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Posted at 5:22 AM ET, 11/17/2010

Wonkbook: Tax cut negotiations off to bad start; two more deficit plans (now with added stimulus!)

By Ezra Klein


Tis the season for cut the deficit? Apparently so. The group headed by Alice Rivlin and former senator Pete Domenici are throwing their effort into the ring today, and Rep. Jan Schakowsky added her progressive alternative to the pile yesterday. So that's three big deficit reports in about two weeks. And if you're paying close attention, you'll notice that both Rivlin and Schakowsky are members of the commission Simpson and Bowles are chairing, which perhaps says something about their confidence in that process.

The thing you're supposed to say about these plans is that the devil is in the details, but it's really not. Balancing the budget is not impossible as a matter of policy ingenuity. You add stuff here, subtract it there, and set down a magic asterisk whenever necessary. It's impossible as a matter of politics. The devil, in other words, is in the votes.

And both of these plans have something that Simpson-Bowles doesn't, but that may be important for getting those votes: Further short-term stimulus. That makes sense from a deficit perspective, as if we can get growth moving again, we won't have to do as much deficit reduction. But it also makes sense from a political perspective, as it's something liberals actually want, and so has some real potential as part of a deal.

Top Stories

Negotiations between the White House and Congress on extending the Bush tax cuts are not off to a good start, report Lori Montgomery and Anne Kornblut: "The bipartisan White House meeting President Obama had hoped to hold this week to discuss tax cuts and other matters has been postponed, officials said Tuesday...The White House said in a statement Tuesday night that the meeting had been rescheduled 'at the request of Senate Minority Leader Mitch McConnell and House Minority Leader John Boehner due to scheduling conflicts in organizing their caucuses.' The meeting will instead be held on Nov. 30, the White House said."

A vote just on extending tax cuts for under-$250,000 earners is still possible:

Though the incoming GOP chair of the Ways and Means Committee would oppose it proposal extending only middle-class tax cuts, reports Martin Vaughan: "Rep. Dave Camp (R., Mich), said during a Tuesday speech that Republicans will insist on the same period of extension for all of the expiring tax cuts, or go home without extending any of them."

Another day, another deficit plan, this time from former Sen. Pete Domenici and former OMB head Alice Rivlin -- and this time, including stimulus: "To ensure a more robust recovery, we propose a one-year "payroll tax holiday" for 2011, suspending Social Security payroll taxes for employers and employees. We also would phase in the steps to reduce deficits and debt gradually beginning in 2012, so the economy will be strong enough to absorb them...We would control health-care costs - the biggest driver of long-term deficits - by reforming Medicare and Medicaid while, starting in 2018, capping and then phasing out the tax exclusion for employer-provided health care. We would reform medical malpractice laws and help address the health costs tied to rising obesity by imposing a tax on high-calorie sodas."

Rep. Jan Schakowsky, a member of the president's fiscal commission, also has a debt reduction proposal, reports Lori Montgomery: "Schakowsky's proposal, which she described as hers alone, embraces the bipartisan goal of cutting spending. However, she proposes to take virtually all of the cuts from the military, slicing $110 billion from the defense budget in 2015 by reducing troop levels, cutting weapons systems and scaling back wartime spending...Meanwhile, tax collections would soar by more than $280 billion in 2015 under the plan, mainly by eliminating various corporate tax breaks, ending the Bush tax cuts for the wealthy and creating a new energy tax through the cap-and-trade system envisioned in Obama's budget request...Schakowsky's plan calls for an additional $200 billion in economic stimulus over the next two years to create jobs and combat unemployment."

Sen. Bob Corker and Rep. Mike Pence want the Fed to only focus on inflation, not unemployment, reports Neil Irwin: "The changes proposed by Corker and Pence would align the Fed's legal marching orders with those followed by most other foreign central banks. For example, the European Central Bank is charged with maintaining inflation just under 2 percent but has no formal mandate to prevent joblessness. A Fed spokeswoman said Tuesday that the central bank is not seeking a change in its mandate, and that the current policy is 'appropriate.' However, some presidents of regional Fed banks are more open to the idea that the central bank would be better off with a narrower mission, like its counterparts abroad."

