand…You all are between $250 and $400 billion in additional cuts on discretionary, so I assumed that we could reach a compromise of an additional $300 billion discretionary spending cuts,” Bowles said. “On health care you are somewhere between $500 and $750 billion of additional health care cuts. I assume we can get to $600 and I got there by increases in the eligibility age for Medicare…. On other mandatory cuts you’re somewhere between $250 and $400, so I settled on $300 there.”

Bowles also proposed $200 billion in savings by changing the way the government calculates inflation to a less generous measure called chained CPI. That would reduce seniors’ Cost of Living Adjustments under Social Security, among other government benefit cuts, and provide the Treasury new revenue by slowing the rate at which tax brackets rise. That would push workers into higher brackets sooner as they climb the income latter — a de facto tax increase over time.

For Democrats, he asked Republicans to accept $800 billion in new tax revenues.

Add in $400 billion in 10-year savings on interest payments on the debt, and over $1.3 trillion in 10-year savings from cuts Congress has already passed, and that adds up to $3.9 trillion.

If you think this is an offer Republicans couldn’t possibly refuse, think again. Committee co-chair, Rep. Jeb Hensarling (R-TX) cautioned Bowles in his closing remarks, “You’ve certainly created some excitement for the press I think. I would say don’t necessarily believe everything you read and hear about the proceedings of this committee.”

If you add in the war savings, which I do not believe Bowles does, then the debt reduction is closer to $5 trillion. But this also looks like a flat-out tax hike rather than tax revenue through economic growth from tax reform, which was the old Boehner-GOP proposal.

9 thoughts on “The House Republicans make their counteroffer

  1. Try the Boehner’s plan from this perspective, You got transferred to Chicago in 2007.You found outrageous home prices compared to your selling price in Indianapolis but you pressed on. Today your mortgage balance is about $80,000 higher than the value of the house. http://www.zillow.com/visuals/negative-equity/#4/39.98/-106.88 You are staying afloat because most of your mortgage payment is interest and thus deductible. You think, hey, with Obama reelected maybe the House Rs will finally take note of the balance sheet that REALLY needs fixing, namely yours and the 36 percent of Chicago mortgage borrowers who are also underwater. (Ibid)

    Of course, you would be wrong. Given a choice of finding some cover for themselves on their tax hike problem or considering the real problem, the Rs are perfectly happy to throw you under the bus.

    Seriously, it is time for Plan B, Obviously, the Rs are bent on self destruction. The question is whether they drag us with them.

  2. The Democrats are not much interested in revenue for The Rich. They are interested in raising marginal tax rates because their constituencies want a visible sign that The Rich are being punished.

    “the GOP get spending cuts”?? After everything is done, I can guarantee you that Federal spending will never actually decrease. In Washington-Speak a “cut” is when you threaten to spend 25% more and you only spend 20% more.

      • The GOP has blathered for 4 years that we have a spending problem but when presented with the opportunity to cut spending what have they proposed?

        well they proposed to reduce the cost of living index for Social Security (which needs to be done) but what the heck does that have to do with cutting spending?

        They’ve advocated cutting Medicare (which should be done) but instead of admitting they made a mistake with Medicare Parts C&D (passed under Bush), they’ve advocated increasing the age of eligibility – which is at best only a partial fix).

        so when you actually give the GOP the PRIME opportunity to specify in chapter and verse what should be cut what do they do? they revert to the fetal position and blame the POTUS for his “bad” proposal.

        We are dealing with a grade-school mentality here.

        they do not even have the simple courage of their own stated convictions to step up and forthrightly lay out what they would do.

        that’s pathetic. They DID lose the election but they are still in denial about just about everything they disagree with. Like a 5-year old, they just refuse to budge and threaten tantrums.

  3. Boehner basically rehashed the old plan. And after complaining during the election that Obama “stole” $800 billion from Medicare, Boehner wants to “steal” more.

    Time to cave on those marginal rates guys. The public will have it no other way.

    • basically, they cut and pasted the FRAMEWORK from Simpson/Bowels who quickly disowned the GOP misuse of the framework rather than laying down their specific ways to raise revenue.

      It’s becoming increasingly obvious that the GOP, who has spent the last 4 years saying we have a “spending” problem cannot or will not make a credible proposal with specific cuts and specific revenues.

      they’ve spent the entire four years talking about a spending problem and not when it comes time to walk-the-walk, they are AWOL.

      Hypocrites and weasels would be a fair way to describe them. They simply do not have the courage of their own self-professed convictions.

      The virulent anti-govt dysfunction of the GOP renders them feckless and impotent on actual governance.

      They keep pining away for the ghost of Reagan to return to show them the way… but Romney was no Reagan and Boehner is no leader of the tea party insurgency.

  4. Does anyone know if it is possible (and if so, where) to find detailed outlines and analysis regarding the different “offers” we keep hearing about.

    For instance, I want to see what Obama saw when he declined the GOP’s proposal. Is this possible?

    Thanks

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