All at once, a “fiscal cliff” deal seems to be coming together. Speaker John Boehner’s latest offer doesn’t go quite far enough for the White House to agree, but it goes far enough that many think they can see the agreement taking shape.
Boehner offered to let tax rates rise for income over $1 million. The White House wanted to let tax rates rise for income over $250,000. The compromise will likely be somewhere in between. More revenue will come from limiting deductions, likely using some variant of the White House’s oft-proposed, oft-rejected idea for limiting itemized deductions to 28 percent. The total revenue raised by the two policies will likely be a bit north of $1 trillion. Congress will get instructions to use this new baseline to embark on tax reform next year. Importantly, if tax reform never happens, the revenue will already be locked in.
On the spending side, the Democrats’ headline concession will be accepting chained-CPI, which is to say, accepting a cut to Social Security benefits. Beyond that, the negotiators will agree to targets for spending cuts. Expect the final number here, too, to be in the neighborhood of $1 trillion, but also expect it to lack many specifics. Whether the cuts come from Medicare or Medicaid, whether they include raising the Medicare age, and many of the other contentious issues in the talks will be left up to Congress.
And it's the chained-CPI that's the problem. What is it? The short answer is that it's a complicated piece of economic mumbo-jumbo that justifies cutting Social Security benefits by 5% immediately and more as time goes on. The longer answer is here.
That's crappy enough right there. In fact, it's bad enough that Paul Krugman says he's torn on whether this is deal is better or worse than the consequences of no deal at all. "It’s not clear that going over the cliff would yield something better," he says, "on the other hand, those benefit cuts are really bad, and you hate to see a Democratic president lending his name to something like that. There is a case for refusing to make this deal, and hoping for a popular backlash against the GOP that transforms the whole debate; but there’s also an argument that this might not work."
Beyond being a typical Republican attack on consumer demand, it also amounts to a raid on Social Security to pay for all the crap Bush did to run up the deficit. Consider that the Social Security trust fund is self-funding and doesn't add a dime to the deficit. It's your money, to be spent on your retirement, and Republicans are demanding that a good chunk of it be used to cover their bloody and idiotic snipe hunt for WMD in Iraq. It absolutely must be used to pay for the bailouts for billionaires -- the same billionaires who crashed the economy and created the need for their own bailouts. Your Social Security benefits have to be taken from you, in order to avoid cuts to our bloated military -- in itself a constant and needless bailout of defense contractors.
The deal was that you'd contribute to the trust fund and, when your time came, you'd get a fair share of it for your retirement. It's your money and Republicans want to take it away from you, to pay for their own idiotic mistakes and boondoggles. That wasn't the deal.
But to paraphrase someone who was no doubt a conservative: Republicans are altering the deal. Pray they don't alter it any further.