The wide gap between GOP lawmakers and President Obama over what constitutes serious deficit reduction may be too much to overcome in time to avert the year-end fiscal cliff.
Republicans now say they're willing to yield ground on taxes — though not on tax rates — to reach a grand deficit-cutting bargain, but Obama has a different idea about what qualifies as "grand.
The deal laid out by the White House leading up to and since Obama's re-election has involved about $4 trillion in claimed deficit cuts over 10 years.
Yet Republicans have kicked the tires before — the deal has been on the table since September 2011 — and come away finding it's smaller and far more tilted toward tax hikes than advertised.
The reality is that Obama's new spending program cut proposals appear relatively modest: less than $600 billion over 10 years.
Of those, about $250 billion come from Medicare, mostly via reduced payments to providers. That would come on top of deep ObamaCare cuts that may be hard to achieve.
The White House's $4-trillion-plus in savings also includes $1.1 trillion from drawing down troops in Iraq and Afghanistan; $1.2 trillion in savings from Budget Control Act spending cuts passed into law in August 2011; and related reductions in debt service.
At the same time, the White House wants $1.6 trillion in new revenue, of which nearly $1 trillion would come from letting the Bush tax cuts expire for the top 2% of earners.
In a September 2011 analysis, the nonpartisan Center for a Responsible Federal Budget called the trillion-plus savings from the troop drawdown "a true budget gimmick.
The group also judged that Obama's approach "is unlikely to sufficiently control long-term deficits and debt.
At Wednesday's news conference, Obama said, "I'm ready and willing to make big commitments to make sure that we're locking in the kind of deficit reductions that ... start bringing down our debt.
Yet Republicans responded that the president has yet to put out a credible plan to tackle entitlements. While the White House says its Medicare curbs would save a lot more in the second decade, it has so far steered clear of Social Security reform.
"It's now the president's turn to propose a specific plan that includes meaningful entitlement reforms to strengthen and protect these programs for future generations," Senate Minority Leader Mitch McConnell said.
McConnell's statement implied that the GOP won't be satisfied until it sees detailed policy prescriptions, as opposed to numerical spending-cut commitments such as those offered in August 2011 with the sequester set to take effect in January 2013.
Tax Reform Debate
Yet while the two parties are far apart on spending, taxes remain a central sticking point.
The GOP, though expressing openness to more revenue via pro-growth tax reform, has drawn the line at raising tax rates, citing a negative impact on small business and therefore, job creation.
But on Wednesday, Obama said that idea doesn't add up:"It's very difficult to see how you make up that trillion dollars — if we're serious about deficit reduction — just by closing loop holes and deductions. You know, the math tends not to work.
Republicans regularly cite Ernst & Young estimates that ending the Bush income and investment rate cuts for top earners and applying new ObamaCare tax hikes would cost the economy 710,000 jobs in the long run and cut output by 1.3%. (The study assumed the taxes would be used for more spending, not deficit reductions.)Democrats have found comfort in the Congressional Budget Office's estimate that undoing the top Bush tax cuts would slice just 0.1 percentage point off GDP next year.
Still, Obama said he does worry about the impact of going over the fiscal cliff, even temporarily.
"I suspect (that) will have a big impact on the holiday shopping season, which in turn will have an impact on business planning and hiring," he said.
The National Retail Federation urged Washington to reach a deal to avert the fiscal cliff before the Thanksgiving kickoff for holiday shopping.
Yet with such deep differences over taxes and spending, delaying the fiscal cliff may be the only way to avoid the holiday blues.
- Budget, Tax & Economy
- Politics & Government
- the White House
- Bush tax cuts