Who's Really Refusing to Compromise on the Sequester?

By Jim Geraghty

Good morning. Here's your Tuesday Morning Jolt.

Enjoy!

Jim

Who's Really Refusing to Compromise on the Sequester?

Over the weekend, Ezra Klein wrote that Obama has already made all of the concessions on entitlement programs that Republicans are looking for, and that the main problem is that congressional Republicans just haven't read Obama's proposals closely enough:

It's a continuing source of frustration among Republicans that the Obama administration, which seems so comfortable taxing the rich, isn't comfortable with "means-testing" entitlements — which is to say, asking wealthier seniors to bear a heavier burden for their health-care costs or receive less coverage from Medicare.

But on page 34 of the White House's most recent budget, President Obama proposes to do exactly that. Medicare, it's important to note, is already a partially means-tested program, with richer seniors — about 5 percent of them — paying income-related premiums for their hospital and drug insurance. Obama would increase those premiums by 15 percent, and he'd freeze the threshold such that, over the next decade or two, 25 percent of seniors were paying part of the cost of their coverage.

Monday he returned to the topic, once again contending that long-term fiscal and budgetary Nirvana would be within our reach if the Republicans weren't so darn stubborn about tax increases:

But it's unpopular for Republicans to simply say they won't agree to any compromise and there's no deal to be had — particularly since taxing the wealthy is more popular than cutting entitlements, and so their position is less popular than Obama's. That's made it important for Republicans to prove that it's the president who is somehow holding up a deal.

This had led to a lot of Republicans fanning out to explain what the president should be offering if he was serious about making a deal. Then, when it turns out that the president did offer those items, there's more furious hand-waving about how no, actually, this is what the president needs to offer to make a deal. Then, when it turns out he's offered most of that, too, the hand-waving stops and the truth comes out: Republicans won't make a deal that includes further taxes, they just want to get the White House to implement their agenda in return for nothing.

There's a fairly key point that Klein keeps glossing over: Republicans feel they just made a concession on tax hikes — gobs and gobs of them, in fact:

Tax increases the fiscal cliff deal allowed:

1. Payroll Tax: increase in the Social Security portion of the payroll tax from 4.2 percent to 6.2 percent for workers. This hits all Americans earning a paycheck—not just the "wealthy." For example, The Wall Street Journal calculated that the "typical U.S. family earning $50,000 a year" will lose "an annual income boost of $1,000."

2. Top marginal tax rate: increase from 35 percent to 39.6 percent for taxable incomes over $450,000 ($400,000 for single filers).

3. Phase out of personal exemptions for adjusted gross income (AGI) over $300,000 ($250,000 for single filers).

4. Phase down of itemized deductions for AGI over $300,000 ($250,000 for single filers).

5. Tax rates on investment: increase in the rate on dividends and capital gains from 15 percent to 20 percent for taxable incomes over $450,000 ($400,000 for single filers).

6. Death tax: increase in the rate (on estates larger than $5 million) from 35 percent to 40 percent.

7. Taxes on business investment: expiration of full expensing—the immediate deduction of capital purchases by businesses.

Obamacare tax increases that took effect:

8. Another investment tax increase: 3.8 percent surtax on investment income for taxpayers with taxable income exceeding $250,000 ($200,000 for singles).

9. Another payroll tax hike: 0.9 percent increase in the Hospital Insurance portion of the payroll tax for incomes over $250,000 ($200,000 for single filers).

10. Medical device tax: 2.3 percent excise tax paid by medical device manufacturers and importers on all their sales.

11. Reducing the income tax deduction for individuals' medical expenses.

12. Elimination of the corporate income tax deduction for expenses related to theMedicare Part D subsidy.

13. Limitation of the corporate income tax deduction for compensation that health insurance companies pay to their executives.

Some Republicans feel you should go, I don't know, at least a couple of months between tax increases.

Oh, and if you demand policy Y "in return" for enacting X, you're not really in support of X. You may be amenable to X, but you're not really helping with the lift, making the case for it to a public that remains utterly oblivious to fiscal realities. Americans want to reduce spending while increasing spending or maintain it at current levels for 18 of 19 programs. Our debt, the deficit, the long-term fiscal health of our entitlement programs — all of these would be easier to deal with if the public understood budgetary reality, instead of thinking we can solve all our problems by enacting the Buffett Rule and relishing its $3.6 billion per year in revenue. Projected deficit for 2013: $900 billion.

And when "X" is an unpopular but probably necessary reform to keep entitlement costs from exploding, I don't know how many "political courage" points you should get for declaring that you're only willing to support it if you get what you originally wanted, which is even more tax hikes.

Oh, and listing an idea as an option on page 34 of the budget report barely counts as "support," although I suppose we should be thankful it wasn't relegated to a footnote.