Debt Talks: The Grand Bargain
EmailABC News’ Jonathan Karl (@jonkarl) reports:
President Obama and Speaker John Boehner have been discussing a grand bargain to cut some $4 trillion in projected budget deficits over the next 10 to 12 years, according to officials familiar with the talks.
There is no deal yet, but the ideas under consideration include reductions in spending on the big three entitlement programs: Social Security, Medicare and Medicaid. That would be a huge concession for Democrats. In return, Republicans would agree to close some big tax loopholes, reducing some deductions and other so-called spending in the tax code as part of a tax reform deal that would also lower corporate tax rates. The net effect of that tax reform plan would be an increase in tax revenue.
As one senior administration official told me: “We need to do something unthinkable on entitlements. They need to do something unthinkable on taxes.”
Another White House official acknowledged that Democrats won’t like the proposed reductions in Social Security and Medicare (an understatement), but that the changes would be modest compared to what Republicans have proposed in the Paul Ryan budget plan.
“We’ll never agree to anything close to the GOP plan to voucherize Medicare,” said one White House official.
Among the spending reductions the president and the speaker have discussed is reducing the annual cost of living increase (COLA) for Social Security and Medicare as well as increasing the level of income subject to the Social Security FICA tax (the tax currently applies to an individual’s first $106,800 of income).
As for the tax changes, a top Republican official says that while they are discussing closing tax loopholes and other changes to increase tax revenues, there is still a red line for Republicans when it comes to tax rates: “The Speaker has never offered to let any of the Bush tax cuts expire.”
The big question: Even if Obama and Boehner can strike a deal, will it fly with other Congressional leaders?
Senior Congressional Republicans said this morning that they are doubtful that anything that looks like a tax increase can pass the House – or even gain the support of others in the Republican leadership. And Democrats from Harry Reid and Nancy Pelosi on down have said they would oppose anything that cuts Medicare or Social Security benefits.
In other words: a deal that both raises tax revenues and cuts entitlements may be exactly what needs to be done to deal with the deficit, and it may also be impossible to pass in Congress.
UPDATE FROM ABC NEWS' ANN COMPTON (@AnnCompton): “The President has always said everything should be on the table,” deputy communications director Jen Psaki told ABC News this morning in an interview in her office down the hall from the Oval Office.
Psaki would not give specifics of any presidential offers on the table as talks move to a higher level, but she did say the President is ready to put his hand on entitlements often called the dangerous “third rail” of politics.
“We wish there was an easy solution to bringing down the deficit and doing it in a responsible way but unfortunately, there isn't.” Psaki said. “That’s why we need to go after some of the sacred cows in politics, things like entitlement reform, areas like changing the tax code. That’s a conversation the president is willing to have and he hopeful the Republicans will come to the table willing to have it, as well.”
Psaki was careful not to yield on the president’s hope to raise taxes for the wealthiest income tax bracket.
“We’re not talking about raising taxes on middle class families or working people here. We are talking about areas in tax code; corporate taxes is a good example.” She targeted tax subsidies.
“Oil and gas companies are right now taxed at a rate of nine percent. Companies that are out there building factories, hiring people to work in them, are taxed at a rate of 30 percent. So we feel there are areas that are low hanging fruit in the tax code we can go after first.”
The White House calls today’s talks “a pivotal time” in the negotiations and officials do not expected to cinch a deal today.
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If this is true then there’s not an ounce of brain matter among the Republican leadership. The cuts on an annual basis (assuming they are actual reductions and not elimination of programs that never started) won’t total the annual debt credit payments of $490 billion. In other words, the only thing this will accomplish is the elimination of borrowing to pay the interest on our debt. Then, the day they walk out of the closed chambers, the Democrats will loudly claim and the mainline media support that the Republicans cut the elderly’s pay and kicked granny out of the nursing home but the Democrats were able to force the Republicans to tax those dirty wealthy people. Will this leadership never learn?
Posted by: wantingbalance | July 7, 2011, 10:04 am 10:04 am
I still don’t hear anything about cutting Government and the entitlements of the Government employee. When will their retirement age be the same as the tax payer who pays for it? As for the COLA adjustment, I thought we haven’t had inflation for a couple years so there hasn’t been any COLA adjustment or is the fear that we soon will have inflation? So far I see only increased burden on the taxpayer and none on the guy receiving the tax dollars.
