Stuck on Usual Quarrel: Raising New Revenue

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WASHINGTON -- Be skeptical. Be very, very skeptical.

That was the reaction from nearly all corners to the talk of convening yet another round of bipartisan negotiations to reduce the nation's long-term debt. The idea has resurfaced as a way of resolving the standoff between President Obama and the Republican-controlled House over reopening the government and increasing its legal borrowing limit, perhaps for months or even just weeks.

But even if the current talks soon resolve the immediate impasse, which did not look likely on Saturday, any renewal of negotiations for a long-term fiscal plan will run into the same underlying problem that has doomed efforts for the past three years.

Republicans refuse to raise additional tax revenue, and until they do, Mr. Obama will not support even his own tentative proposals for reducing spending on fast-growing social benefit programs, chiefly Medicare. During a White House meeting with Senate Republicans on Friday, he reiterated that the two go hand in hand, according to people who were there.

"Revenue remains obviously the biggest stumbling block," said Ed Lorenzen, the executive director of the Moment of Truth Project, a fiscal advocacy group formed by the chairmen of Mr. Obama's failed 2010 fiscal commission, Erskine B. Bowles, a former chief of staff for President Bill Clinton, and Alan K. Simpson, a former Senate Republican leader from Wyoming.

Brian Gardner, a senior vice president in Washington of the investment firm Keefe, Bruyette & Woods, said: "We've been through this fight before. I'm very skeptical on the grand bargain."

Yet Speaker John A. Boehner, who only a week ago again ruled out raising taxes, is demanding as part of a short-term deal that he and Mr. Obama return to the bargaining table for a deficit-reduction blueprint covering many years and ultimately saving trillions of dollars.

While that prospect has cheered budget watchers in both parties, even they know the discouraging history of such negotiations. In the three years since Republicans won control of the House, there have been five bipartisan efforts to design a long-term debt-reduction plan, two of them between Mr. Obama and Mr. Boehner. All collapsed.

The most recent effort, between the White House and some Republican senators, died this summer.

Yet there is some broad common ground, which is why the idea of talks keeps surfacing. Both sides recognize that the United States must confront the rising costs of the benefit programs, especially Medicare and Medicaid but also Social Security. Those are driving projections that the mounting debt will become unsustainable after 2016, as more baby boomers begin drawing on benefits and health care costs rise.

Representative Paul D. Ryan of Wisconsin, the chairman of the House Budget Committee and the conservative Republicans' fiscal guru, has retreated -- for now -- from insisting that Medicare be transformed into a voucherlike program and Medicaid into a much-reduced state block grant.

In a recent shift, he has proposed embracing several of Mr. Obama's plans that would trim Medicare and Medicaid expenses by $400 billion over the first 10 years while otherwise leaving the programs unchanged. The savings would come in part by means-testing Medicare so that more affluent beneficiaries pay more for coverage and by ensuring that taxpayers are not subsidizing so-called Medigap policies that upper-income recipients buy for extra coverage.

Significantly, Mr. Ryan has been silent recently on the president's health care law -- a break from conservatives' unattainable demands to defund, delay or even repeal the Affordable Care Act, and the major issue that led to the Republicans' refusal to finance the government.

He has also noted that both sides want to overhaul the tax code, simplifying it by reducing tax breaks for corporations and individuals. The difference is that Republicans want to use new revenue from scouring the code to reduce Americans' tax rates. Mr. Obama and Democrats say some of that revenue must be used to pay down the debt.

"This isn't a grand bargain," Mr. Ryan wrote in The Wall Street Journal last week, acknowledging his more modest proposals. "For that we need a complete rethinking of the government's approach to health care. But right now we need to find common ground."

That suggests a less ambitious outcome for any deficit-reduction talks that would spring from the current impasse. In the past, the general goal was $4 trillion in savings in 10 years that would compound over time.

Democrats and many Republicans also want to apply some new savings not to reduce the deficit, but to replace roughly $100 billion a year in across-the-board cuts known as sequestration, which since March have been hitting nearly all federal programs, domestic and military. Those cuts do not touch the benefit programs that are the root of the long-term debt problem.

While Republicans initiated the call for renewed negotiations, party lawmakers and senior aides said in interviews that they could not say exactly what Mr. Boehner would take to the table. Some pointed to Mr. Ryan's recent suggestions. By contrast, Mr. Obama's plan is well known: over some Democrats' objections, he put it in his annual budget in April, hoping his concessions would entice Republicans to parlay.

The president proposed $1.8 trillion in deficit reductions over the next 10 years, including the $400 billion in Medicare and Medicaid savings. He also called for saving $230 billion by changing an inflation measure, the Consumer Price Index, which would have the effect of lowering the government's annual benefit adjustments, including for Social Security, and raising revenue as some taxpayers more quickly reach higher tax brackets.

An additional $200 billion would come from other domestic and military programs; $200 billion more from accounts covering farm subsidies, federal employee retirement programs, the Postal Service and the unemployment compensation system; and still another $200 billion, he estimated, from lower interest payments on the reduced federal debt.

But Mr. Obama called for $580 billion in new tax revenue over 10 years by closing loopholes and offering tax breaks. And he wants any budget deal to provide more spending, not less, for investments in infrastructure, technology and research, and for universal prekindergarten programs. That would be a hard sell, but still far from the biggest impediment to a bipartisan deal.

"If you talk about reforming entitlements and adding revenues, boy, then both sides just go ballistic," said Senator Saxby Chambliss, Republican of Georgia. "And right now the tension is so high, it's just not the right time for it." Mr. Chambliss knows the difficulties -- he is not seeking re-election partly because of his frustrations after more than two years of seeking a grand bargain as part of a bipartisan group of senators known as the Gang of Eight.

Even the prospective bargainers are skeptical.

In January, with the start of a new Congress and Mr. Obama's second term, Mr. Boehner declared that he would never again negotiate with the president, calling it "futile."

So when Mr. Boehner last week raised the idea of a third round of talks during an Oval Office meeting of the president, Vice President Joseph R. Biden Jr. and Congressional leaders, Democrats rolled their eyes and laughed, according to people who were there.

"On the one hand, the speaker says he wants to have an open negotiation; on the other hand, he is shutting the door to eliminating a single tax break for the purpose of reducing the deficit," said Representative Chris Van Hollen, Democrat of Maryland.

On the Republican side, a senior Congressional aide who declined to be identified while the parties were trying to break the impasse, said flatly: "We're never going to have a grand bargain with this president, I think that is safe to say. Ever."

nation

This article originally appeared in The New York Times. First Published October 12, 2013 2:01 PM


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