Got tips, additions, or comments? E-mail me.

Brit-rock interlude: British Sea Power play "Apologies to Insect Life" live.

Still to come: Half a percentage point more of economic growth would mean 40% to 50% less deficit reduction; Congressional complaints aside, most Americans take longer than freshman representatives to get health care at a new job; Obama supports a push for a vote on the DREAM Act; the Senate won't vote on a bill boosting electric vehicles; and Barack Obama interacts with a Japanese humanoid robot.


The best deficit reduction plan is economic growth, writes David Leonhardt: "If the economy grew one half of a percentage point faster than forecast each year over the next two decades — no easy feat, to be fair — the country would have to do roughly 40 to 50 percent less deficit-cutting than it now appears...To get a concrete sense for what this would mean, you can play around with the The Times’s online deficit puzzle. It asks you to find almost $1.4 trillion in annual spending cuts and tax increases by the year 2030. If growth were a half point faster than expected, the needed savings would instead drop to less than $700 billion."

The House may try to override Obama's veto of a bill making it harder to challenge foreclosures, reports Nick Timiraos: "The vetoed bill, sponsored by Rep. Robert Aderholt (R., Ala.), would require notarizations of mortgages and other documents, including those done electronically, that are done in one U.S. state to be accepted by courts in another state. The House approved the bill in April by a voice vote, and the Senate passed it unanimously in late September. But Mr. Obama returned the bill to Congress without his signature last month as concerns mounted over the unintended impact the measure could have on consumer protections amid growing problems with foreclosure documentation."

The GOP cares more about upper-income tax cuts than job growth, writes Steven Pearlstein: "If Republicans were truly interested in reducing the deficit while stimulating private-sector job creation, they would have jumped to embrace the idea floated last week by Sen. Mark Warner, the centrist Democrat from Virginia: let high-end tax rates return to where they were during the Clinton years and use the $65 billion in additional income over the next two years for tax breaks for businesses that increase investments or hire new employees. After that, the extra revenue would go toward deficit reduction. And how many of Warner's Republican colleagues have called to express interest in his idea? So far, not a one."

Ben Bernanke and Tim Geithner deserve credit for averting economic catastrophe, writes Warren Buffett:

Adorable animal operating a motor vehicle interlude: A sloth works a manual transmission.

Health Care

Most Americans wait longer than members of Congress to get health care at a new job, reports Brian Beutler: "Rep.-elect (and physician) Andy Harris (R-MD) stood up at an orientation of newly elected members, flabbergasted that he'd have to wait a month for his government-provided private health insurance to kick in...According to the 2010 Kaiser Family Foundation annual survey of employer-provided health benefits, most workers would be lucky to start a new job in Harris' shoes...'The average waiting period among covered workers who face a waiting period is 2.2 months...Thirty-one percent of covered workers face a waiting period of 3 months or more.'"

Sen. Chuck Grassley prevented a bipartisan health care bill:

A Democratic member of Congress is asking Republicans to not claim their health benefits, reports Simmi Aujla: "'If your conference wants to deny millions of Americans affordable health care, your members should walk that walk,' Crowley writes in a letter to House Minority Leader John Boehner (R-Ohio) and Senate Minority Leader Mitch McConnell (R-Ky.). 'You cannot enroll in the very kind of coverage that you want for yourselves, and then turn around and deny it to Americans who don't happen to be Members of Congress. We also want to note that in 2011, the Federal government will pay $10,503.48 of the premiums for each member of Congress with a family policy under the commonly selected Blue Cross standard plan.'"

A new Dartmouth Atlas study shows that where and how patients die has more to do with the hospital than the patient:

Domestic Policy

Obama wants the DREAM Act passed during the lame duck session, reports Sam Youngman: "The White House readout of the meeting said Obama wants to see passage of the DREAM Act during the lame-duck session...'Speaker Pelosi has indicated to me personally that she wants the House to move on the DREAM Act,' [Gutierrez] said. 'Majority Leader Harry Reid has consistently supported a DREAM Act vote during lame-duck, and now the president and I have had an opportunity to discuss the lame-duck strategy.'"

