If loophole closures are benefit cuts, are benefit cuts tax hikes?

Eduardo Porter suggests that raising new tax revenue by cutting loopholes opens up a semantic loophole:

Though the offer to raise money by closing loopholes has a bipartisan pedigree — based on a plan proposed last year by the Democrat Erskine Bowles and the Republican Alan Simpson, the chairmen of President Obama’s deficit commission — it relies on rhetorical sleight of hand. If tax breaks are equivalent to government spending, eliminating them is equivalent to spending cuts. Mr. Boehner’s offer to do away with tax breaks in exchange for cutting entitlements raises no new revenue. It amounts to cutting spending twice.

Porter goes on to point out that a) Democrats have opened many "loopholes" for the poor and middle class because it's often the only form of social spending that Republicans will allow, but b) on balance, tax deductions disproportionately benefit the wealthy. His main point: we should consider each break on its merits, not make a shibboleth out of closing out as many as possible.

I would add a couple of wrinkles. First, Republicans are conflicted about whether to regard tax breaks for the nonwealthy as spending or tax cuts.  On the one hand, they've not only acceded to Democrat-initiated lower-income tax breaks, but sweetened their own wealthy-tilted tax cut goodies by cutting taxes and expanding loopholes for the nonwealthy as well.  On the other hand, they've come to regret the low-end largess, as all that bitching about the 47%, the lucky duckies who pay no income taxes, demonstrates.

Second, if Republicans are pulling the wool over by treating loophole closures as tax hikes, they've got themselves fooled as well.  When such tax "increases" were being bruited in the debt ceiling negotiations of 2011, Tom Coburn and others struggling to wriggle out of Grover Norquist's embrace experimented with casting  loophole closures (e.g., the ethanol subsidy) as "spending cuts."  It didn't fly; Norquist screamed that any phased out tax break would have to be offset by another tax break, and the GOP fell in line.

In which Henry Aaron talks himself into supporting a raised Medicare eligibility age

Henry Aaron of Brookings, one of the nation's top healthcare economists, has a rather odd perspective on the current brewing battle over so-called "entitlement reform." On the one hand, he focuses his concern on the older elderly, with their ever-dwindling purchasing power, which leaves him less hostile to raising the Medicare eligibility age than other left-of-center economists who acknowledge a need to trim benefits. He is more distressed by proposals to trim cost-of-living increases, e.g. the so-called chained CPU, which seem to strike most observers as a milder, more gradual mode of trimming benefits. Indeed, in the fullness of time, when the ACA is fully up and running and providing affordable care to the uninsured, Aaron favors raising the Medicare eligibility age to expand the ratio of working to retired adults.

On another front, Aaron at once provides historical and comparative data to demonstrate that U.S. senior health and pension benefits are unduly skimpy, and effectively concedes that given our political culture, we need to plan how best to make them skimpier still. He suggests that only by agreeing to benefit cuts can Democrats forestall more radical proposals to shred the safety net, e.g. via private accounts for social security or voucherization of Medicare. At the same time, he argues for benefits that increase with age, with offsets for lower-income younger elderly for whom raised retirement ages are a burden, and for a variety of formulas to shift costs onto the wealthier elderly (his Medicare reforms look something like those proposed by Senators Lieberman and Coburn: providing catastrophic insurance but ending Medigap as we know it, and making the wealthy elderly pay a much higher percentage of the actuarial value of their coverage).

I find it odd that Aaron argues, in effect, for preemptive concessions -- proposing policy choices he regards as less than optimal as a means of forestalling more radical, Paul Ryanesque attacks on safety net programs: 

Writhing out of Norquist's embrace, Part V

Here we go again: Senator Saxby Chambliss, R-Georgia, one of the Quixotes of the Senate Gang of Six, is writhing out of Grover Norquist's embrace, almost exactly as in March 2011 when the Gang first got in gear to try to reincarnate, or rather fully incarnate, Bowles-Simpson.*  In this iteration, Chambliss says, "I care more about my country than I do about a 20 year-old pledge"; Norquist shoots back that Chambliss's oath is to the people of Georgia, not to him. Then Norquist revives a nonsense claim from the prior round:

Norquist also highlighted a letter Chambliss signed with fellow Gang of Six members Mike Crapo of Idaho and Tom Coburn of Oklahoma where the three said they hoped for a plan with “lower individual and corporate tax rates for all Americans.”

A GOP oath best kept in the breaking?

