Government: The GOP wins the first round on the debt ceiling
The collapse of the debt-ceiling talks has left House Republicans and Senate Democrats developing rival proposals, setting up a fight over just how much to raise the borrowing limit. But both proposals concede to the GOP's main demand: Every dollar of additional borrowing authority will be accompanied by at least a dollar in cuts to projected spending, with no increase in taxes.
That's quite an accomplishment for the Republicans, considering that they control only the House (although they have enough votes in the Senate to block action on anything they oppose). Yet it doesn't suggest anything about the outcome of the much bigger battles to come.
As much as Republicans complain about the increasing size of government, the reality is that the bulk of the growth since 2008 stems from temporary measures tied to the downturn. This includes unemployment benefits, food aid, the auto-industry and bank bailouts and the 2009 economic stimulus package.
The budgetary problems to come won't be caused by discretionary programs such as foreign aid, student loans or the Environmental Protection Agency. They'll be caused by the healthcare costs that are forcing Medicare and Medicaid budgets to grow unsustainably. And though Social Security doesn't contribute to the deficit, its growth (in line with the increasing number of retirees, longer lifespans and higher cost of living) is driving government spending to an ever greater percentage of GDP.
Neither the Republican nor the Democratic debt-ceiling bill is likely to touch any of those entitlements. Instead, they'll stick to comparatively low-hanging fruit; in the Democrats' case, that's likely to include more than $1 trillion in savings that are already expected over the coming decade as U.S. troops diminish their roles in Iraq and Afghanistan, in addition to more than $1 trillion in savings from domestic programs.
The House GOP is expected to propose about $1.2 trillion in spending cuts and a cap on spending as the price for raising the debt ceiling by about $1 trillion -- enough to set up another fight over the debt ceiling early next year. It also would call for a bipartisan congressional commission to recommend additional cuts that would be the prerequisite for raising the debt limit in 2012.
That commission could conceivably take up the healthcare entitlements that pose the government's real long-term fiscal problems. The chances of that happening in an election year, however, are slim at best. The House GOP's first pass at the issue -- the fiscal 2012 budget proposal written by Rep. Paul Ryan (R-Wis.) -- proved so deadly politically, even the GOP-controlled House Ways and Means Committee dropped it like a live grenade. Not that anyone should have been surprised by that; Ryan's plan shifted much of the expense of retirees' health insurance onto the elderly, along with all of the risk of future cost increases. Slashing Medicaid isn't so problematic at the polls, but that program isn't nearly as expensive as Medicare, so the potential savings are much smaller.
So the day of reckoning on entitlements is likely to wait a while. The battle over taxes, on the other hand, is guaranteed to resume soon. That's because the Bush-era tax cuts are set to expire at the end of 2012.
The "grand bargain" that President Obama and House Speaker John A. Boehner (R-Ohio) sought in vain included a way around yet another debate over renewing the Bush cuts: a proposal to reform the tax code by eliminating many exemptions. The extra revenue generated would have allowed the government to collect more dollars while still lowering marginal rates, both for individuals and corporations. The problem was the amount of extra revenue in the plan. The two sides had talked about $800 billion over 10 years, but Obama asked for an additional $400 billion after the bipartisan Gang of Six plan in the Senate advocated a significantly larger increase in revenue.
Tax reform remains a laudable goal. Whether it's doable, however, depends on whether Republicans stop counting the elimination of tax breaks as a tax increase and Democrats stop equating lower marginal rates with giveaways to the wealthy. They had a golden opportunity to do so in 2010, when the Bush tax cuts were originally set to expire, but the politics were too difficult then. They're not likely to be any easier next year.
-- Jon Healey
Photo: House Speaker John Boener (R-Ohio). Credit: Jason Reed / Reuters