As Rich noted yesterday, Democrats on the supercommittee have rejected a $1.5 trillion Republican proposal that included nearly $500 billion in new revenue. As evidence by their most recent counter-proposal, Democrats are insisting on a much higher tax increase.
The $2.3 trillion package includes $1 trillion in tax increases, $1 trillion in spending cuts, with the remaining $300 billion saved from reduced interest payments on the federal debt. Republicans have rejected the offer.
The proposed spending reductions include:
$350 billion in Medicare savings ($250 billion from providers, $100 billion from beneficiaries)
$50 billion in Medicaid savings
$200 billion in other mandatory savings
$400 billion in discretionary savings ($200 billion from defense, $200 billion from non-defense)
On the tax side:
$350 billion “down payment” consisting of “miscellaneous revenue provisions”
$650 billion in new revenue resulting from future tax reform that must conform to certain requirements. If such legislation is not passed by Jan. 1, 2013, a tax “trigger” will go into effect, which would raise the same amount of revenue automatically.
Additionally, the proposed entitlement cuts would only go into effect once the full $1 trillion tax increase has been enacted.
Supercommittee co-chair Jeb Hensarling (R., Texas) has said this insistence that entitlement reforms be directly tied to further tax increases remains the primary impediment to a deal:
“Republicans have made a major concession here, but ultimately we want to solve the problem,” Hensarling said, referring to the GOP’s proposal. “We want to create more jobs for the American people, and even as President Obama has admitted, and I give him an ‘A’ for courage for stating it to the nation, that the drivers of our spending is Medicare, Medicaid and heath care, nothing else comes close. And unless we fundamentally address that, we will fail in our statutory duty.”
Hensarling also suggested that Republicans would propose at least one more plan before all is said and done, though the November 23 deadline is fast approaching:
“I’m not giving up hope, and I hope my Democrat colleagues aren’t giving up hope until midnight on the 23rd,” he said, referring to the panel’s deadline of Nov. 23. “And we’ve got a very practical challenge in getting something to the Congressional Budget Office. I acknowledge that. but the stakes are too high for our economy to throw up our hands and give up. And so we’re not.”