More on the Budget

I remain optimistic about the budget negotiations, not because I think default would be too catastrophic to come to pass but because those in power seem to have reached this conclusion, too.

One very encouraging (and I think astute) move by House Republican Leaders was their decision to have Rep. Paul Ryan educate caucus members about the potential consequences of a default. It demonstrated the kind of leadership we’d been missing in the House: a willingness to say to fellow party members “You are wrong about this,” and try to convince them of a better path. And I can’t think of a better salesman to that group on that issue than Rep. Ryan.

Then Sen. Tom Coburn unveiled his own (600 page!) budget proposal. It was far more ambitious than the $4 trillion “grand bargain,” calling for $9 trillion in deficit savings over the next decade. The size of the cuts helped him maintain his conservative credentials. But the plan also contained some interesting provisions that will provide cover for those signing on to the $4 trillion package: $1 trillion in defense cuts and $1 trillion in savings from reforming tax breaks (ie., raising taxes). Regarding the later element, Coburn said:

“Tax expenditures are not tax cuts. Tax expenditures are socialism and corporate welfare. Tax expenditures are increases on anyone who does not receive the benefit or can’t hire a lobbyist or special interest group to manipulate the code to their favor. Politicians love to play the tax code because it benefits the politicians. No conservative should support Washington choosing winners and losers in the tax code.”

New details on the bipartisan plan prepared by the reinvigorate “Gang of Six” suggest that other Republicans are willing to take on Coburn’s challenge. The plan includes lowering tax breaks on things like mortgages, health insurance, and retirement savings, resulting in increased tax revenue. In other words, it distributes the impact of budget balancing to the wealthy and middle class rather than simply cutting services to the poor (a too-common response to recession and tight government budgets). Increased tax revenue would be partially offset by lowered marginal tax rates and a simplified tax code.

The devil’s in the details, which will determine whether the changes fall more or less heavily on the wealthy or middle class. But I’m encouraged by Republican and Democratic Senators’ willingness to adopt Coburn’s logic on tax breaks. After all, there’s plenty of money in that system to be tapped.

Finally, I was heartened by Felicia Sonmez’s breakdown of the House Republican Caucus and the potential votes for a debt ceiling raise. It was a nice reminder that the House may not be home to as many zealots as the catastrophe media coverage would suggest. Here’s to hoping a dose of good sense can prevail.