The Gang of 31 - The American Spectator | USA News and Politics
The Gang of 31
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In the Wall Street Journal, Damien Paletta and Naftali Bendavid report that the bipartisan “Gang of Six” senators working on a deficit-reduction compromise deal have expanded their group to 31 total. 

The original group was led by Republican Saxby Chambliss and Democrat Mark Warner, joined by four former members of the president’s deifcit commission: Republicans Tom Coburn and Mike Crapo, and Democrats Kent Conrad and Dick Durbin. The other 13 Republicans and 12 Democrats in the now-larger group are not named in the WSJ article. 

The compromise would resemble the Bowles-Simpson deficit commission’s proposals. While it would cut $4 trillion from the projected budget deficit over the next 10 years, it would be a tough compromise for both parties: 

The package under consideration would essentially force Congress, within a short period of time, to come up with changes to spending and tax rules to achieve that goal over the next decade.

Republicans have agreed to consider raising new revenue through the tax code-without raising tax rates-and Democrats have agreed to trim Medicare benefits, moves that would be major concessions from both parties.

“Raising new revenue through the tax code” means eliminating or reducing tax deductions, credits, and breaks for specific kinds of products, services, activities, and so forth. In other words, the plan would broaden the tax base as opposed to raising tax rates. 

Republicans favor getting rid of these so called “tax subsidies” or “tax expenditures” as long as tax rates are also lowered so that the net result is revenue-neutral. But as the story makes clear, the compromise would be that the reform would raise revenues. 

Yet, as recently as February 17th, Coburn, Crapo, and Chambliss reasserted (in response to a report similar to today’s WSJ article) their intentions not to vote for a plan that would raise revenues. 

Because the two sides are so far apart on how to address the debt problem, Republicans are going to have to compromise somewhere. As the negotiations have unfolded, tax preferences, for better or for worse, have become the most likely area for compromise. If revenue-raising tax reform accounted for, say, $1.5 trillion of the final $4 trillion of debt reduction, that would be a terrible deal. It wouldn’t be nearly as bad, however, if Republicans were able to target only a few of the most harmfully inefficient tax preferences while ensuring that the rest of the debt reduction comprised spending cuts.

Remember that the McCain campaign platform included eliminating one of those tax preferences — the exclusion for employer-provided health insurance — on its own, separate from any consideration of tax-code reform. At the time the exclusion was worth more than $200 billion per year, which the federal government would have raised as new revenue under the McCain plan. Doing the exact same thing today would be probably one of the least harmful ways for Senate Republicans to compromise, if they are bound to compromise anyway. 

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