Monday, August 05, 2013

Reminder: chained-CPI means new revenue

Chuck Todd, attempting to flesh out  some talk show chatter from Eric Cantor about budget compromise (GOP-style, i..e., with no new revenue), floats a GOP trial balloon:
Left unsaid by Cantor is what entitlement reform has to look like. There’s been some chatter in GOP circles that it’s about simply taking the president’s offer on chained CPI.  The argument by some Republicans on this strategy is that Republicans would be able to claim victory on stopping the sequester and getting an opening to begin entitlement reform without capitulating to the president’s demand that chained CPI (which would change Social Security benefits among other things) come with some new tax increases. But would the president be open to this? Chained CPI in exchange for turning off sequester? Seems reasonable now… but who knows.
Let's not forget, kids...chained-CPI itself raises new revenue, by slowing the rate at which income tax brackets are adjusted upward for inflation. According to the CBO, it would raise $123.7 billion over ten years, while reducing spending by $236 billion. Considering that Obama's 2014 budget proposed replacing the sequester with a more-targeted $900 billion in spending cuts over ten years (including those generated by chained-CPI), this alleged proposed deal would be a cheap way (for Democrats) to shut off the sequester, while also providing a revenue fig leaf to meet Obama's condition.  In fact, there's no way Republicans would go for it in simple form, as it would mean forgoing about three quarters of the deficit reduction mandated by sequestration.  Perhaps they'd float it as the price of a year's suspension, or in exchange for mitigating cuts to a mix of selected defense and domestic programs.

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