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GOP Regains High Ground With Cliff Counteroffer

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The Republicans regained some of the high ground on Monday by embracing the framework of the president's own fiscal reform guru, Democrat Erskine Bowles.

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The Paper Tiger Roars

"At the same time, mindful of the status quo election and past exchanges on these questions, we recognize it would be counterproductive to publicly or privately propose entitlement reforms that you and the leaders of your party appear unwilling to support in the near term," the letter stated.

"With the fiscal cliff nearing, our priority remains finding a reasonable solution that can pass both the House and Senate, and be signed into law in the next couple of weeks," the leaders said. They went on to say that Bowles' testimony last November before the bipartisan super committee on deficit reduction offered "a good middle ground approach that garnered praise from many fiscal watchdogs and nonpartisan experts."

The Republicans stressed that Bowles recommended $800 billion in new revenue – precisely the amount they are seeking – and that by closing special interest loopholes and deductions and then lowering rates, unlike Obama who seeks to increase rates on those making more than $250,000. Bowles also recommended cuts of more than $900 billion in mandatory spending and another $300 billion in discretionary spending.

While there would still be need for "fundamental entitlement reform", the GOP leaders said, "The Bowles plan is exactly the kind of imperfect, but fair middle ground that allows us to avert the fiscal cliff without hurting our economy and destroying jobs," the letter said. "We believe it warrants immediate consideration."

But Bowles and other budget experts argued yesterday that the actual middle ground between the two parties has shifted dramatically since the November election when Obama won reelection and Democrats made gains in both chambers of Congress. "It is up to negotiators to figure out where the middle ground is today," Bowles said in a statement. "Every offer put forward brings us closer to a deal, but to reach an agreement it will be necessary for both sides to move beyond their opening positions."

Sean West, head of US political risk at the Eurasia Group, a consultant, said yesterday, "The most positive thing about the GOP counteroffer is that we now know where both parties stand 28 days out from the fiscal cliff. "

"The GOP could have dragged its feet for another week, but now we have motion," he told The Fiscal Times. "The GOP spending cuts are not acceptable to Democrats as such but are not so outlandish that they prohibit an eventual deal where spending cuts are the big win for Republicans even as they compromise on taxes. I don't think the deal aims for bipartisanship in terms of content, but it strikes a more constructive tenor of negotiations and opens the door to an eventual compromise."

Conservative Reaction

But some conservatives were dismayed by the Boehner letter, saying that Republicans essentially conceded at least $800 billion in new taxes without an iron clad commitment from the Democrats for meaningful entitlement reform in the coming year.



"I wonder if they're putting this out in order to be reasonable while desperately hoping the president doesn't accept this, or if it's a preemptive capitulation," said one conservative economist speaking on background. "The sentence in the letter where they refer to the fact that they don't see it as useful at this stage to be putting forward publicly or privately substantive reforms to entitlement programs, basically taking entitlement off the table, doesn't leave you much hope for the kind of a deal that would be worth even negotiating."

With the White House turning down the GOP counteroffer, it's not clear where the negotiators go from here in trying to stave off a year-end fiscal crisis. "If the President is rejecting this middle ground offer, it is now his obligation to present a plan that can pass both chambers of Congress," Brendan Buck, Boehner's spokesman, said in a statement.

For several months, Obama sold his tax rate increase as a return to Clinton-era prosperity. Just as the economy didn't stumble under Bill Clinton's top 39.6 percent rate, it would flourish again at the same level during the Obama administration. But House Republicans undercut the Clinton comparison yesterday by endorsing the rough budgetary framework from Bowles, the Comeback Kid's third chief of staff and budget consigliere after the GOP retook the legislative branch majorities in the 1996 election.

Bowles' chief virtue is that both parties have jilted his past deficit entreaties. Obama largely ignored the Simpson-Bowles plan that he personally commissioned back in 2010. Ryan, the House Budget Committee chairman-later the Republican vice presidential nominee-also served on that deficit commission and voted against the plan. As recently as last March, the House spurned a budget modeled on Simpson Bowles by a 382 to 38 vote.

But since that time, Bowles' power has grown. Corporate powers like the CEOs of General Electric and Goldman Sachs enshrined his deficit reduction plan as the ideal policy, saving it from the legislative scrapheap. The Simpson-Bowles plan essentially broke an ideological logjam by starting over with a relatively fresh tax code and taming the growth of entitlement spending. For two parties with a messy history, it was the epitome of a clean break.
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