Sen. Jim Inhofe promises to defy the GOP's earmark ban:

The Senate could vote on a food safety bill as early as today, reports Bill Tomson: "A different version of the bill passed the House more than a year ago, in July 2009, but it has had trouble making it through the Senate after small farmers expressed concern that the new regulations might disadvantage them. A bipartisan roster of senators is trying to push it through the Senate during the lame-duck session. A vote was tentatively set in the chamber for Wednesday that would move the bill to formal debate and allow consideration of amendments. The bill would give the FDA the power to mandate food recalls, keep better track of fruit and vegetable shipments so contaminated commodities can be found more quickly and set new standards for food manufacturers."

There could be a bipartisan coalition for defense cuts, writes Derek Thompson: "Sen. John McCain announced that he sees room for up to $100 billion in defense cuts, including the $400 million Lockheed Martin Corp F-35 fighter program. He has support from Tea Party celebrity Rand Paul, who recently won a Senate seat in Kentucky, and Sen. Tom Coburn, who has repeatedly called for cuts to the Pentagon budget. Meanwhile, the report from chairmen of the deficit commission called for aggressive cuts in the Pentagon's budget -- far more than the White House felt comfortable calling for when they proposed a non-security (ie non-defense, non-homeland security, non-veterans spending) discretionary budget freeze."

Intercultural exchange interlude: Barack Obama plays with Japanese robots.


The Senate won't vote on a pro-electric vehicle bill in the lame duck session, report Dan Berman and Robin Bravender: "The Senate was scheduled to vote on moving forward with the bill that is a pet project of oilman T. Boone Pickens. Reid (D-Nev.) scheduled the vote in September when he was in the middle of his contentious reelection bid. But a Reid spokeswoman said the majority leader and Sen. Orrin Hatch (R-Utah) want to wait on the vote, which was not expected to win the 60 votes needed in any event...Reid’s bill would provide tax incentives and loans for buying and building natural gas vehicles and $100 million to promote the deployment of plug-in electric vehicles."

The stimulus package's investment in solar energy is due to expire soon:

Likely House energy committee chair Fred Upton is sharpening his anti-Obama rhetoric, reports Robin Bravender: "The Michigan Republican laid out his ambitious agenda for the House Energy and Commerce Committee in a letter sent to fellow GOP lawmakers and incoming members yesterday, pledging to pursue a conservative agenda and to end 'the job-killing policies of Obama and Pelosi.'...Among his top priorities, Upton said, are repealing the Democrats’ health care reform law, conducting rigorous oversight of agency rules, aggressively cutting spending and ensuring that no federal funds go to abortion."

Closing credits: Wonkbook is compiled and produced with help from Dylan Matthews, Mike Shepard, and Michelle Williams. Photo credit: White House.

By Ezra Klein  | November 17, 2010; 5:22 AM ET
Categories:  Wonkbook  
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I really honestly thought that the Simpson-Bowles plan would be the most laughed at proposal because even though it struck at sacred cows it struck at them on both sides (defense and entitlements)it hit way too close to home for too many people. Rep Schakowsky's plan is sheer lunacy. Defense reductions that large AND huge tax increases? Please Ms. Schakowsky where do you think the pain from the left should come? That plan will die faster than Simpson-Bowles.

As far as healthcare goes Ezra you should really be following more what's happening in MA if (and it is) a pre-cursor to what will go on throughout the US several years down the road.

Short view. Yes everyone's insured but costs are rising at alarming rates becuase insurance doesn't equal access to care. Only 44% of doctors are accepting new patients and primary health services are being increasingly done by Emergency Rooms exactly what PPACA was supposed to avoid. How are we doing with more doctors in the US? Is the AMA still holding this up? Can we see some statistics there?

Posted by: visionbrkr | November 17, 2010 8:51 AM | Report abuse

"Payroll tax holiday and other measures to reduce the debt"

This is the headline for Domenici and Rivlin's deficit reduction plan. Didn't know that a payroll tax holiday is considered a measure to 'reduce the debt'.