Grover Norquist continues to insist loudly that Republicans violate his "no new taxes ever" pledge when they vote to close out any given tax loophole without instituting a fresh tax cut to offset the extra revenue. The response below is emotionally satisfying but misleading in one important regard:

“Grover is embarrassed that 34 Republicans essentially told him to take a hike [by voting to end the ethanol tax subsidy] and rejected his narrow and ridiculous interpretation of what the pledge means,” one aide says. “He’s made a calculation that this is an existential threat to his lobbying livelihood. That’s what this is about, one desperate lobbyist.”

The problem is, Norquist's "interpretation" of his tax pledge, which almost every Republican in the House and Senate has signed, is not "ridiculous." It's not even an interpretation.  He is simply holding the GOP to the letter of the pledge:

Coburn: ending the ethanol subsidy is (half?) a tax cut

I have been intrigued in the past to note that some conservatives characterize reductions in "tax expenditures" -- targeted tax breaks, such as for ethanol production or mortgage interest -- as "spending cuts" rather than as "tax hikes."  But Tom Coburn has gotten even more creative. Yesterday, Coburn won the support of 34 GOP senators for an amendment that would end the ethanol subsidy -- a vote he staged as a refutation of Grover Norquist's insistence that every closed-out tax break has to be offset with an equal tax cut.  Last week, ratcheting up his months-long feud with Norquist, cast ending a wasteful tax subsidy like this:

Did Tom Coburn just quadruple the debt ceiling ransom?

Tom Coburn, who recently withdrew from the Senate Gang of Six that was purporting to negotiate a comprehensive tax reform/deficit reduction deal along the lines of Bowles-Simpson, deserves some kudos for saying with increasing clarity that any such deal will have to include increasing tax revenue -- a point the GOP leadership and over 90% of the rank-and-file are unwilling to concede.

In an interview with the WSJ's Jerry Seib posted today, however (below), Coburn also sets the bar for a deal to raise the debt ceiling at $4 trillion in deficit reduction -- that is, a deal on the scale of President Obama's proposal, albeit obviously tilted far more to the right. The working media assumption, prompted by an intimation from Joe Biden, has been that a debt ceiling deal might block out about $1 trillion in cuts over ten years, and/or institute triggers mandating cuts if reductions don't hit targets at various points. 



At about 14:25, Seib asks whether a debt ceiling deal can take the country "some way down the path" toward deficit reduction.  Coburn's response (my emphasis):

Writhing out of Norquist's embrace, Part IV

You have to respect a conservative Republican who tells his colleagues that the only way they're going to get a deficit reduction deal is to raise tax revenue, no matter what contortions he has to twist himself into to cover himself.

Tom Coburn has separated himself from current GOP orthodoxy, and specifically from a fundamentalist interpretation of Grover Norquist's no-new-taxes pledge, by degrees.  Now, even as he withdraws (temporarily, he implies) from the Gang of Six purporting to negotiate a tax reform/deficit reduction deal, he's completed the clarification. And incidentally, effectively told Norquist to go fuck himself.

Studied ambiguity in tax reform negotiations

There is a good deal of confusion and obfuscation on both sides of the debate over tax reform  -- at least, over the kind of centrist tax reform outlined in the Bowles-Simpson plan and being negotiated by the Senate Gang of Six.
The basic premise is to vastly reduce targeted tax breaks both personal and corporate while simultaneously reducing marginal tax rates.  The battlegrounds are presumably how much to reduce which tax breaks and how much of the resulting revenue to devote to lowering rates as opposed to deficit reduction.

For Republicans, the taboo is to "raise taxes."  Their potential cover is to lower marginal rates while raising the government's net income, most easily measured as a percent of GDP.  That's the point of obfuscation -- will they or won't they?  Can Coburn/Chambliss/Crapo sell Republicans on raising more revenue in any given year than the current tax code would bring in? Will they try?

For Democrats, the loaded phrase is to raise taxes on the wealthy, which they are sworn to do.  The problem is that that goal is generally equated with (or let's say mainly symbolized by) letting the Bush cut in the marginal rate for the wealthiest 2% expire. Comprehensive tax reform of the sort envisioned by Bowles-Simpson would render debate over the Bush tax cuts moot -- all marginal rates would be lowered (while in Bowles-Simpson capital gains would be taxed at ordinary income rates -- a major hike on the rich). Can Obama and the Democratic leadership in Congress get behind a plan that will reduce the top marginal income tax rate on the wealthy? Will they try?

Running behind the Gang of Six

On the theory that presidential advocacy on a given issue polarizes the parties on that issue, I have more than once suggested half-seriously that when Obama decides to put forward a deficit reduction plan, we will know that he's thrown in the towel on a deficit reduction deal. The corollary to date has been that if there's any hope at all for such a deal before the 2012 election, it lies in the negotiations of the Senate Gang of Six, who are using Bowles-Simpson as a baseline. GOP Gang of Six members Saxby Chambliss and Tom Coburn have been bucking GOP orthodoxy by acknowledging that any deficit reduction plan will have to increase Federal revenue.  What they don't need is Barack Obama to make that case for them.

