CQ TODAY ONLINE NEWS
Oct. 26, 2011 – 11:07 p.m.
GOP Plan Heavy on Spending Cuts
By Joseph J. Schatz and Paul M. Krawzak, CQ Staff
Republicans on the joint deficit reduction panel responded to a comprehensive Democratic budget proposal with a counteroffer that would rely principally on spending cuts for its savings and would probably set in motion a tax code overhaul.
The panel’s private deliberations Wednesday followed a public session during which Douglas W. Elmendorf, director of the Congressional Budget Office, told members that enacted spending caps will prevent some programs from continuing at current levels.
And as the joint committee evidently moved toward a decision on how to reduce the budget deficit by at least $1.2 trillion over the next decade, Senate Majority Leader
Reid, Boehner and the joint committee’s co-chairmen, Rep.
Both leaders have a stake in the panel’s progress, or lack thereof; it has a Nov. 23 deadline to produce a deficit reduction plan.
Details of the Republican plan remained minimal late Wednesday. That was one day after Senate Finance Chairman
The Democrats’ plan, which relied on roughly equal parts tax increases and spending cuts, included $500 billion in savings from Medicare and Medicaid combined. News of the plan, which had the backing of a majority of the Democrats on the panel — though not of Rep.
“When the time comes to pay to clean up the mess that Wall Street’s excesses caused in our economy, Americans will not accept having the bill sent to seniors, the vulnerable, the ill and the disabled,” said Roger Hickey, co-director of Campaign for America’s Future, in a news release.
Republicans privately dismissed the Democratic plan because of its tax increases and began presenting their own plan.
One source characterized the Republican counteroffer as a “go big” proposal similar in scope to the Democratic plan and said it would derive 75 percent of its savings from spending cuts. The rest would come mainly from increases in non-tax revenue, such as the sale of government wireless spectrum and other fees.
Some revenue in the GOP plan would probably come from moving to a different cost-of-living adjustment index, known as the chained consumer price index, which would also have the effect of limiting annual increases in Social Security benefits. And some revenue might result from a tax overhaul.
It remains unclear whether panel Republicans want to deal only with corporate taxes — and not with individual tax rates and exemptions — as some Republicans had been considering. Also, the degree to which Republicans assume extra revenue from economic growth remained unclear.
GOP Plan Heavy on Spending Cuts
On the spending side, a lobbyist said Republicans were looking to “beef up” spending cut proposals laid out by Baucus.
Joint committee members of the panel declined to comment on details of the Republican proposal. “Stay tuned. We’ll see how it shakes out,” said
“Every single day we talk about it: more ideas and more proposals,” said Hensarling, who is also the chairman of the House Republican Conference. “If we were there yet, I assure you we would quit meeting,” Hensarling said.
One Democratic aide close to the joint committee warned that the GOP plan might contain “gimmicks” and said Democrats were likely to take issue with the way Republicans characterize revenue increases in the plan.
Although Republicans have been looking at user fees, property sales and the sale of broadband spectrum as revenue-raisers, some Democrats argue that many of those are really spending cuts because they reduce the cost of programs.
“It’s unfortunate that Republicans have once again retreated to their partisan corner by putting forward a plan that may fulfill their pledge to Grover Norquist but won’t fulfill their duty to come up with a serious deficit reduction plan,” said a Democratic aide, referring to the anti-tax advocate who heads Americans for Tax Reform.
Discretionary Spending Constraints
Until now, individual members of the joint committee or factions within the panel have offered proposals for reducing the deficit. And the committee has sent potential pieces of a package to CBO to be “scored” for their effect on the deficit.
With the presentation of a comprehensive Democratic proposal by Baucus, the panel is starting to get “more into the meat of” negotiations, the Democratic aide said.
In public testimony to the joint committee, Elmendorf said that appropriations caps enacted in August as part of the debt limit law (PL 112-25) will hold increases in non-emergency defense and domestic spending below the rate of inflation for the next decade. CBO projects that discretionary spending will decline from 7 percent of gross domestic product in fiscal 2012 to 5.5 percent in 2021.
If the caps are followed, budget deficits will decline by $778 billion over the next decade, not including savings from lower interest rates, Elmendorf said.
Those limits may crimp panel members’ efforts to find additional savings from appropriations. In his testimony to the panel, Elmendorf said the caps “will mean reductions in the real [inflation-adjusted] resources available for the government’s programs.” Even if spending were to grow at the rate of inflation, he said, there would be insufficient money to pay for some programs under current plans.
“For example, early in 2011 the administration put forth a plan to address future defense needs that would require defense spending to grow faster than the rate of inflation,” he said. “As further examples, the demands for veterans’ health care and Pell grants for higher education are growing more quickly than inflation.”
GOP Plan Heavy on Spending Cuts
During Elmendorf’s testimony, joint committee members explored whether they could count savings from declining war costs as part of deficit reduction.
That might be a relatively painless way to help reach the panel’s savings target, but some critics object that it would be dishonest to claim credit for spending reductions that are likely to occur anyway.
Even if the panel chooses that course, it will be able to claim smaller savings than were anticipated earlier in the year. CBO’s forecast for war spending over the coming decade has already dropped by $440 billion this year, reducing the savings the panel might claim.
But Elmendorf did confirm to the committee that a statutory cap on war spending — even if it matched current congressional and administration expectations — would be scored as savings. That is because CBO is required to assume that war spending will continue at current levels indefinitely, with adjustments for inflation.
Alan K. Ota and Frances Symes contributed to this story.