If President Obama and Speaker Boehner manage to strike a big deal, will that vindicate Republican brinkmanship? Somehow I suspect people will disagree on this question. But we shouldn’t get ahead of ourselves.
Jay Newton-Small outlines a more modest potential deal, which she describes as Door Number Two:
Door Number Two: a more modest package for roughly $1.7 trillion to $2.3 trillion in cuts with upwards of $500 billion in revenue increases, including $40 billion to $60 billion from ending tax breaks for corporate jets, yachts and race horses (and, possibly, a proposal to stop taxing hedge fund managers’ income as capital gains, thus subjecting it to a higher rate); plus $150 billion to $200 billion in increased revenues from requiring more pension contributions from federal employees, broadcast frequency auctions and getting rid of farm subsidies; and another several hundred billion dollars from pegging inflation to the Consumer Price Index. All of the new revenues would be offset by a permanent or long-term Alternative Minimum Tax fix, a popular bipartisan move, thus satisfying the Grover Norquists of the world. This deal would include modest Medicare cuts, but to providers only, and could also include some short term stimulus such as an employer payroll tax holiday.
Using revenues to fund an AMT fix makes intuitive sense to me, as it is in keeping with a “realistic” budget baseline. More recently, Newton-Small has reported that a medium-sized (and still quite large) deal is somewhat more likely:
Some have wondered if Obama and Boehner aren’t indulging in a bit of theater: aiming to go big so that when that falls flat, the medium size package – which is actually still quite substantial with upwards of $3.5 trillion in savings – won’t seem so controversial. But neither Obama nor Boehner seem the type to play games. If it’s the big package they want, they have their work cut out for them.
I’m drawn to Door Number Two because I think that we need to lay the groundwork for deeper structural changes, including base-broadening tax reform, and that will take time. And an AMT fix acknowledges what we all know, which is that both parties have loud and vocal anti-AMT constituencies, particularly affluent suburban Democrats.