There are basically two ways to reduce a deficit: the government can bring in more money or spend less money. Historically, every deal ever struck in Washington has offered some combination of the two.
Republicans have been cagey lately about how they define “tax increase,” but they’ve said repeatedly that they want a massive debt-reduction plan in place that deals exclusively with one side of the budget ledger. This morning, two leading Democrats said if there’s going to be a deal, it’s going to have to need at least some balance.
As Sen. Chuck Schumer (D-N.Y.) told reporters this morning, “There needs to be revenues in any deal.”
What kind of revenues? The Democratic plan appears to be taking shape.
Democrats want to close tax loopholes that benefit oil companies, and eliminate a tax preference that gives corporate aircraft a friendlier depreciation schedule than commercial aircraft. Additionally, Van Hollen said, Democrats were proposing to phase out tax deductions and certain credits for people making more than $500,000 a year. These would be paired with a reduction in the tax burden on lower earners, by eliminating existing limitations on their deductions.
“Folks with over $500,000, we’re going to phase out your deductions and some of your tax credit,” Van Hollen said.
“The message Republicans sent was…unless we accept their lopsided approach…they’re prepared to tank the economy,” Van Hollen said.
Republicans have to hope the debate over details doesn’t reach the public, because the Democratic approach would likely be pretty popular.
But I just want to emphasize again that the Republican approach, on multiple levels, is like nothing we’ve ever seen. Not only has a major party never threatened to crash the economy on purpose as part of debt talks, but no debt-reduction plan has ever categorically ruled out additional revenue.
Indeed, the whole point of bipartisan talks is to find a balance — have some more money coming in, less money going out, and arguing over the ratio. Republicans are saying, in all seriousness, that this balanced approach, embraced by policymakers on both sides for generations, is somehow a radical new extreme.
Their argument is so absurd, the fact that they’re not simply laughed out of the room is itself rather remarkable.