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The Hidden Flaw in Obama's and Boehner's Cliff Plans


Crunching the numbers in each plan.

"That strikes us as our minimal bogey," Rattner said. "In a perfect world, you'd like to get that ratio to go down; you would like to pay down debt. But in an imperfect world, at least you want to keep the problems from getting worse. So to do that you need $4 trillion of savings, whether it's tax increases or spending cuts over the next ten years."

According to Rattner's analysis, the president's long-term deficit reduction strategy is a mix of 47 percent tax increases, 17 percent entitlement savings, 19 percent reductions in discretionary spending on government services and programs, and 17 percent miscellaneous savings.

Boehner's approach, by contrast, is a mix of 22 percent increased revenues, 31 percent entitlement cuts, 31 percent discretionary savings and 16 percent all others.

Rattner, who has called himself "a proud alumnus" of the first Obama administration, said that Congress and the administration must be careful not to undermine the economic recovery by cutting too deeply into discretionary domestic programs and services, including the social safety net. "What Obama is trying to say in his proposal – and I agree with this – is that there's really a limit to how much of that you can do" without harming the economy.

With entitlements, "the president has proposed $350 billion in health care savings and $250 billion to other stuff for a total of $600 billion," he said. "Boehner is at $900 billion, plus a change in the Social Security formula , which Obama hasn't signed on to yet – although I think he will – for $1.1 trillion. And again, I think there's someplace in between that you can get to make it work. I don't think there's a magic number. I just think Obama is too light on [entitlement savings], and I don't think the Democrats will ever accept the magnitude of what Boehner is talking about."

Unless the White House and Congress can agree on a package of savings and tax increases before the end of the year, about $600 billion of tax increases domestic and defense spending cuts will automatically kick in on Jan. 2, likely triggering a fiscal crisis that could hurt the economic recovery. Although negotiations between Obama and Boehner have stalled, Rattner thinks the two sides will work through their differences before year end.

"I'm less concerned, frankly, with what's in the deal," he said. "I think there's a lot of different ways you can get to an acceptable number. I fear that as these negotiations progress and as the things that each side basically says, 'I can't do that,' they simply come out of the package, as opposed to being replaced by something else."

Rattner added, "For reasons I can't defend or explain, I think they will find their way through this because the notion of going over the cliff is so crazy. I'm certainly worried about going over the cliff, but I'm just as worried, maybe more worried, about them chickening out and not doing something as robust as what we need to address the [debt] problem."

Editor's Note: This article by Eric Pianin originally appeared on The Fiscal Times.

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