As an aside, let's consider what happens to "demand" after:

A. The payroll tax holiday expires
B. A 6.5% tax is slapped on all retail purchases.

Like cash for clunkers, you might get a surge in durable good purchases during the tax holiday and in advance of the sales tax, but sales will absolutely collapse afterwards. I don't see what good comes from 4% GDP growth in 2011 if it is followed by a 2% contraction in 2012.

"Meanwhile, tax collections would soar by more than $280 billion in 2015 under the plan, mainly by eliminating various corporate tax breaks, ending the Bush tax cuts for the wealthy and creating a new energy tax through the cap-and-trade system envisioned in Obama's budget request...Schakowsky's plan calls for an additional $200 billion in economic stimulus over the next two years to create jobs and combat unemployment."

Agreed visionbrkr, Rep Schakowsky's plan is lunacy.

Taxing the stuffing out of business is not going to create jobs.

If you are a small business owner in the top tax bracket, your marginal rate jumps from 37.9% under Bush to 58.6% under this plan. That's just the federal rate. Throw in state and local taxes and you're up to as much as 70%.

Marginal rates are going to be high throughout. You have the withdrawal of welfare and subsidies for the poor of middle class creating high implicit marginal rates for them, and high explicit marginal rates for those who manage to stumble into six figure territory.

Good luck getting students into medical schools considering all of the debt they will have to take on for after tax incomes of perhaps $100,000 starting in their 30s.

What's most depressing is that despite all of this, we will still have homeless, hungry and uneducated citizens who lack access to quality medical care.

Posted by: justin84 | November 17, 2010 10:26 AM | Report abuse

Another deficit reduction plan, another month of columns from Ezra about things that will never happen.

If you want a dark horse for GOP nominee in 2012, look at Bob Corker. He's much more at ease in front of the camera than Romney. He's a business conservative but a social moderate, or at least as much of one as a Rep gets.

You linked to a column written by Warren Buffet. Who ARE you?

"The White House readout of the meeting said Obama wants to see passage of the DREAM Act during the lame-duck session...'Speaker Pelosi has indicated to me personally that she wants the House to move on the DREAM Act,' [Gutierrez] said. 'Majority Leader Harry Reid has consistently supported a DREAM Act vote during lame-duck, and now the president and I have had an opportunity to discuss the lame-duck strategy.'"

So I wonder what the world will look like under a Republican controlled Senate and possibly White House too?

"Reid’s bill would provide tax incentives and loans for buying and building natural gas vehicles and $100 million to promote the deployment of plug-in electric vehicles."

Well if we can't pass a stimulus bill for OUR economy, I guess it makes sense to pass one for the Chinese.

Posted by: 54465446 | November 17, 2010 10:28 AM | Report abuse

justin wrote:

"Agreed visionbrkr, Rep Schakowsky's plan is lunacy."

Lunacy is such a harsh word. How about if we call it "fiscally immature".

Posted by: 54465446 | November 17, 2010 10:31 AM | Report abuse

"The White House readout of the meeting said Obama wants to see passage of the DREAM Act during the lame-duck session"
I think we need a law requiring that a sitting Pres be given mandatory drug tests...

The "Delusional Act" is DOA.

Posted by: illogicbuster | November 17, 2010 11:13 AM | Report abuse


actually the lunacy is suggesting that members of congress actually suggest raising taxes on businesses over several hundred billion dollars and forgetting that this may have a little impact on that pesky unemployment figure. I'm guessing she doesn't get why jobs went overseas in the first place.

Posted by: visionbrkr | November 17, 2010 11:15 AM | Report abuse

Modern Tea Partiers need to learn about history, specifically the history of EMPIRE and corporate economic exploitation through the guise of a political conduit --- which is what the orginal Tea Party was all about.

How many tax haters today in America know that by far the greatest tax on Americans --- far greater than income taxes, property taxes, or Social Security taxes --- is the over $10 Trillion "Negative Externality Tax" which the people, through their government merely pass through to the hidden ruling-elite corporate/financial/militarist EMPIRE each year. And what can't be paid out of current government taxes on the people to this corporatist EMPIRE is forwarded as deficit and DEBT on the people and their children.

