Obama's Deficit-Reduction Framework...
A process to by the end of June reach a bipartisan deal backed by automatic triggers starting in 2014 to cut spending and raise taxes relative to the current-policy baseline over the next twelve years. The targets are:
- Restore high-bracket tax rates to Clinton-era levels: $1T
- Cut tax-expenditure spending through the tax code: $1T
- Cut health care spending: $0.5T
- Cut other mandatory spending by: $0.4T
- Cut security spending: $0.4T
- Cut non-security discretionary spending: $0.8T
- Those reductions will carry with them a reduction in net interest of: $1.2T
Total twelve-year deficit-reduction target of: $5.3T relative to the current-policy baseline...
This framework already includes major, painful concessions relative to the technocratic ideal. Obama has already made these in order to try to start this framework. They include:
- The United States now really needs the government to be spending an extra $3T on infrastructure over the next 12 years--other Pacific nations are planning to do so. Obama is giving up.
- The United States now really needs--and Ben Bernanke recommends--an additional ARRA-sized fiscal stimulus over the next three years of $1T or so. Obama is giving that up.
- The United States really needs failure to meet budget-balance targets to trigger high-bracket tax increases. Obama is giving that up.
- The United States really needs to deal with the greater fiscal needs of an aging America by either (a) opening the borders, or (b) implementing a VAT. Obama is giving that up.
I say this framework would be OK--not ideal, but OK--as a deal. Giving up infrastructure, giving up another full-employment boost, giving up high-bracket triggers, and giving up fixing the long-ran tax base are al very bad for America. We should not give up anything else in addition in "negotiations" but rather insist on hitting the targets. If Republicans want to participate in the process, they need to start by signing on to these targets.