Posted by: Sick of them all | July 7, 2011, 10:55 am 10:55 am
Everyone knows that the big three (Medicare, Medicaid, and SS) need to be cut. Why are the Democrats fighting it so much? It is the main reason for our deficits every year. They need to do something about these budget busters and admit that it needed to be done and not blame anyone for it.
Posted by: Earl | July 7, 2011, 11:23 am 11:23 am
Look, all this political posturing is confusing to the ordinary citizen. Explain how we can get ‘promises’ to save 14T dollars over the next 10 to 12 years, but we can spend several trillion every year. The only thing that computes, is that all of these dirt bags will be out of office and out of reach.
Posted by: James L | July 7, 2011, 11:32 am 11:32 am
Funny how the Speakers twitter had no mispelled words in it but after it went thru the WH it did. This President wants to take credit for all the good and blame others for all the other, he is like a small spoiled child. I’m loosing my business because of him, the Dems and their agenda but they could care less. I’m not a rich person, just trying to make it, and they want to raise taxes and fees (which they don’t consider taxes) so they can keep on spending and buying votes.
Posted by: Freedom | July 7, 2011, 11:51 am 11:51 am
Funny how the Speakers twitter had no mispelled words in it but after it went thru the WH it did. This President wants to take credit for all the good and blame others for all the other, he is like a small spoiled child. I’m loosing my business because of him, the Dems and their agenda but they could care less. I’m not a rich person, just trying to make it, and they want to raise taxes and fees (which they don’t consider taxes) so they can keep on spending and buying votes.
Posted by: Freedom | July 7, 2011, 11:51 am 11:51 am
““We’re not talking about raising taxes on middle class families or working people here. We are talking about areas in tax code; corporate taxes is a good example.” Gee, I wonder who hands the corporations the money in the form of higher prices to pay those extra taxes?
Posted by: Publius | July 7, 2011, 12:17 pm 12:17 pm
The Republicans never liked Medicare, Medicaid and Social Security from day one when it became law: it had enough funds to help with the deficits from the Reagan administration to Son Bush, taking 850 billion and over each time it was needed for the deficit. These funds were never put back either. they want to make cuts now, is it to replenish these funds on the backs of the elderly, young and sick? And to top this, they have signed a contract to the American people. I am the American people that did not ask for this contract. The Republicans pledged to the corporate America, including Wall Street that they will protect them, any taxes will be given by the middle class. The candidates running, have subsidies for their farms and companies. I hope when the government shuts down and the elderly and senior living homes do not receive funds, that the Republican representatives do not receive their pay either. That is fair. They need to understand that their are people out here who depend on that Social Security. Cut the subsidies to their businesses. Stay away from the gym facilities we see advertised on the news in Congress. I would appreciate those Republicans to do the right thing: Leave the average American alone. I feel we are hostage to the Republican/Tea Party!
Posted by: angeline tetteris | July 7, 2011, 1:19 pm 1:19 pm
Angeline — I don’t know where to start with your silly comments!! — Do you realize HALF of what you wrote is progressive lies?? — GOP Presidents raided SS??? Johnson signed that bill to change the accounting… and every congress since is guilty!!! — “replenish these funds on the backs of the elderly, young and sick”?… What… Medicare reform?? NOTHING has been proposed that affects ANYONE over age 55… did you know that?? What happens if we DONT reform Medicare… it goes away for everyone!! —- “any taxes will be given by the middle class”??? Actually, if 48% of the US is paying no income tax… maybe we SHOULD do that…. but even Obama has only asked for increases for the top 5%… where are you coming from?? —-”Cut the subsidies”??… If you mean “oil co subsidies”… they don’t exist… they are not subsidies, but business expense write-offs that all companies except oil companies have always enjoyed! —- Geeeesh!!!
Posted by: TheLoyalOpposition | July 7, 2011, 1:41 pm 1:41 pm
I’am a senior citizen. My medicare
will not start until september 1, 2011.
I will turn (65) at this time however,
I have been disable for some time. We
have not received a cola in over (2) two years. Now, they want to cut the
benefits. I worked for since I was fifteen. JUst like the speaker of the
house my mother and father worked hard
and so did my five (5) brother and my
(2) sisters. We managed to go to school
everyone is still working. I got sick
so I depend on Medicare and Social
Security. Now, that I will turn (65) and can received what I worked for and
my mother and father. Who, did not live long enough to receive the benefits of
working. Sorry,the Republicans need to
get a grip. Mr. President you need to stand tall and so does the Democrats.