So  now Obama is primed to lay out a plan, and word is that it is to be based (to what extent?) on Bowles-Simpson and the Gang of Six negotiations.  Predictably, the very senators who a month ago were begging for presidential participation are now warning that a presidential endorsement could be the kiss of death:

Is Obama his own Grover Norquist?

As David Brooks noted in the midst of the 2008 campaign, Obama has put himself in a box on taxes. Here's David Plouffe on Meet the Press today:

DAVID GREGORY:
--bring up taxes, though. Is-- in the President's plan as he envisions tackling the deficit, do taxes have to go up? Does that have to be part of this equation across the board?

DAVID PLOUFFE:
Well, this is part of his budget for next year. He has said he believes-- taxes on the higher income, people over $250,000-- should eventually go up.

Time to throw in the towel and 'lead'?

In my last post, I suggested that Paul Ryan's extremist, intellectually dishonest long-range budget plan is a sideshow -- that if there's any chance at all of a long-range tax/budget agreement, it rests with attempts by Chambliss, Coburn and perhaps Crapo to convince fellow Republicans that tax reform will have to increase federal revenues.

Now, though, Ezra Klein relays some intelligence that suggests that Ryan's plan may kill that admittedly distant hope:

Two days ago, I predicted that Ryan’s budget would sell a lot of Democrats on the Simpson-Bowles plan. But James Pethokoukis says it’s also doing the reverse. “I hear what GOP support there was for Obama/Bowles/Simpson debt panel plan is collapsing thanks to Ryan Plan,” he tweets. If that’s true, then Ryan, by yoking Republicans to a radical and polarizing proposal that stands no chance of passage, may have set the deficit-reduction effort a very long way back. 

Forget Ryan -- watch Coburn and Chambliss

For those who believe that Obama has failed a s test of courage by not rolling out a detailed tax reform/deficit reduction plan early this year, a thought experiment: had he done so, would Tom Coburn have said this on the Senate floor? (link is to Greg Sargent; emphasis is his.)

Well, the message for America today is every program’s going to get hit. The Defense Department’s going to get hit, every program’s going to get hit. My taxes are going to go up. Sorry, they’re going to go up. This country cannot get out of this mess with the behavior that we’re exhibiting in this body, and if we fail to do what is necessary for our country at this critical time in our juncture, history will deem us absolutely incompetent. With that, I yield the floor.Maybe...I admit that the thought experiment yields no clear results.  But if Obama and Dems really do want a tax reform/deficit reduction deal, it's Coburn Chambliss & Crapo who are carrying the ball. Because this can't happen unless Republicans sign on to tax reform that raises revenues.  Which is almost to say that it can't happen, period.

The sine qua non for a bipartisan long-range budget deal is for Republicans to acknowledge that taxes will have to be raised, albeit as part of a deal that lowers marginal rates while drastically reducing targeted tax breaks. The bipartisan Senate Gang of Six currently negotiating the outlines of a deal is allegedly using the Bowles-Simpson plan as a baseline. While Bowles-Simpson was  criticized from the left for achieving too high a percentage of its projected deficit reduction from spending cuts (two thirds) as opposed to taxes (one third), the plan did envision raising Federal revenue by about $1 trillion over nine years.  Grover Norquist, meanwhile, is waving his bloody-sheet "no tax increases" pledge, signed by (he claims) 95% of House and 87% of Senate Republicans.

The art of grilling a tax/budget deal

A dozen or more years ago, I wrote a press release announcing the opening in Manhattan of the Greek seafood restaurant Milos Estiatorio.  The owner, Costas Spiliadis, explained to me that in cooking fish, timing is everything. At Milos they keep it simple, and concentrate on getting it off the grill at the right instant.*

Perhaps that is the Obama theory of bipartisan budget negotiation? The WSJ's Damian Paletta and Naftali Bendavid, reporting on progress in Senate bipartisan "Gang of Six" negotiations toward a comprehensive tax/budget reform deal, has this to say about the White House posture:

 The success of the senators' efforts will depend on whether it is endorsed at some point by President Barack Obama. White House officials have been briefed on progress but have mostly stayed on the sidelines, people familiar with the matter said.

 White House budget director Jacob Lew said, "We think it's a good thing to have members looking for bipartisan conversations where they are exploring ideas."

