Fiscal Cliff: Boehner sends counter proposal to White House

Republican House Speaker John Boehner addressing reporters on Nov. 20, 2012. SOURCE: GOP.gov

ANALYSIS: 

Taking up the Democrats’ challenge to present a “specific” deficit reduction plan, Republican House Speaker John Boehner sent a counter proposal to the White House today, urging the President to adopt spending cuts and tax reforms set forth by the bipartisan Simpson-Bowles Commission.

Read more: Fiscal Cliff: Text of Boehner’s “counter-offer” to the White House

“With the fiscal cliff nearing, our priority remains finding a reasonable solution that can pass both the House and the Senate, and be signed into law in the next couple of weeks. The best way to do this is by learning from and building on the bipartisan discussions that have occurred during this Congress,” Boehner wrote in a letter to President Barack Obama. “Erskine Bowles, the co-chair of your debt commission, presented the Joint Select Committee with a middle ground approach that garnered praise from many fiscal watchdogs and nonpartisan experts.”

Boehner’s move puts the ball back in the Democrats’ court after the President and his surrogates spent the past week blaming Republicans for obstructing fiscal cliff negotiations by rejecting the White House’s tax proposal and failing to offer specifics on tax reforms and spending cuts that the GOP wants.

Chart of the deficit reduction measures proposed by the Simpson-Bowles Commission in 2010. SOURCE: FiscalResponsbility.gov

In a politically-savvy move, Boehner purposely co-opted many of the deficit reduction measures proposed by the Simpson-Bowles Commission, which would force the White House to either accept tax reforms that address only tax expenditures rather than the Administration’s plan to raise revenues by allowing the Bush tax cuts to expire for the top 2% or to explain its decision to not follow the recommendations by a bipartisan commission appointed and often praised by the President.

In particular, Boehner highlighted the proposal by Erskine Bowles, who served as President Bill Clinton’s chief of staff, to raise tax revenues by getting rid of nearly all tax expenditures (or tax credits, deductions, exclusions, and incentives). In exchange, tax rates would be reduced, and under the Simpson-Bowles’s proposal, the top income tax rate could drop down to as low as 23% from the current 35%.

The Simpson-Bowles approach differs from the President’s current proposal, which calls for a rate increase of about 4.6% for the top 2% income earners (reverting back to the Clinton-era rate of 39.6%), cap deductions for high-income individuals, but extend the Bush-era tax cuts for the first $250,000 a person earns in a year.

Eliminating tax expenditures would generate about $800 billion in additional revenue over 10 years, which is about half the amount the President is seeking to raise to reduce the deficit.

Boehner also pointed out that the Simpson-Bowles plan would cut another $300 billion in (presumably, both defense and non-defense) discretionary spending beyond the $1 trillion reduction imposed by the Budget Control Act of 2011.

While Boehner stated that the Bowles recommendation would cut more than $900 billion in mandatory spending, in fact, the Simpson-Bowles proposal called for $556 billion in spending cuts to mandatory government programs over 10 years. Most of those cuts would fall on military and federal employees’ health and retirement programs, agriculture subsidies, and in-school interest subsidies in federal student loan programs.

Notably, the Simpson-Bowles Commission did not recommend cuts to income-support programs. “We felt that income support programs for the most disadvantaged, such as unemployment compensation, food stamps, and Supplemental Security Income (SSI), should not be touched. These programs provide vital means of support for the disadvantaged,” Bowles stated in his written testimony to the Joint Select Committee on Deficit Reduction (“Super Committee.”)

The Simpson-Bowles plan also called for nearly $500 billion in cuts government health programs such as Medicare and Medicaid.

“This is by no means an adequate long-term solution, as resolving our long-term fiscal crisis will require fundamental entitlement reform. Indeed, the Bowles plan is exactly the kind of imperfect, but fair middle ground that allows us to avert the fiscal cliff without hurting our economy and destroying jobs. We believe it warrants immediate consideration,” wrote Boehner.

On Monday, the White House issued a short statement dismissing Boehner’s counter proposal.

“The Republican letter released today 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,” said White House Communications Director Dan Pfeiffer.

Pfeiffer added, “While the President is willing to compromise to get a significant, balanced deal and believes that compromise is readily available to Congress, he is not willing to compromise on the principles of fairness and balance that include asking the wealthiest to pay higher rates. President Obama believes – and the American people agree – that the economy works best when it is grown from the middle out, not from the top down. Until the Republicans in Congress are willing to get serious about asking the wealthiest to pay slightly higher tax rates, we won’t be able to achieve a significant, balanced approach to reduce our deficit our nation needs.”

 

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2 Comments on “Fiscal Cliff: Boehner sends counter proposal to White House

  1. Pingback: Obama-Boehner meeting fails to revive fiscal cliff negotiations | What The Folly?!

  2. Pingback: Corker concedes GOP should let top tax rate go up | What The Folly?!

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