After yesterday’s embarrassing plea to Mitch McConnell to save him from a cloture vote, Harry Reid went back to the drawing board. The Hill reports that Reid has altered his plan to raise the debt ceiling by borrowing more from the plans of McConnell and John Boehner, hoping to shake loose enough Republicans to get past the procedural hurdle:
The biggest change is that Reid would give the president almost unilateral power to raise the debt limit, borrowing an idea introduced by Senate Republican Leader Mitch McConnell (R-Ky.).
Reid would have President Obama request a $2.4 trillion debt-limit increase in two installments of $1.2 trillion each. The requests would be subject to congressional resolutions of disapproval, but these would do little to restrict the president.
Obama could veto any resolution of disapproval, and it would take a two-thirds vote in both chambers of Congress to override him.
According to a Senate Democratic aide, Reid also increased the total level of spending cuts from $2.2 trillion to $2.4 trillion, in part by using the January baseline — a budget maneuver House Speaker John Boehner (R-Ohio) used on a previous version of his debt-limit plan. The January budget baseline does not count cuts Congress implemented in legislation passed this spring to avert a government shutdown.
The McConnell mechanism wouldn’t stop Obama from raising the debt ceiling limit in the next installment, but Republicans might be more inclined to see that as a bug rather than a feature by now. The “cuts” – such as they are – would come up front, with the possibility for getting more cuts down the line. Obama would have to raise the limit himself, and Republicans in both chambers would be able to vote against it, forcing Democrats to own the hikes. It’s not pretty, but it would set up the debate in 2012 as well as can be expected for the GOP at this point.
Reid also is rumored to be offering a vote on a balanced budget amendment as a sweetener for Republicans in the Senate, although not requiring passage. That’s also a good development for the GOP. A properly written amendment would force Congress to control spending rather than raise taxes by limiting the federal budget to a constant percentage of GDP. If Democrats vote such a plan down, it’s yet another point for the 2012 debate.
However, according to The Daily Caller’s Amanda Carey and the Republicans on the Senate Budget Committee, the Reid plan has a big and unpleasant surprise for Republicans on taxes. Reid’s figures rely on current law — and current law has all of the Bush-era tax rates expiring and rising to their previous levels. It also assumes that Congress won’t provide a “patch” for the AMT:
Reid’s proposal includes a provision that “deems” budget resolutions for fiscal years 2012 and 2013, but Senate Democrats have not yet produced a 2012 budget proposal, much less one for 2013.
Within those anticipated budget resolutions lie the tax increases, according to the analysis, and here is where it gets tricky.
When the Congressional Budget Office scores a proposal, it uses either current policy or current law as its baseline. Reid’s bill is based on current law, which assumes certain tax breaks will expire according to pre-determined scheduled. That is a big deal.
The 2001–2003 Bush tax cuts are set to expire at the end of 2012. And some business tax breaks, “death tax” cuts, and the patch for the Alternative Minimum Tax expire at the end of 2011. Reid’s proposal assumes that Congress will not act to renew or extend those expiring tax breaks.
Total tax hike over 10 years, according to the GOP analysis? $3.8 trillion. And those would not just be tax hikes on the “wealthy,” either. Those tax hikes would hit the middle class like a freight train, both on basic rates and the AMT creep that Congress has parried for years. If this analysis is correct, Reid either wants to hit the US with the biggest tax hike in its history, or he’s offering bogus deficit reduction that will never occur.
If this sounds like a bad deal to you, keeping in mind what Tina wrote yesterday as well, then it just shows that you’re paying attention. It could get worse, though, as this Star Wars parody shows:.
I was actually looking for the original clip when I came across this one — which describes the situation far better. Who knew Lando Calrissian was a Tea Party supporter?
Update: Fred Bauer says S&P is counting on the expiration of all the Bush tax rates, too.