Obama's new budget includes about $800 billion in new revenue over ten years and $800 billion in spending cuts, not counting savings from chained-CPI, to replace the sequestration cuts. The chained-CPI method of inflation calculation, which reduces Social Security spending and also boosts revenue (by slowing the upward adjustment of income tax brackets for inflation), is included as a concession to Republicans demanding the Obama propose "entitlement cuts" (Obama cut $716 billion over ten years in Medicare spending in the ACA and last year proposed another $400 billion in federal Medicare spending reductions, but never mind). Chained-CPI, with Obama's offsets for low-income seniors, saves a projected $130 billion over ten years. Sargent, trying to scope out administration intentions in light of Obama's new budget, writes:
Senior administration officials who briefed a number of us late yesterday repeatedly insisted that the White House will not move any further in the GOP’s direction if Republicans try to pocket the entitlement cuts while refusing to make any concessions. The officials say that without new revenues, no deal is possible.And then, assessing the import of Obama's chained-CPI "concession" (which he had already put on the table, publicly, in December):
It’s welcome that the White House is vowing not to budge off its current offer, but only the White House can ensure that this promise holds over time.The White House has not vowed not to budge off its current offer. It has vowed not to deal if Republicans put no revenue on the table. As his been true since the 2011 negotiations, Republicans can clean Obama's clock by offering some revenue.
The problem, from a progressive standpoint, is not that Obama is going to sign off on an all-cuts deal (including chained-CPI) to replace the sequestration cuts. The problem is a) if Republicans offer him a fig leaf of modest tax loophole closures, Obama will probably agree to a not-very-balanced deal that includes say $200-300 billion in new revenue over ten years (nominally, at least) along with $900 billion in spending cuts including chained-CPI. That is, a deal as bad as the grand bargain he was prepared to strike in summer 2011, excepting that chained-CPI is a less stupid benefit cut than raising the Medicare eligibility age, which he was entertaining at that time. Or, b) The Republicans will refuse to accept a win, offer no new revenues, and we will be stuck with the sequestration cuts for the foreseeable future, forestalling any chance of implementing the long-term investments that Obama has been talking about since he took office (and that he got a jump on with the 2009 stimulus).
To my mind, the question is whether the gradually deepening bite of sequestration (Wonkblog notes today that the cuts begin in earnest this month), and the resulting political pressure from myriad quarters to replace it with more targeted cuts, will induce Republicans to budge a little on revenue. I'm sure Obama could be had for a projected total of say $300 billion over ten years. Chained-CPI would take care of the first $100 billion (the revenue projections seem to have crept up from about $70 billion to the rounder figure since the change was first reported to be on the table). Capping the value of itemized deductions at 33%, the income tax rate for households earning $223k--$398k, instead of at the 28% that Obama has long proposed and continues to propose, would probably do it. Ending the carried interest loophole would be a nice populist sweetener. Such a deal would put Obama's new revenue haul about $300 billion below his third offer to Boehner last December. That's probably the best that Democrats will do at this point.
Related:
Look what the GOP can get for $300 billion
Obama, the GOP's enabler
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