The Deficit Deal the President Proposed was 3:1 Cuts to Revenues

I’ve published this once but I think it’s worth re-emphasizing. This is a bit wonky but it’s really important so please stick with me. In April 2011 President Obama proposed his own deficit reduction plan. In that plan he defined, in writing, what would constituted a “balanced approach” of cuts and new revenues. He said it would be “three dollars of spending cuts and interest savings for every one dollar from tax reform.” In chart form, this is what the President wanted:

Balanced approach

According to the House Progressives Caucus, we are currently at 70% cuts to 30% revenues. In other words, the President got more of what he wanted (taxes) and the GOP got less of what they wanted (cuts). Advantage Democrats.

In addition, Senate Dems are now proposing a 1:1 split of cuts to revenues to avoid the sequester and complete the Grand Bargain of deficit reduction which began in 2011. The President has endorsed the Senate proposal. Say he gets it. That would mean the Grand Bargain would be about $2.2 T in cuts to about $1.4T in revenue. That’s roughly a 3:2 ratio. From the President’s perspective, that’s a big win. If you ask for 3:1 (25% new taxes) and you get 3:2 (40% new taxes) you just rolled the opposition.

Meanwhile, Republicans are being painted as crazy people for asking for a deal that would be very slightly better (from their perspective) than the one the President originally proposed. If they stick to the “no revenues” line and somehow get $1.5T in cuts, that would mean the Grand Bargain works out to about $3 T in cuts to $700B in revenues. That’s a bit better than 4:1. It would mean the Grand Bargain had roughly 20% new taxes instead of the 25% the President requested.

My take is Republicans would love to move the President to the right of what he proposed but they are absolutely not going to move to the left of what he proposed. That’s probably why the sequester is looking like their best option right now. If Democrats really want to avoid it, they need to offer a deal that is no worse than the 3:1 offer the President initially put on the table.

Addendum: Greg Sargent doesn’t get it:

Let’s give them an overall cuts-to-revenues victory of two to one.
It’s easy to get there; it all turns on how you divide that remaining
$1.5 trillion in deficit reduction. Republicans would simply have to
agree to a measly $477 billion in new revenues, while Dems agreed to
$842 billion in new spending cuts. (We’re again factoring in the $200
billion in interests savings). This would mean Republicans agreed to an
overall total of $1.2 trillion in spending cuts, while Dems agreed to an
overall total of $2.4 trillion in spending cuts.

That would be roughly a two-to-one ratio. You see? In this scenario, Republicans could declare victory, and they’d be right.

 When the President opens with 3:1 and you get 2:1, that’s not victory. That’s getting rolled.


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