The New York Times sets out the shape of the coming deal to avert the self-inflicted “fiscal cliff”:
The two sides are now dickering over price, not philosophical differences, and the numbers are very close.
…The White House plan would permanently extend Bush-era tax cuts on household incomes below $400,000, meaning that only the top tax bracket, 35 percent, would increase to 39.6 percent. The current cutoff between the top rate and the next highest rate, 33 percent, is $388,350.
On spending, the two sides are also converging.
The White House says the president’s plan would cut spending by $1.22 trillion over 10 years, compared with $1.2 trillion in cuts from the Republicans’ initial offer. Of that, $800 billion is cuts to programs, and $122 billion comes from adopting a new measure of inflation that slows the growth of government benefits, especially Social Security. The White House is also counting on $290 billion in savings from lower interest costs on a reduced national debt.
Of the $800 billion in straight cuts, the president said half would come from federal health care programs; $200 billion from other so-called mandatory programs, like farm price supports, not subject to Congress’s annual spending bills; $100 billion from military spending; and $100 billion from domestic programs under Congress’s annual discretion.
To make all this happen, Mr. Obama proposed fast-track procedures to help Congressional tax writers overhaul the individual and corporate tax code and make changes to other programs.
There’s still a little bit of “dickering” to be done – but we now know that, as expected, the price of that gourd known as “bipartisanship” involves serious, harmful, cuts in the already-tattered safety net of those who can least afford it while still giving money away to those who earn enough that they’re not hurting.
Update: Robert Kuttner.
Especially foolish is the cut in Social Security benefits, disguised as a change in the cost-of-living adjustment formula. Before getting to the arcane details of the formula, here’s the bottom line. The proposed change will save only $122 billion over ten years, but it will significantly cut benefits for the elderly.
Because the cut is in the form of a change in the Consumer Price Index (CPI), the longer you live, the more is the total cut. On average, the cut is about 3 percent a year, but if you live twenty years after you start drawing benefits (the average), that adds up to over ten thousand dollars.
Put this in the context of the reliance of the elderly on Social Security. More than 70 percent of all recipients depend on Social Security for more than half their income. The average Social Security benefit is less than $15,000 a year, and in recent years all of the cost-of-living adjustments and more have gone to defray the annual increases in Medicare premiums and other health costs.
…it’s unconscionable to cut Social Security at all when then president is proposing to reduce the proposed taxes on the wealthiest by $400 billion—more than three times the savings of the planned cuts in Social Security.