Don’t let them bully you or the Dems.
They can afford the cuts. I can not…
Posted by: Betty Lemmons | July 7, 2011, 3:32 pm 3:32 pm
Budget cuts are needed today, not just over the next 10 to 12 years or more.
Obama has 2011 and 2012 to reduce spending, after that hopefully we will no longer be dealing with Obama and the Democrats. The debt ceiling has been reached, live with it and now begin to make the changes that are necessary to begin eliminating the debt, not increasing it at a reduced rate.
Posted by: Dr John Galt | July 7, 2011, 3:33 pm 3:33 pm
Learn what Monetary Sovereignty means before talking about economics. Those who do not understand Monetary Sovereignty do not understand economics.
Posted by: Rodger Malcolm Mitchell | July 7, 2011, 4:24 pm 4:24 pm
Voters in swing states Ohio, Missouri, Montana and Minnesota were asked: “In order to reduce the national debt, would you support or oppose raising taxes on those with incomes over $1,000,000 a year?”
80% said YES.
The top 25 Hedge Fund managers earned $22 BILLION last year. That’s with a “B”.
Even for those less wealthy, $1.5 million a year is 100 times the minimum wage. To pay down our national debt, it simply makes sense right now to return those small number of massively high incomes back to pre-GWB era tax rates.
Posted by: green.goddess | July 7, 2011, 4:34 pm 4:34 pm
Billy Bob…LOL….I have no idea where you get your “FACTS” from…but this country is going to MOVE FORWARD WITH OR WITHOUT YOU. I guarantee that. Thank goodness that ‘paranoia based , fear mongering conspircies’ are only effective on the “base”.
Posted by: CND FOX | July 7, 2011, 4:43 pm 4:43 pm
Why hasn’t Ron Paul’s idea been given more MSM attention? Dr Paul says the Fed now holds nearly $1.7 trillion in U.S. debt. But that is really phony debt. His plan: Get the Fed and the Treasury to rip up that debt. It’s fake debt anyway. And the Fed is legally allowed to return the debt to the Treasury to be destroyed.
Posted by: deanbob | July 7, 2011, 6:42 pm 6:42 pm
One thing becomes painfully obvious about this, Obama is in way over his head.
Posted by: juice | July 8, 2011, 8:12 am 8:12 am
Listening to Obama, the most prolific ‘over-spender’ in American presidential history, lecture others on fiscal responsibility is a pathetic example of blatant demagoguery. Even his most rabid Senate supporters abandoned ship with a ’97-to-zero’ rejection of his proposed budget in January with its $1.65 Trillion budget deficit. Obama’s characteristic refuge from the consequences of his disastrous Marxist economic policies, is to attempt to demonize select segments of the American business sector so as to create an ‘us-vs-them’ mentality that will appeal to his left-wing base. Obama meticulously honed this Saul Alinsky tutored tactic when he was serving as an ACORN rabble-rouser on the streets of Chicago. It’s the only public-sector experience that this pitiful excuse for a man has in his quiver. The latest example being his shameless attempt to isolate the business segment of the aviation industry as a pariah to be scorned. The only foreseeable consequence of such selective ridicule will be to force business executives to go off-shore to purchase their transportation assets, while the hapless workers in this hi-paying industry will be forced into the rapidly-inflating Obama unemployment lines. The Socialist practitioners in our society should have learned the fallacy of their politics-of-envy when they destroyed American’s yacht building industry in the ’90s. It was only the industry workers who were sacrificed on the altar of Obama-style socialist greed. Having Obama as the final arbiter in our current debt/deficit negotiations is analogous to a feeding of the sheep to the lions, the sheep (i.e. the American taxpayers) have a zero probability of survival. God speed November 2012. Greg Neubeck
Posted by: gneubeck | July 8, 2011, 12:15 pm 12:15 pm
I can not believe this President is this dumb and hopes we are as dumb as he is. He does not have a clue, JOBs idiot, we are not worried about the debt ceiling being raised, we only worry that you will raise it and spend more foolishly. He spends all his time talking on radio or TV. He has lied so badly in his speeches and the news media will not hold him accountable.
Posted by: Freedom | July 8, 2011, 2:26 pm 2:26 pm
The compromise should be to invest money not spend money. gov subsides to build many solar power plants, new gas fired plants, clean coal plants reduce the cost of power and create jobs.invest in things that would make our economy more efficent,
Posted by: wallace | July 8, 2011, 8:33 pm 8:33 pm