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The big budget mumble

Source : BUSINESS_STANDARD
Last Updated: Fri, Dec 07, 2012 21:02 hrs

pIn the ongoing battle of the budget President Obama has done something very cruel Declaring that this time he won&rsquot negotiate with himself he has refused to lay out a proposal reflecting what he thinks Republicans want Instead he has demanded that Republicans themselves say explicitly what they want And guess what They can&rsquot or won&rsquot do itppNo really While there has been a lot of bluster from the GOP about how we should reduce the deficit with spending cuts not tax increases no leading figures on the Republican side have been able or willing to specify what exactly they want to cutppAnd there&rsquos a reason for this reticence The fact is that Republican posturing on the deficit has always been a con game a play on the innumeracy of voters and reporters Now Obama has demanded that the GOP put up or shut up &mdash and the response is an aggrieved mumbleppHere&rsquos where we are right now As his opening bid in negotiations Obama has proposed raising about 16 trillion in additional revenue over the next decade with the majority coming from letting the high-end Bush tax cuts expire and the rest from measures to limit tax deductions He would also cut spending by about 400 billion through such measures as giving Medicare the ability to bargain for lower drug pricesppRepublicans have howled in outrage Senator Orrin Hatch delivering the GOP reply to the president&rsquos weekly address denounced the offer as a case of &ldquobait and switch&rdquo bearing no relationship to what Obama ran on in the election In fact however the offer is more or less the same as Obama&rsquos original 2013 budget proposal and also closely tracks his campaign literatureppSo what are Republicans offering as an alternative They say they want to rely mainly on spending cuts instead Which spending cuts Ah that&rsquos a mystery In fact until late last week as far as I can tell no leading Republican had been willing to say anything specific at all about how spending should be cutppThe veil lifted a bit when Senator Mitch McConnell in an interview with The Wall Street Journal finally mentioned a few things &mdash raising the Medicare eligibility age increasing Medicare premiums for high-income beneficiaries and changing the inflation adjustment for Social Security But it&rsquos not clear whether these represent an official negotiating position &mdash and in any case the arithmetic just doesn&rsquot workppStart with raising the Medicare age This is as I&rsquove argued in the past a terrible policy idea But even aside from that it&rsquos just not a big money saver largely because 65- and 66-year-olds have much lower health costs than the average Medicare recipient When the Congressional Budget Office analysed the likely fiscal effects of a rise in the eligibility age it found that it would save only 113 billion over the next decade and have little effect on the longer-run trajectory of Medicare costsppIncreasing premiums for the affluent would yield even less a 2010 study by the budget office put the 10-year savings at only about 20 billionppChanging the inflation adjustment for Social Security would save a bit more &mdash by my estimate about 185 billion over the next decade But put it all together and the things McConnell was talking about would amount to only a bit over 300 billion in budget savings &mdash a fifth of what Obama proposes in revenue gainsppThe point is that when you put Republicans on the spot and demand specifics about how they&rsquore going to make good on their posturing about spending and deficits they come up empty There&rsquos no there thereppAnd there never was Republicans claim to be for much smaller government but as a political matter they have always attacked government spending in the abstract never coming clean with voters about the reality that big cuts in government spending can happen only if we sharply curtail very popular programs In fact less than a month ago the RomneyRyan campaign was attacking Obama for yes cutting MedicareppNow Republicans find themselves boxed in With taxes scheduled to rise on January 1 in the absence of an agreement they can&rsquot play their usual game of just saying no to tax increases and pretending that they have a deficit reduction plan And the president by refusing to help them out by proposing GOP-friendly spending cuts has deprived them of political cover If Republicans really want to slash popular programmes they will have to propose those cuts themselvesppSo while the fiscal cliff &mdash still a bad name for the looming austerity bomb but I guess we&rsquore stuck with it &mdash is a bad thing from an economic point of view it has had at least one salutary political effect For it has finally laid bare the con that has always been at the core of the GOP&rsquos political strategyhr pp alignrightem© 2012 The New York Times News Serviceemp


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