Looming 'fiscal cliff' makes election friction look tame
Instead, Josten favors tax code reform, regulatory reform and expanded energy production — all with an eye to stimulating growth.
The Medicare monster
“The government spends about $3.5 trillion a year,” said Rep. Tom Price (R-GA), a member of the House Budget committee. According to him, “$2.5 trillion of that is Medicare, Medicaid, Social Security and interest on the debt.”
Everything else, Price said, is $1 trillion, including defense, against a deficit of $1.3 trillion. “You could do away with the entire federal government except for Medicare, Medicaid and Social Security — and not even balance the budget,” Price said. “That is the magnitude of the challenge we face.
“Medicare reform — saving, strengthening and securing the program — has to be part of moving forward and solving the fiscal challenges. If we don’t address Medicare, we will never get our finances under control.”
Something must give
On the revenue side, one of the biggest chunks on the table is the payroll-deduction tax holiday, which reduces Social Security contributions by 2 percent. Letting that lapse would bring in $135 billion, according to Rep. Price, and he sees no one arguing to keep it.
The other major piece is the Bush-era tax rates, which Price pegs at costing upwards of $150 billion.
But Price does not want to see those rates go up. “I do not think that raising taxes on people out there trying to create jobs in this time of economic challenge is wise at all,” Price said.
GOP resistance to higher income tax rates has flummoxed Rep. Chris Van Hollen (D-MD), ranking member of the House Budget Committee.
Romney had signed the Grover Norquist tax pledge, Van Hollen, observed, a pledge that bound him in writing to “oppose any and all efforts to increase the marginal income tax rates for individuals and/or businesses and oppose any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates."
Asked during the GOP primaries if he would support $10 in cuts for every $1 in revenue, Romney said he would not.
“I think it is indisputable that the president’s plan is closer to the Simpson-Bowles framework than anything the Republicans have put forward,” Van Hollen said, noting that Simpson-Bowles called for just $2 of cuts to $1 of revenue.
“The starting point of tax reform should be to allow the top rate to return to Clinton-era levels. Then we can have a discussion about reducing the rates and broadening the base,” Van Hollen said.
In the short term, Van Hollen hopes to “buy down the sequester” with a short-term compromise that retains the deficit targets but averts the meat-ax cuts. “You could come up with an agreement to replace six months worth of the sequester. That would give you breathing room,” Van Hollen said.
Only then would the real battles begin.
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