After months of negotiations, a bipartisan group of senators known as the “Gang of Six” has released its plan for long-term debt reduction. The proposal is in line with previous recommendations from the Simpson-Bowles Commission. It includes $500 billion in discretionary spending cuts, cuts to Medicare (which can include an increase in the eligibility age) and unspecified Social Security reform. It also contains revenue increases, broad-based tax reform, and discretionary spending caps with a trigger that will kick in by 2015 if deficit reduction isn’t on track. The plan assumes that the Bush tax cuts for higher-income earners will expire. On the whole, it saves $3.7 trillion, which is close to the $4 trillion the administration's “grand bargain” of two weeks ago would have saved. Given their reaction to Simpson-Bowles earlier this year, liberals won’t love the proposal, but it’s not the worst possible outcome.
President Obama called the Gang of Six proposal “broadly consistent” with his deficit-reduction goal, and Senate Republicans haven’t dismissed it out of hand. But the real challenge is convincing House Republicans to pass any bill with tax increases, much less $1 trillion worth of them. John Boehner and Eric Cantor already rejected the other grand bargain because of their fundamental opposition to tax increases, and there’s no indication that they would accept it a second time around.
House Republicans have doubled down on their opposition to new revenue; yesterday, they passed the “Cut, Cap and Balance” plan, which would slash spending, cap it at 18 percent of GDP, and pass a balanced budget amendment. The vote was an obvious stunt -- the Senate votes today, and no one expects it to find a majority -- but it signals the GOP’s core opposition to any plan that provides additional revenue. This is to say nothing of the GOP’s growing belief that debt default would be a good thing.
In other words, it's not enough that the Gang of Six has support from a large number of senators and the president of the United States; if this plan is to pass, they'll need to convince House Republicans of its necessity. So far, that looks like a fool's errand.
