Sunday, August 14, 2011

Obama's uncertain trigger finger, cont.

I have suggested before that Obama's endgame in the deficit reduction fight is basically the busted Boehner deal, which in turn looks awfully like the plan the President sketched out in April: an alleged $4 trillion in deficit reduction over 10-12 years, with $800b -- $1 trillion coming from new revenue, $2+ trillion in alleged spending cuts, and close to $1 trillion from alleged reduced interest payments.  Two bullet points in the White House's outline of the debt deal struck in early August would seem to bear this out:
  •  ...the President will demand that the Committee pursue a balanced deficit reduction package, where any entitlement reforms are coupled with revenue-raising tax reform that asks for the most fortunate Americans to sacrifice. 
  • The Enforcement Mechanism Complements the Forcing Event Already In Law – the Expiration of the Bush Tax Cuts – To Create Pressure for a Balanced Deal: The Bush tax cuts expire as of 1/1/2013, the same date that the spending sequester would go into effect. These two events together will force balanced deficit reduction. Absent a balanced deal, it would enable the President to use his veto pen to ensure nearly $1 trillion in additional deficit reduction by not extending the high-income tax cuts.
Question, though: Obama can't "use his veto pen" on some but not all of the Bush tax cuts, can he? When they were extended at the end of 2010, there was no separate provision for the upper-end cuts (see Section 101), and Section 901 of the original bill applies the sunset uniformly. So we're back where we started: Obama can force repeal of the cuts for the top bracket only if he's willing to let all the cuts expire in the absence of a deal -- which he was not willing to do in 2010. And what about the expiration of the capital gains tax cut enacted in 2003?  Or the tax cuts Obama implemented as part of the stimulus package? They all expire in 2013.

Another question: Ezra Klein once wrote that the deficit reduction plan that Obama floated in April called for I think $1.5 trillion in new revenue -- in any case, much more than the $800 billion that was allegedly on the table with Boehner. I have sought clarification on that; I don't see it in the  plan outline posted by the White House. You can't double-count revenue gains from letting the Bush cuts for the wealthiest expire and for tax reform that would lower all marginal rates while reducing tax expenditures.  Thorough tax reform renders the Bush cuts moot.  As far as I can tell, what the administration has in mind is sunsetting the Bush rate cut for the wealthiest 2% and then tacking on a few reductions in deductions that benefit the wealthy primarily or exclusively.You know, millionaires and billionaires.

See also: Obama's uncertain trigger finger

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