The GOP’s idea of a debt deal

As far gone as they are, congressional Republicans at least seem to understand that Democrats will not accept a spending-cuts-only debt-reduction deal. Dems aren’t known for being tough negotiators, but they’re not that bad.

With this in mind, GOP leaders have been crafting a proposal that they consider more balanced — at least by Republican definitions of the word.

Republican members of a Congressional panel seeking ways to cut the federal budget deficit indicated on Monday that they might allow some additional tax revenue as part of a deal with Democrats.

The Republicans met Monday to consider a proposal that would raise additional revenue by limiting some income tax deductions that primarily benefit higher-income households. […]

Under the proposal, Republicans would agree to limit certain itemized tax deductions in return for a permanent reduction in marginal tax rates. This would not just extend the 2001 and 2003 tax cuts, but reduce the rates that apply to each additional dollar of a taxpayer’s income.

There’s simply no way Democrats can take this offer seriously. Republicans are using this offer to effectively say, “See? We’re open to new revenue, which proves we’re not crazy,” but even GOP leaders have to realize how weak a con this really is.

Here’s how the Republican plan would work: they would accept some new revenue by agreeing to eliminate some tax expenditures, including, by some accounts, mortgage-interest deductions on second homes. Exactly how much revenue would the GOP be prepared to accept? That’s still unclear, but all of it would come from limiting tax deductions, and none of it would come from actually increasing anyone’s taxes.

In exchange some undetermined amount of revenue, Democrats on the super-committee would be expected to accept massive spending cuts, including cuts to entitlements, and Dems would have to agree to make all of the Bush tax cuts permanent.

That’s just crazy. The Bush-era tax rates are due to expire at the end of next year; why in the world would Democrats give up their only leverage, in exchange for a few eliminated deductions? As Jon Chait explained yesterday:

The Bush tax cuts are scheduled to expire at the end of next year. This is a huge amount of leverage for Democrats — unless the House, Senate, and president can agree, taxes will return to Clinton-era levels at the beginning of 2013. The Republicans want to stop that from happening. The deal leaked [by Republicans] is that they will agree to reduce some tax deductions, in return for which Democrats will agree to make the tax cuts permanent, in return for which Democrats will also agree to reduce entitlement spending.

Anybody see a problem with this deal? Yes: Democrats would be giving away an enormous amount of future leverage. Passing a bill to raise revenue is extremely hard. Passing any bill is extremely hard. When you stand to gain from nothing happening, you’re in a very strong position. Republicans used that leverage during the debt-ceiling fight — doing nothing meant the credit markets imploded, the economy melted down, and everybody started hating President Obama even more. That’s why Obama made a deal. Now “doing nothing” means the Bush tax cuts disappear. Democrats have no reason to give that away.

And while this is probably obvious, I’d also ask why any sane person would believe it makes sense to work on a debt-reduction deal by approving massive tax breaks that make the debt much worse, not better? It’s almost as if GOP leaders aren’t really concerned at all about the debt, only care about tax breaks. That couldn’t be, could it?

The so-called super-committee has roughly two weeks remaining until their deadline. Given Republican refusals to consider any tax increases on anyone at any time, I don’t know of anyone on either side of the aisle who believes they can succeed.