It appears that the action on the debt ceiling has shifted to the Senate. With Sen. Tom Coburn rejoining the “Five Guys,” thereby making them the Gang of Six again, and President Obama cautiously latching on to the group’s nascent plan, it looks as though the Gang of Six proposal is, for right now, the most plausible blueprint for a compromise plan.
Perhaps the reason the Gang of Six plan is politically viable is that is mostly a promise to make cuts in the future, rather than a measure to cut spending now. The plan would only cut about $500 billion immediately, and most of that would be spending already agreed to by all sides: discretionary spending caps, a federal worker pay freeze, and a (gradual) shift to the chained CPI to calculate retirement benefits.
The measure would also “require” committees to come up with longer-term measures that would bring the total amount of deficit reduction to $3.6 trillion over 10 years. In other words, the bill would force committees to figure out how to trim entitlements (without fundamentally reforming them), simplify the tax code by eliminating preferences and loopholes and lowering rates, and lower other spending.
The plan is intended to increase revenues both by leading to higher economic growth and by cutting tax preferences and loopholes more than tax rates. However, because repeal of the alternative minimum tax is included, according to the authors, “if CBO scored this plan, it would find net tax relief of approximately $1.5 trillion.”
The Gang of Six plan is a far cry from the Cut, Cap, and Balance strategy that Republicans in the House are pushing for right now. It’s even further from the $9 trillion debt reduction plan Coburn released just yesterday. In terms of guaranteed cuts, it does less than any plan yet proposed, except for the McConnell Plan B. The vast majority of the spending reductions would be left up to Democratic-chaired committees to determine, to be worked out after the debt ceiling is raised.
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