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Fiscal Cliff Impasse Isn’t About Tax Rates — It’s About Entitlements

Do You Really Wanna Jump? by movieclips The Washington Examiner’s Byron York has advice on how Republicans can shift the fiscal-cliff debate to their advantage, but he begins with this revealingly frank prediction: Republicans will cave on the question of raising the tax rate for the highest-income Americans. The only question is whether they do […]


Do You Really Wanna Jump? by movieclips

The Washington Examiner’s Byron York has advice on how Republicans can shift the fiscal-cliff debate to their advantage, but he begins with this revealingly frank prediction:

Republicans will cave on the question of raising the tax rate for the highest-income Americans. The only question is whether they do so before or after the government goes over the so-called fiscal cliff.

First, many in the GOP do not believe that raising the rate on top earners from 35 percent to 39.6 percent (the rate before the Bush tax cuts) would seriously damage the economy [emphasis mine]. Second, they know that most Americans approve of higher taxes on the top bracket, and President Obama, having campaigned and won on that platform, seems dead-set on higher rates. Third, they fear that if the government does go over the cliff and Democrats propose re-lowering taxes for everyone except the highest earners, Republicans would be in the impossible position of resisting tax cuts for 98 percent of the country on behalf of the top 2 percent.

This will come as news to the casual consumer of “cliff” media coverage. Officially, Republicans are not opposed to new revenues per se; it’s precisely how they’re raised that accounts for the stalemate in Washington. Capping tax deductions and eliminating loopholes is kosher — but hiking rates will disincentivize productivity and job creation. If that’s not the case — or if “many in the GOP” don’t believe it’s truly the case — then what are we arguing about?

We’re arguing about entitlement spending.

Republicans will give in to President Obama — reluctantly, kicking-and-screamingly — on the top tax bracket, but they want substantive entitlement reforms in return, and they want bipartisan, Bowles-ian cover as part of the bargain. The outline of a deficit-reduction plan offered by House Republican leaders yesterday in the form of a letter to the president was vague about revenue: a headline number of $800 billion over 10 years was put on the table, but the letter did not specify which deductions and loopholes are on the chopping block. Because that’s not the point. Obama will get his revenue. This New York Times report is on the right track:

Republicans did produce proposals that could create a political backlash. Of the plan’s savings, $200 billion over 10 years would come from changing the way the government calculates inflation, which would slow benefit increases in programs from Medicare to Social Security and raise taxes by slowing the annual rise in tax brackets. Republican aides said that it would be unpopular, but that it was the right response to deficits still topping $1 trillion.

The Republican plan also called for $600 billion in cuts to federal health care programs, including an increase in the eligibility age for Medicare and increased means testing to shrink health benefits for more affluent elderly Americans.

I ask both liberals and conservatives: Is this such an unreasonable expectation for compromise? The bulk of the Republican party is about to ditch its longstanding opposition to new taxes — a stance that Grover Norquist reckons as a sort of blood contract. And the mere broaching of a plan that the White House considers unworthy of further negotiation has caused rumblings of revolt against Boehner and his allies. Can you blame them for not acceding to Obama’s revenue demands just yet?

In the interest of full disclosure, I should remind readers that I used to work for Boehner. I’ll presume you won’t question my establishment-tweaking bona fides when I say that roughly $1 trillion in new revenue for roughly $1 trillion in spending cuts, including modest structural reforms to Social Security and Medicare, is a realistic target to shoot for, all things considered.

Let’s move on and spare ourselves a needless crisis, shall we?

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