WASHINGTON — The debt ceiling looms. Confusion reigns. Schemes abound. We are deep in a hole with, as of now, only three ways out: the McConnell plan, the G6 plan and the Half-Trillion plan.
The McConnell essentially punts the issue till after Election Day 2012. A good last resort if nothing else works.
The G6, proposed by the bipartisan Gang of Six senators, reduces 10-year debt by roughly $4 trillion. It has some advantages, even larger flaws.
The Half-Trillion raises the debt ceiling by that amount in return for an equal amount of spending cuts. At the current obscene rate of deficit spending — about $100 billion a month — it yields about five months respite before the debt ceiling is reached again.
In my view, the Half-Trillion is best: It is clean, straightforward, yields real cuts, averts the current crisis and provides until year-end to negotiate a bigger deal. At the same time, it punctures President Obama's thus far politically successful strategy of proposing nothing in public, nothing in writing, nothing with numbers, while leaking through a pliant press supposed offers of surpassing scope and reasonableness.
As part of this pose, Obama had threatened to veto any short-term debt-ceiling hike. Which has become Obama's most vulnerable point. Is the catastrophe of default preferable to a deal that gives us, say, five months to negotiate something more significant — because it doesn't get Obama through Election Day?
Which is why Obama is already in retreat. On Wednesday, press secretary Jay Carney showed the first crack by saying the president would accept an extension of a few days if needed to complete an already agreed upon long-term deal.
Meaning that he would exercise his veto if that larger deal required several months rather than several days? Call his bluff. Let the House pass the Half-Trillion. Dare him to put America into default because he deems a short-term deal insufficiently grand. After all, it dovetails perfectly with parts of the G6, for which the president has expressed support and which explicitly allocates roughly the same amount of time — six months — to work out the grander $3-$4 trillion deal.
The G6 conveniently comes in two parts. Part One puts immediately into effect, yes, a half-trillion dollars in cuts, including a more accurate inflation measure (that over time greatly reduces Social Security costs) and repeal of the CLASS Act (the lesser-known of the two new Obamacare entitlements, a fiscally ruinous, long-term care Ponzi scheme).
Part Two of the G6 is far more problematic. It mandates six months of committee negotiations over the big ones — Medicare, Social Security, discretionary spending caps and tax reform. Unfortunately, the Medicare and Social Security parts are exceptionally weak — no mention of any structural change, such as raising the eligibility age to match longevity. As for the spending caps, I wouldn't bet my dog's food bowl on their durability.
On tax reform, the G6 calls for eliminating deductions, credits, exclusions and exemptions to reduce rates across the board. The new tax rates — top individual rate between 23 percent and 29 percent — would bring us back to Reagan levels (28 percent). This would be a good outcome, but the numbers thus far are fuzzy and some are contradictory. Moreover, those negotiations have yet to begin.
In principle, however, if the vast majority of the revenue raised by closing loopholes goes to rate reduction, and if the vast majority of the net revenue raised comes from the increased economic activity spurred by lowering rates and eliminating inefficiency-inducing loopholes, the trade-off would be justified. We shall see.
- Doug Robinson: We are in the midst of an era...
- Most popular letters to the editor of 2013
- My view: Fix Obamacare, don't replace it
- Michael Gerson: The gospel according to JC...
- In our opinion: Don't raise the minimum wage
- Robert J. Samuelson: Government programs...
- In our opinion: Forgiveness, positive focus...
- Robert Bennett: Create wealth before...
- In our opinion: Don't raise the minimum... 62
- My view: Fix Obamacare, don't replace it 56
- Robert Bennett: Create wealth before... 41
- Letter: Doctors unite 40
- Letter: Elected representatives 36
- Andrew Morriss: No, Congress should not... 32
- Michael E. Kraft: Yes, Congress should... 22
- Letter: No limits 20