This week, the most abused word in Washington has been “impasse.” Prospects for a deal between President Obama and congressional Republicans on raising the debt ceiling are appearing increasingly grim as Aug. 2 nears, the date of the promised debt-pocalypse. Republicans want real spending cuts in exchange for raising the debt ceiling, and Democrats say they will only accept spending cuts if coupled with tax increases on wealthier Americans. These differences seem unbridgeable, but there are multiple measures that could help foster a deal.
The most obvious bipartisan compromise would involve expanding means-testing within the nation’s entitlement programs. Medicare already contains elements of means-testing, but raising premiums and co-payments on wealthier beneficiaries is one possible way to save money within the program.
Any money generated by such increases would be counted as “offsetting receipts” within the mandatory spending part of the budget, but those receipts would not violate the anti-tax pledge that has been signed by most Republicans, according to Ryan Ellis of Americans for Tax Reform.
What’s more, Democrats already supported means-testing on Obamacare and Rep. Paul Ryan’s budget that all but four House Republicans voted for also included means-testing.
Sen. Joe Lieberman, I-Conn., told me, “Whether it is a place for common ground, I don’t know, but it does begin to deal with both the pending insolvency of Medicare and the drain that Medicare is on the rest of the federal budget, and without
raising taxes it does ask more of people who have more.”
Because this well has already been tapped into before, there would be a limit to the amount that can be saved just by charging wealthier Medicare recipients more. But there’s also potential in Social Security.
One possible approach would be to change the system so that the benefits of wealthier recipients are set at a lower level, based on the growth in standard inflation rather than wage growth.
The so-called “progressive price indexing” reform would save $85 billion over the next 10 years, according to the Congressional Budget Office. But more importantly, the CBO says those savings would grow over time:
“By 2050, outlays for Social Security would be reduced by 18 percent, or from 5.9 percent to 4.8 percent of gross domestic product.” For context, a 1.1 percent reduction in spending as a share of GDP would be equivalent to $165 billion in 2011.
Conservative Rep. Jeff Flake, R-Ariz., told me that, “This system isn’t sustainable, so to expand means-testing in these programs and to tweak it — yeah, I think so.”
Another stumbling block has been on taxes. Obama and Democrats say they want to close loopholes enjoyed by wealthier Americans, but Republicans won’t support a net tax increase.
But Republicans could agree to extend the payroll tax cut, as Obama has requested. And, if Obama wants to go after more loopholes, Republicans can push for the repeal of some of the roughly $800 billion in taxes that were used to finance his health care law (such as the arbitrary tanning salon tax).
These proposals, on their own, wouldn’t be enough to break the current stalemate. But they do offer an opportunity to get past some of the current stumbling blocks.
They would allow Republicans to say that they achieved some fundamental entitlement reform that will have a real long-term effect without raising taxes. And Democrats could say that they negotiated a deal that asked more from wealthier Americans.
Philip Klein is senior editorial writer for The Examiner. He can be reached at [email protected].
