Grand Bargain Taxes, Entitlements Cuts Await Deal Makers

Photographer: Win McNamee/Getty Images

Rep. Paul Ryan, Chairman of the House Budget Committee, joins with other members of the committee as he departs a press conference at the Capitol where he unveiled his budget plan on March 12, 2013 in Washington. Close

Rep. Paul Ryan, Chairman of the House Budget Committee, joins with other members of the... Read More

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Photographer: Win McNamee/Getty Images

Rep. Paul Ryan, Chairman of the House Budget Committee, joins with other members of the committee as he departs a press conference at the Capitol where he unveiled his budget plan on March 12, 2013 in Washington.

Some of the elements of a budgetary “grand bargain” will be on the table today. Merging them is the biggest political challenge in the U.S. Capitol.

Senator Patty Murray, a Washington Democrat, will unveil her party’s fiscal 2014 budget, a plan generating almost $1 trillion in new revenue while protecting Medicare and expanding Medicaid health coverage for more low-income Americans, said a Democrat familiar with the proposal. It comes a day after House Budget Committee Chairman Paul Ryan, a Wisconsin Republican, offered his blueprint for balancing the government’s books in 10 years by cutting $4.6 trillion.

“If we pass our budget, and the Senate passes their budget, we have at least revived the budget process through which we can look for common ground,” Ryan said today on MSNBC’s “Morning Joe.”

Lawmakers in both parties are waiting to see whether President Barack Obama, who begins two days of meetings with congressional Republicans today, will chart a compromise for those competing visions or side with the Democrats as he pushes for a grand-bargain budget settlement this year.

“That’s the big question that Washington is waiting to see,” said Bob Bixby, executive director of the Concord Coalition, an Arlington, Virginia-based group pushing for smaller deficits. “There is hope for some sort a deal in the coming months,” though “it might not be as grand a bargain as some of us would like.”

‘Bigger Role’

By waiting until next month to propose his own 2014 budget request, the president is able to “play a bigger role as a mediator” between the two sides of the congressional debate, Bixby said in an interview.

“Right now, what I’m trying to do is create an atmosphere where Democrats and Republicans can go ahead, get together, and try to get something done,” Obama said in an interview broadcast today on ABC’s “Good Morning America.” “But ultimately, it may be better if some Democratic and Republican senators work together.”

While the House and Senate seek to craft a temporary spending plan by March 27 to avert a government shutdown, the urgency for a broader agreement on spending and taxes is fueled by the expected need to raise the federal debt limit in May.

Medicare Eligibility

In a meeting yesterday with Senate Democrats, Obama was noncommittal when asked whether he would resist raising the eligibility ages for Medicare or Social Security, Iowa Senator Tom Harkin told reporters. “I didn’t hear a commitment” to preserve the Medicare (USBOMDCR) eligibility age of 65, Harkin said.

Asked about accepting a change in the formula for calculating cost-of-living increases in entitlement benefits, the president told lawmakers that “things were open for negotiation,” Harkin said.

During the meeting, Obama said he hoped that Congress would “reach some kind of grand bargain” on spending, entitlements and revenue, Harkin said. He and several other Democrats urged Obama to avoid “some kind of grand bargain that pulls the rug out from under the elderly, or our sick, our needy.”

Louisiana Senator Mary Landrieu, a Democrat, said Obama “was very optimistic about working with Democrats and Republicans to give the country a path forward for growth.” Still, the House and Senate plans present “a very stark choice,” she said.

Tax Increases

The Senate Budget Committee plans to spend today and tomorrow working on its plan. The starting point includes $1 trillion in additional tax increases for the wealthy and corporations over the next 10 years, $500 billion in domestic budget cuts and a $240 billion reduction in projected defense spending, according to a Democrat familiar with the plan.

“My goal is not to chase a balanced budget just for the sake of balance,” Obama said in the ABC interview. “My goal is how do we grow the economy, put people back to work. And if we do that, we’re going to be bringing in more revenue.”

The difference between the Republican and Democratic approach to budgeting is highlighted by how each would allocate added revenue coming from elimination of tax exemptions.

Ryan’s plan would use new revenue to lower tax rates for individuals and corporations as part of a broader tax overhaul. Murray’s plan would apply savings from ending tax breaks toward $1.85 trillion in deficit reduction over a decade, said the Democrat familiar with it, speaking on condition of anonymity.

‘Distinct Contrast’

“It’s a very distinct contrast,” said Idaho Senator Mike Crapo, a Republican member of the Senate Budget Committee. “It’s discouraging that we are continuing the age-old debate over whether to tax and spend or whether to put into place the kinds of spending restraints that will get us on a pathway to a balanced budget and the kind of tax reforms that will create a pro-growth economy,” he said in an interview.

Obama told Senate Democrats that a bigger deal on spending and entitlements is the only way to end the automatic spending cuts that started on March 1, Harkin said. Those cuts, known as sequestration, take $85 billion from the current fiscal year. In all, $1.2 trillion would be cut over nine years.

The Senate this week is considering a bill extending the government’s spending authority after its March 27 expiration. The measure introduced by Senate Appropriations Committee Chairwoman Barbara Mikulski, a Maryland Democrat, would give the Defense Department and six other Cabinet-level agencies flexibility to implement the cuts. It also would continue to freeze the pay of government workers through Dec. 31.

Election Argument

Democrats maintain that Obama’s 2012 re-election victory over Republican challenger Mitt Romney turned largely on winning the argument over government spending, taxes and the future of Medicare and other entitlements.

“We have really good common ground with the American people” with a budget that “does a good job of balancing our economy and creating jobs” and “responsibly” cutting the deficit, Murray told reporters.

Ryan’s budget plan contains elements that Democrats are committed to opposing. It assumes that a Democratic-controlled Senate would go along with a House Republican plan to repeal the 2010 health-care law, which is set to be fully implemented next year. It would partially privatize Medicare (USBOMDCR) by giving future recipients -- those now younger than 55 -- a choice to buy private insurance with a government subsidy.

Republicans will continue to push their spending- and tax- cutting agenda though they lost the presidential election and Democrats gained a bigger majority, said Ryan, his party’s vice presidential nominee last year.

“This is our offer,” Ryan told reporters yesterday. “This is our vision.” As a party that controls the House, he said, “what you do is you actually show that country what you believe in.”

To contact the reporters on this story: James Rowley in Washington at jarowley@bloomberg.net; Roxana Tiron in Washington at rtiron@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net

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