Exposure of the massive, and greatest hidden "Negative Externality Tax" scam which is being foisted on people and our country by this disguised EMPIRE is going to be the catalyst that both opens peoples' eyes to the real source of their horror, and ignites a focused explosion at the EMPIRE when the system and the people reach the critical mass and there is "no room for denial" of being "Against EMPIRE".

Alan MacDonald
Sanford, Maine

Posted by: alanmd | November 17, 2010 12:34 PM | Report abuse

This Chain Migration is the principal mechanism that has caused legal immigration in this country to quadruple from about 250,000 per year in the 1950s and 1960s to over one million a year since 1990. This isn’t counting the 1.5 million immigrants who arrive here, through legal channels annually. Eventually the people sponsored will end up on the taxpayer’s welfare and entitlements program, which happened after the 1986--AMNESTY. As such, it is one of the chief menaces in America's current record-breaking population boom and the entire attendant sprawl, congestion, school overcrowding, dwindling energy supplies and other impacts that reduce American's quality of life. This type of immigration is very dangerous to our society as the US population is beginning to see the light, from the costs brought to them in higher taxes from catering to the illegal alien inhabitants by Liberal zealots.

Anybody who believes we can afford this immigration nightmare needs to see a psychiatrist while we are in a massive recession. You cannot trust the Liberal Press or far left wing Liberals that includes Senator Harry Reid, Barbara Boxer, Nancy Pelosi, Janet Napolitano and Socialist Czars in the Obama administration that the population figures of 12 million aliens who have illegally migrated here, needs to be certified? DO SOMETHING TO HELP YOUR FELLOW TAXPAYING CITIZEN OR RESIDENT, OR THE IRS WILL BE LOOKING FOR YOU TO PAY FOR THE NEXT AMNESTY. THIS IS ANOTHER SPENDING SPREE COMPLIMENTS OF THE LIBERALS. Lawmakers cannot even tell the truth about funding Sanctuary Cities across the country. Even the courts have been infiltrated by left progressives, who are taking away the rights of States.These corrupted legislators will not even tell you the real costs, for settling instant-citizenship infants (Anchor Babies?) Here is the last chance to harass your Senator or Representative by phoning (202)224-3121. Challenge them to stop the Left wing zealots for planting another Amnesty in America called the DREAM ACT. Google—Want facts, not lies, go to NumbersUSA website for the truth and learn about the corruption hidden from view at Judicial Watch.


Posted by: infinity555 | November 17, 2010 3:10 PM | Report abuse


Time to deliver your ultimatum to the Liberal Democrats, that any underhand form of Amnesty will not be tolerated. The Dream Act is an Amnesty disguised by the progressives that need to be fully understood by all Americans? Once passed and students are naturalized, they can then begin sponsorship of their immediate families. Then in their turn family members who are legitimized by this process can start sponsoring their family members and the vicious cycle will be repeated-over and over again. Needless to say the cost to taxpayers will be as proportionate as another war like Iraq or Afghanistan, costing an estimated $2.6 Trillion dollars ( According to the Heritage Foundation), as an append on to the 13 plus trillion dollar of the US deficit. To repeat "Chain Migration" refers to the unceasing and often-snowballing chains of foreign nationals who are allowed to immigrate as the law allows citizens and lawful permanent residents to bring in their extensive, non-nuclear family members.

Posted by: infinity555 | November 17, 2010 3:11 PM | Report abuse

Maybe, if we're lucky, the two parties will just play chicken right off a cliff. No one gives and Bush tax cuts expire as scheduled.

Posted by: zosima | November 17, 2010 5:22 PM | Report abuse

The fact that Obama and his staff aren't going full force with what they want is embarrassing and shows what little backbone they have

If Obama went full force with his plans and made the public aware that Republicans were holding it up...he would win public opinion

Posted by: Bious | November 20, 2010 2:42 PM | Report abuse

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