President Obama has been traveling around the country telling the GOP to show their hand; and now they have. Monday the House Republicans released their own proposal to avoid sending the nation over the “fiscal cliff” including $4.6 trillion in debt reduction without raising anyone’s tax rates.
The GOP used the framework formulated by the former co-chairman President Obama’s debt commission and Clinton chief of staff, Erskine Bowles; the plan includes an increase in the eligibility age for Medicare benefits but doesn’t offer a specific age; however it’s the first attempt by either party to address entitlements in their fiscal cliff negotiations.
In discussions held during 2011 Obama and Speaker of the Houser John Boehner, R-Ohio discussed raising the Medicare age to 67 over a 50-year period, but failure to conclude an agreement pushed Medicare to the back burner.
“What we’re putting forth is a credible plan that deserves serious consideration by the White House and I would hope that they would respond in a timely and responsible way,” Boehner said.
The White House sent Treasury Secretary Timothy Geithner to discussions with congressional leaders this past week with a fiscal cliff proposal the GOP considered “not serious.” The plan submitted by Geithner included a $1.6 trillion request for new tax revenues without comparable spending cuts or entitlement reforms and $80 billion in new stimulus finds. The White House plan was deemed by Boehner as a “la-la land offer.”
The fiscal cliff back-and-forth continued today as White House Communications Director Dan Pfeiffer said the Republican plan “does not meet the test of balance. In fact, it actually promises to lower rates for the wealthy and sticks the middle class with the bill. Their plan includes nothing new and provides no details on which deductions they would eliminate, which loopholes they will close or which Medicare savings they would achieve. Independent analysts who have looked at plans like this one have concluded that middle class taxes will have to go up to pay for lower rates for millionaires and billionaires.”
Apparently this White House, which completely disregarded their own deficit commission’s plan, is only focused on raising tax rates to address the fiscal cliff. Without any flexibility from the Obama Administration there is no foreseeable path to avert the fiscal cliff, which includes huge increases in tax rates that will affect not only the wealthy, but anyone who has a 401k or invests in the stock market as capital gains tax rates soar; add in the mandatory spending cuts and the weak economy will almost surely slide back into recession.
While the GOP fiscal cliff avoidance proposal leaves out much of details it does specify $800 billion in new revenue gained by closing loopholes and capping deductions; $900 billion in health care and other mandatory spending cuts; $300 billion in cuts to discretionary spending, which includes social programs such as food stamps; and $200 billion gained by changing the way the government calculates cost-of-living adjustments for Social Security and Medicare.
Where the GOP plan shines is that it provides sufficient deficit reduction to remove the threat of the $1.2 trillion in automatic spending cuts, a.k.a “sequestration,” removing a large part of the pain of the fiscal cliff.
Even though the GOP plan prevents sequestration it does nothing to address the debt ceiling, which the White House has insisted must be included in any agreement. Without a prior resolution the nation will breach the debt ceiling in February when the U.S. exhausts its $16.4 trillion borrowing limit.
An agreement resolving the fiscal cliff is almost impossible to envision before year’s end; nonetheless the White House and the Congress will push the limits taking the nation to the brink of disaster and then agree to delay action until next year.
The White House has decided that if the economy crashes the GOP will take the lion’s share of the blame, once again showing the leadership vacuum at 1600 Pennsylvania Avenue.
Odds of a real resolution to this self-created crisis before New Years: 70 – 30 against.
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