Just as We Thought: Debt Deal Forcing Tax Revenue Increases

You might have noticed that lately, the Supercommittee in Congress, charged with reducing the deficit by $1.2 trillion or face the country with huge automatic cuts to defense and entitlement provider payments, has been a subject of buzz. That's because the deadline for the supercommittee to reach a deal and vote on it is exactly one week away. Something interesting is happening: Republicans are still by and large opposed to tax revenue increases in any significant way, but they offered, as the opening offer, a $300 billion increase in tax revenue by closing some loopholes for the top income earners. Sen. Pat Toomey, the super anti-tax, anti-government Republican even suggested a similar plan while lowering the overall top rate from 35 to 28 percent.

Yes, it's not much. And there is no way Congressional Democrats or President Obama will accept this without more revenue increases. But this is already opening a rift among Republicans - those who understand that the debt limit deal was a sure loss for the Republicans and compromise to avoid those painful, automatic defense (and medical industry) cuts is a must, and those who are running for president in their own party. Don't take it from me; take it from them:
House Speaker John Boehner publicly blessed a Republican deficit-reduction plan Tuesday that would raise $300 billion in additional tax revenue while overhauling the IRS code, bucking opposition by some GOP presidential hopefuls and colleagues wary of violating a longstanding point of party orthodoxy.

Despite Boehner's comments — and Toomey's credentials as an opponent of tax increases — GOP presidential contenders Newt Gingrich and Rick Perry said they were prepared to oppose a plan along the lines of the one under consideration. Another candidate, Mitt Romney, brushed aside a question on the subject.
It's not just that the Republicans in the Suprecommittee are being pummeled by their own presidential contenders (remember the "we would not accept a 9:1 cuts: revenue deal" moment?). To make matters even more complicated, there is a movement by rank-and-file House members and Senators both Democratic and Republican to go big on deficit reduction and produce a package that reduces the deficit by $3.7 trillion, way above and beyond the supercommittee's mandate of $1.2 trillion. The "gang of six" plan, which is now being revived as a backup should the supercommittee fail, would raise revenues far more drastically than what Newt thinks is bad now.
Hoyer joined the House effort led by Idaho Republican Mike Simpson to urge a big supercommittee deal along the lines of the Gang of Six. Savannah's John Barrow, a Democrat, and Jack Kingston, a Republican, were among the 100 U.S. House members to sign on. Across the Capitol, U.S. Sen. Johnny Isakson, R-Ga., is one of nearly 50 senators to lend their support to the Gang of Six -- led by Chambliss and Virginia Democrat Mark Warner -- which came up with a plan in July to reduce $3.7 trillion in future deficits, but never produced an actual bill.

Of that sum, $1.5 trillion came from tax reform that reduced many tax rates while eliminating a slew of deductions. The proposal also included cuts to domestic programs, a change in the way cost-of-living adjustments are calculated for Social Security and other reforms.
Now, yes, I know, the gang of six or even any talk of COLA adjustments to Social Security is the antithesis to the professional, yelling, sanctimonious pretend-Left. But screw that for a second. Neither Newt Gingrich nor Michael Moore's ideologically strident solutions are likely to get this country very far. The real story, if you put together the two quotes I just presented, is this: If the Republicans on the Supercommittee don't embrace something close to what the Democrats on the committee have proposed, i.e. about $1 trillion in revenue increases, $1 trillion in cuts and $300 billion from interest savings, the revenue increases they face will be bigger - either by the virtue of the movement in Congress in support of the "gang of six" plan (which raises revenue by $1.5 trillion and which, by the way, was essentially what the president offered to John Boehner in the first place), or the expiration of the Bush tax cuts.

As I pointed out back in August, the president sacrificed nothing in the debt limit talk, saddled the Republicans with looming defense cuts and medical industry cuts (i.e. Medicare provider cuts) and quite happily used as leverage the certainty of the Bush tax cuts expiring at the end of 2012 to raise revenue should Congress fail to do their job. And that is turning out to be the case, as even Republicans run around trying to figure out how to make a compromise rather than unite behind a plan to just say no.

There are no two ways about it. Revenues are going to be increased, one way or another, and the uber rich are going to end up paying a fairer share of that dues we pay to live in a democracy. The only question that remains before the Republican leadership in Congress is what part they will play in it. Essentially, only three options are on the table:

  1. Continue to kiss up to the Tea Party and stall any revenue increases whatsoever, and be responsible for forcing a situation in which all Bush tax cuts expire at the end of 2012.
  2. Let Congress vote on the Gang of Six plan, pass it, and increase tax revenue by $1.5 trillion, eliminating the beloved tax loopholes for their rich buddies.
  3. Convince some of their own on the Supercommittee to agree to something close to the Democratic proposal of $1 trillion increase.
If the Republican leadership in Congress have a half a brain among the whole lot of them, they will take avenue 3, save face with some adjustments, and declare victory while claiming credit for an overhauled tax code and entitlement reform. Convince the American people that the Republican leadership is capable at all of, well, leadership at a moment of crisis.

No matter what they do though, they have already destroyed their own political motto: that you never raise tax revenue, and that cutting taxes makes revenue rain from the sky. The American people know that it's bunk, but even more importantly, the movement in Congress by more and more rank-and-filers to get behind the Gang of Six plan is demonstrating that so do the Republicans in Congress. The Republican candidates can run against their own Congressional leadership if they wish, but I doubt that GOP members of Congress are going to let their nominee throw them under the bus for too long without consequence. And for the sake of the country, that's a good thing.

The Supercommittee, ideologues on the Left argued, was merely a way to take a hatchet to the social safety net while sparing any additional tax liability for the ultra rich, as it would put on the table everything (apparently, by the definition of ideologue Left, 'everything' means only entitlement programs and not taxes. Go figure. I thought that was the 'everything' definition of the far Right). Some of us on the smart Left, however, said that the Supercommitee, along with the president's success in sequestering and sparing any cuts to benefits on the entitlement side (including Medicare), would force a revenue increase - revenue increase that would come not for poor Americans paying additional taxes but from the wealthy paying a fairer share. And look what is about to happen.

Yes, I know that people on the pretend-Left are going to have a tantrum if the Supercommittee deal (or another deal) substantially increases taxes on the rich but also calculates Social Security COLA using a different formula than the current one and/or raises the Medicare age eventually to 67 from 65. Oh, they are going to have a cow. Of course, as the Affordable Care Act will have fully kicked in before any of this stuff happens, the Medicare eligibility age will become less of a real issue as people will be able to obtain insurance in the private market or through Medicaid, and reforms in Medicare, including the complete closure of the drug benefit donut hole will ensure that the largest rising expense among Social Security beneficiaries, medical costs, are reined in.

When the President offered John Boehner the grand bargain during the debt limit negotiations reportedly these very things, he was thinking ten steps ahead of damn nearly anyone else. Boehner could have taken the deal then and been seen as a statesman and a leader, but instead now, he might have to accept the same thing anyway, and not get any of the spotlight. How's holding them teabags comin' along, Mr. Speaker?