-House Republicans Offer Plan With $1.4 Trln Spend Cuts, $800 Bln Revs
-Plan Revives Package Floated During Super Committee Talks
-Budget Experts Hope Parties Now Ready For Serious Talks

By John Shaw

WASHINGTON (MNI) – To the surprise of few, House Republican leaders
responded to the politically cautious and tactically shrewd fiscal proposal
President Barack Obama offered last week with their own politically cautious and
tactically shrewd proposal this week.

Lawmakers and budget experts say the exchange of modest fiscal offers was
predictable, but it remains unclear what happens next.

Does the exchange of offers lead to direct and intense negotiations or do
the two parties continue to cling to their familiar fiscal talking points?

“I think a deal can be done and the two sides are not that far apart,”
Senate Budget Committee Chairman Kent Conrad told MNI Tuesday afternoon.

“It’s not that hard to see the outlines of a deal,” Conrad said, adding
that various parts of the White House and House Republican plans can be
integrated to craft a $3 trillion deficit reduction framework.

This $3 trillion coupled with the $1 trillion in spending savings that was
agreed to last year would put American fiscal policy on much stronger footing,
Conrad argued.

Bill Frenzel, a former Republican congressman who is now a guest scholar at
the Brookings Institution, said the table has been set for intense and direct
negotiations between Obama and House Speaker John Boehner.

“Now that both sides have put offers on the table that protect their
political backsides and show their core constituencies that their hearts are
pure I would hope the real negotiations would begin privately,” Frenzel said.

“The talks have to begin in earnest now. We’re running out of time. And the
talks should be between the principles, those who can cut a deal, and not their
spear carriers,” Frenzel added.

Boehner and his House Republican leadership team sent the White House a
counteroffer Monday that calls for $1.4 trillion in spending cuts and $800
billion in additional revenues through tax reform.

“What we’re putting forth is a credible plan that deserves serious
consideration by the White House,” Boehner said. “And I would hope they respond
in a timely and responsible way.”

But in a television interview Tuesday, Obama said the plan is not
“balanced” and cannot achieve deficit reduction solely through closing tax
loopholes, because “when you look at the math, it doesn’t work.”

“If we are going to raise revenues that are sufficient to balance with the
very tough cuts that we’ve already made – and the further reforms in
entitlements that I’m prepared to make – we are going to have to see the rates
on the top 2% go up,” Obama said, warning “we are not going to be able to get a
deal without it.”

The House GOP’s plan for spending savings include $600 billion from health
care entitlements, $300 billion from other entitlements, $200 billion by using
the chained CPI for indexing benefit programs and $300 billion in additional
discretionary savings.

The $800 billion in revenues over a decade “would not be achieved by higher
tax rates,” the House GOP said in a letter to Obama, but through tax reform.

But Obama countered that “We are not going to simply cut our way to
prosperity, or cut our way out of this deficit problem we have,” he said. “We
are going to need more revenues.”

Boehner and other Republican leaders said the House GOP counteroffer is
based on the testimony of Erskine Bowles to the so-called Super Committee last
year.

They said the Bowles framework represents “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 Republican leaders say that if the White House accepts this framework
“we are ready and eager to begin discussions” on how to turn this package into a
broader agreement.

Last week, Obama offered a proposal that calls for $1.6 trillion in
additional revenues, $600 billion in entitlement savings and $50 billion for new
infrastructure spending.

The administration also calls for the extension of Bush era tax cuts for
earnings below $250,000 a year, the extension of the two percentage point
payroll tax reduction first approved in 2010, renewal of unemployment insurance
benefits, and a housing refinance provision to help homeowners who are
underwater in their mortgages.

The administration is recommending a revised procedure for the debt ceiling
in which Congress no longer would have to affirmatively approve a debt hike.
Instead, Congress would be able to block debt ceiling increases by passing
motions of disapproval, but these would take two-thirds majorities in both
chambers.

Senate Finance Committee Chairman Max Baucus told a budget conference
Tuesday that the talks should focus on securing about $2 trillion in additional
savings.

This additional $2 trillion, when added to the $1 trillion in savings last
year, $800 billion from savings that come from ending the Iraq and Afghanistan
wars, and $600 billion in interest savings, would constitute a credible fiscal
consolidation plan, he said.

“This plan will strengthen the economy and put us on a sustainable path
forward. And it must ramp up over time, to avoid slowing down the economic
recovery,” he said.

–MNI Washington Bureau; tel: +1 202-371-2121; email: jshaw@mni-news.com

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