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The Supercommittee’s Dueling Budgets
Democrats and Republicans unveil two very different proposals.


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Andrew Stiles

This week, Democratic and Republican members of the so-called “supercommittee” unveiled competing deficit-reduction proposals, both of which were subsequently rejected by the other side. The details are still a bit rough, but here’s a brief rundown:

The Democratic plan — between $2.5 and $3 trillion in deficit reduction over ten years:

— $1.3 trillion in new taxes ($800 billion from letting the Bush tax rates expire on high income earners).

● $600 billion in savings from Medicare, Medicaid, and other health-care spending.

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● $250 billion in savings from other mandatory spending.

● $400 billion in discretionary-spending cuts (half defense, half non-defense).

● $300 billion in new spending, paid for in lower interest rates thanks to the reduced deficit, as well as savings from the military drawdowns in Iraq and Afghanistan.

The Republicans’ plan — between $2 trillion and $2.2 trillion in deficit reduction over ten years:

● $640 billion in new revenues (no new taxes, but about $440 billion from increased fees and adjustments to health-care premiums and $200 billion from projected economic growth as a result of revenue-neutral tax reform).

● $800 billion in savings from Medicare, Medicaid, and other health-care spending.

● $400 billion in savings from other mandatory spending.

● $250 billion in discretionary spending and reduced personnel costs.

● No new spending.

The twelve-member panel has until November 23 to come up with at least $1.2 trillion in deficit reduction, which Congress must then vote on before Christmas. Since its formation, as called for in the August deal to raise the debt ceiling, the supercommittee has operated largely behind close doors. The leaked plans signal that negotiations are entering the final stretch of what is sure to be another contentious showdown over federal spending.

As I wrote earlier this week, the major ratings agencies will be keeping a close eye on Congress over the next couple of months. If the supercommittee fails to hit the $1.2 trillion target or fails to agree on a plan altogether, or even if there is a plan and Congress shows itself to be hopelessly dysfunctional in its effort to pass it, Wall Street analysts have warned that another downgrade of the country’s credit rating is in the offing.

House speaker John Boehner (R., Ohio), who along with Senate majority leader Harry Reid (D., Nev.) has become increasingly involved in the supercommittee’s deliberations, rejected the Democratic proposal, telling reporters that the proposed tax increases were unacceptable.

“This is the same number that was in the president’s budget, the same number that I don’t know if they found any Democrats in the House and Senate to vote for,” Boehner said. “And so, I don’t think it’s a reasonable number.”



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