Writhing out of Norquist's embrace, part III

Grover Norquist is insisting on his bond with the trio of conservative Senators that have begun negotiations on a comprehensive tax/budget reform deal. But Chambliss/Coburn/Crapo are looking for a "pound of flesh/not one drop of blood" loophole.

Shakespeare's merchant had a perfect legal right to claim a pound of flesh from Antonio, who had pledged it to him if he could not repay his debt on time. But Shylock, it was decreed in court,  had no more right than anyone else to shed blood.

In the past two days, Chambliss and Coburn have argued, in effect, that while they promised never to raise taxes, they did not promise to reduce the United States to insolvency. To reduce the deficit to a manageable level, "“We’ve got to close the revenue gap," as Chambliss put it on Monday. 

First, though, they've got to close the rhetoric gap, embodied in Norquist's no-new-taxes pledge. To recap: when reports broke that the conservative 3Cs were working with three Democratic counterpart on a bipartisan budget deal that would include some combination of spending cuts and revenue increases, Norquist sent an open letter reminding them of their pledge never to raise taxes. As I noted at the time,  CCC's carefully-worded response promised to lower marginal rates but most pointedly did not promise that offsetting those reductions by closing or reducing various tax breaks would not result in a net increase in revenue. The letter pitted the "special interests" who would lose tax breaks in an imagined future deal against  the 'taxpayers' whom they were pledged to protect. What it did not note is that most of us are both (see: Chambliss, Coburn, Crapo to Norquist: Kowtow or brush-off?)

Chambliss, Coburn, Crapo to Norquist: kowtow or brush-off?

No question, Ramesh Ponnuru is far more attuned than I will ever be to linguistic code of true-blue GOP supply siders. So perhaps I should accept at face value his report (via Sullivan) of this little tax-pledge tango between Grover Norquist and the Republican half of the new Senate gang of six currently in early-stage discussions of a comprehensive tax reform/deficit reduction deal:

After yesterday’s Wall Street Journal reported on work toward a bipartisan deal on the budget, Grover Norquist of Americans for Tax Reform sent three Republican senators a letter noting that the deal, as outlined in the Journal article, would violate their pledge not to raise taxes. The response letter from Senators Chambliss, Coburn, and Crapo strongly suggests that the senators will not support a deal that raises taxes on net. Instead they want a bill that raises revenue only by increasing economic growth.

If you read the letter, though (link above), you might wonder whether Chambliss et al have really promised not to raise taxes "on net."  They do say that the Journal article, which reported that the six were contemplating an (apparently erroneously low) boost in tax revenues, should not be taken at face value. They do intone,  "Like you, we believe that tax hikes will hinder, not promote, economic growth." And they do plead that "we do not believe that our efforts to avert tax increases on hardworking Americans violates any pledge we have taken..." Of course not!  But...

Pulping the bully approach to presidential leadership IV

Here is the best evidence yet that Obama's low-profile approach to beginning the long process of budget/tax reform is on target.  Never mind Republicans' alleged glee at his refusal to roll out a grand plan -- they are begging him, Jake Sherman reports, to expose himself:

House Republicans were giddy when President Barack Obama took a pass on entitlement reform in his 2012 budget, ripping him for punting on the future of Social Security, Medicare and Medicaid.

But when they’re pressed for answers about what needs to happen on entitlements, Republicans are punting right back, saying the president needs to take the lead and come up with his own ideas

Before stating their own policy prescriptions, no fewer than a dozen GOP lawmakers and aides Wednesday said that it is Obama’s responsibility to put forth ideas on entitlement reform.

“We need his leadership,” Ways and Means Republican Rep. Wally Herger (Calif.) said. “If it’s something this big to get through, it’s very important for the president to lead.”

Rep. Steve Scalise, the Louisiana Republican who sits on the Energy and Commerce Committee, said that the “president looks very small if he doesn’t lead on this issue.” Rep. Patrick Tiberi, an Ohio Republican cozy with Speaker John Boehner, said “you can’t have a big issue that impacts Americans without presidential leadership.” And Rep. Austin Scott (R-Ga.), the president of the anti-Obama freshman class, said “quite honestly, he has a responsibility to America” to put forth his ideas and lead.

Mr. President, Republicans have a playbook for you: Over the Cliff, by Hugo First.

Meanwhile, back in the Senate, the WSJ's Jonathan Weisman reports, negotiations continue apace among a new gang of six toward a plan with at least some resemblance to Bowles-Simpson (including, apparently, a lot of magic asterisks). Weisman notes pointedly that two of the six, Dick Durbin and Tom Coburn, are "personally close to President Obama."  Nonetheless, despite further GOP blandishments, the admin is hanging back: