The year-end fiscal crisis is turning the political screws on John Boehner and the Republican Party. Their challenge is twofold: 1. Convince voters and the President that raising tax rates
exclusively on the wealthy will fall short of reducing the deficit while harming the economy, and 2. Reveal how and when they’ll cut spending over the next decade.
Boehner must appease colleagues who are eager to shrink the size of the federal government, while not downsizing entitlement programs such as Medicare in a way that invites a voter backlash. This is the next critical phase in negotiations with President Obama over a deal to stunt the growing deficit and bypass more than $600 billion in recession-inducing tax hikes and slashed expenditures that are scheduled for next year.
It’s as much about the math as the ideology. The House Republican majority pretty much vilified Obama’s plan to increase tax rates for wealthier Americans—which would generate $1.6 trillion over the next decade as part of framework for trimming the deficit by $4 trillion.
But without a drastic tax increase, the GOP will likely need to slice more deeply into entitlement programs such as Medicare than the roughly $400 billion worth of entitlement reductions
floated by the White House. Boehner tried to deflect questions on “Fox News Sunday” about whether one particularly contentious cut—raising the eligibility age for Medicare insurance from 65-years old—is a possibility.
“There are a lot of items on the table,” the Ohio congressman said. “The president knows what they are. The question is: what are they willing to do?”
Even if Obama has insight into what Republican leaders have proposed, the public doesn’t. Republican congressional leaders have emphasized the possibility of capping Medicare benefits for better-off recipients, but specific dollar figures have yet to be highlighted. House Majority Leader Eric Cantor, R-Va., assured reporters on Friday that the president would receive an outline of entitlement reforms. “We’re not interested in playing rope-a-dope,” he said.
Scaring seniors could devastate the GOP come 2014. About 44 percent of the electorate this year was older than 50 and they overwhelmingly preferred Republicans. Exit polls by the Associated Press showed the GOP enjoyed a five-point margin among 50 to 64-year olds who favored Republicans, an edge that increased to 12 percentage points among those older than 65.
Some congressional Republicans wish their caucus would be more audacious in downsizing the federal government. The $4 trillion figure cited as part of a “grand bargain” between Obama and Boehner would still enable the national debt to continue growing beyond its current $16.2 trillion level, instead of actually paying it down.
“If we have real reform, real cuts, and we deal today with our entitlement spending, I think that would be success,” Rep. Raul Labrador, R-Idaho, told The Fiscal Times. “I’m personally interested in $10 trillion. Over the next ten years, we’re going to raise the debt by $10 trillion. We need to stop raising the debt.”
Editor's Note: This article by Josh Boak and Eric Pianin originally appeared on The Fiscal Times.
And that’s where government insurance programs such as Medicare and Medicaid—right now about 20 percent of the $3.8 trillion budget—becomes a stumbling block. When the GOP rules out major tax increases and reduced military budgets, these programs become the major source of savings. And as baby boomers retire and receive government-backed health insurance, they’re also the main drivers of the deficit.
The budget passed by House Republicans essentially attempted to delay the day of reckoning. As crafted by their vice presidential nominee, Wisconsin Rep. Paul Ryan, it tames Medicare growth by transforming it into a voucher-style program for new retirees beginning in 2023. Almost all of the savings from Ryan’s “premium support” approach would begin to accrue 20 years from now, almost a decade after the end of the 10-year timeline being discussed by Obama and Boehner.
This approach has been endorsed by Ohio Congressman Jim Jordan, who as the outgoing chairman of the Republican Study Committee was among the conservatives who voted against the agreement last year to increase the government’s borrowing authority.
Jordan views the gridlock with Obama as sanctioned by the Founding Fathers and favors letting the fiscal cliff’s $109 billion in reductions to defense and domestic programs go through (“The only thing worse than defense cuts are not cuts at all”). He also typifies the conservative perspective that the government would squander more tax revenues: “This is Charlie Brown, Lucy and the football. Just raise taxes and we’ll get more revenue now and we promise that we’ll cut spending next year. I always tell folks back home, ‘Remember this is a promise from politicians.’”
Yet Jordan would rather ease into transforming Medicare, since the government ought to honor the promises it has made.
“People made their savings and investment decisions based on a certain set of rules,” Jordan told The Fiscal Times. “It would be unfair to change the rules of the game. Common sense and decency.”
When pressed about possible Medicare reductions at a news conference last week, Boehner responded by saying that “there are plenty of specific proposals” in the Ryan budget. The speaker chose not to explain the difficulty with the savings starting in 2023 compared to the next few years, adding , “The debt crisis that we face requires us to make serious decisions and it requires us to make those decisions now.”
Fellow Buckeyes on Capitol Hill criticized the Ryan budget because entitlement savings need to be recognized sooner rather than later in an agreement with Obama.
“His budget was not a big deal,” said Rep. Steven LaTourette, R-Ohio. “His budget was more of a political statement than anything else. And that’s great. That’s what budgets do around here, but this deal is not a budget, it’s a deal and it has to include everything.”
But when LaTourette advocates reductions now, he has one advantage over his peers. He retires from Congress in a month.
For more from The Fiscal Times:
How Bad Will the Economy Be in 2013?
Great Expectations for Carney at the Bank of England
The Diminishing Role of the US in the Middle East
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