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Six senators, three from each
party had been working
for months to come up with
a bipartisan proposal to reduce
the deficit. The gang broke
up in May when Republican Senator Tom Coburn of Oklahoma abandoned
the talks over an impasse on Medicare cuts.
Those differences have now been worked out and the
gang has a plan that as many as 60 senators and president Obama will support.
Please consider Obama Embraces
Senators’ Deficit-Cutting
Plan
President Barack Obama embraced
a $3.7 trillion debt-cutting
plan by a bipartisan group of senators that would combine tax increases and spending cuts, saying it could
offer a way out of the congressional deadlock over raising the U.S. borrowing limit.
“We now are seeing the potential for a
bipartisan consensus,” Obama said today at the White House. He called the proposal by the so-called Gang of Six “broadly
consistent” with what
he has sought and
“a very significant
step” in so far fruitless negotiations between Republicans and Democrats over boosting the nation’s $14.3 trillion borrowing
authority before a threatened default on Aug 2.
At the Capitol, the
bipartisan group led by Republican Senator Saxby Chambliss of Georgia and
Senator Mark Warner of Virginia pitched its plan for an immediate $500
billion in spending cuts followed by a longer-term
effort to force bigger reductions
and $1 trillion in tax increases.
The plan calls for lowering tax
rates and limiting the growth
of entitlement programs such
as Medicare and Social Security.
About 50 senators, roughly
evenly divided between the two parties, attended a closed-door briefing
on the plan, a sign of potentially
widespread support for the kind
of “grand bargain” to reduce the debt that Obama is urging. One member of the
Republican leadership, third-ranking Senator Lamar
Alexander of Tennessee, publicly endorsed the plan.
“In the next 24 hours,
you’re going to see a significant portion of
the Senate come behind this -- bipartisan -- maybe 60 members, and let’s see how things roll,” said Republican Senator Tom Coburn
of Oklahoma, who rejoined
the Gang of Six today after
he abandoned the talks in May over an impasse on Medicare cuts. “This doesn’t
solve our problems, but this creates the way forward where we can,” he said.
House Majority Leader Eric Cantor, a Virginia
Republican, said in a statement
issued tonight on the
Gang of Six proposal that
“while there are still portions that are unclear and need more detail, this bipartisan plan does seem to include some constructive ideas to deal with our debt.”
It would institute an
initial $500 billion of spending cuts, then lay
out targets and enforcement
mechanisms for forcing more future reductions, including between $85 billion and $202 billion in Medicare and other health spending, $80 billion from defense, $70 billion from education and labor programs
and $11 billion from agriculture programs, according to a summary.
Tax Overhaul
It would also call for a broad tax overhaul
that would raise $1 trillion by limiting
breaks for health, charitable giving,
homeownership and retirement while
lowering individual and corporate tax rates. And it would scrap
the Alternative Minimum Tax, a parallel
system designed to prevent
higher- earners from avoiding taxes.
Meaning of "Immediate"
I am wondering about the meaning of "an immediate
$500 billion in spending cuts".
Is that "immediate"
as in this year, or
"immediate" as in a proposed
pissy $50 billion a year reduction for 10 years. If it's the former, I endorse the proposal but if it's the
latter, the deficit cutting
is nothing but smoke and mirrors. I strongly suspect this proposal is smoke
and mirrors.
Either way, I would feel a lot better about the deal if it contained provisions to end collective bargaining, scrap Davis-Bacon,
and institute national right-to-work
laws.
Senator Rand Paul in Hiding
Speaking of right-to-work
laws, where the hell is Senator Rand Paul hiding? He should be at the forefront
of this battle, insisting provisions like those make it
into the deal. It does no
good to sit back in hiding
when everyone knows something will pass.
The idea is to get as much as possible out of
an agreement. Going into hiding solves nothing.
Revenue Hikes Reasonable
On the revenue side, the tax
hikes are trivial, and in the right places. Getting rid of the
Alternative-Minimum-Tax (AMT) is
a good idea and should make the minor give-aways tolerable. However, the housing industry will scream bloody murder.
It remains to be seen if the House goes along with this
plan, but it is a better option than simply handing the reins over
to president Obama as Republican leader Mitch
McConnell proposed.
Mish
GlobalEconomicAnalysis.blogspot.com
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