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The ‘fiscal cliff’ offers: dueling White House and GOP perspectives

at 06:02 AM ET, 12/19/2012


Speaker of the House John Boehner (J. Scott Applewhite/AP)

“The President has put a balanced, reasonable proposal on the table that achieves significant deficit reduction and reflects real compromise by meeting the Republicans halfway on revenue and more than halfway on spending from where each side started.”

— White House Press secretary Jay Carney, statement, Dec. 18, 2012

There are some tentative signs that President Obama and House Speaker John Boehner might reach a deal that would blunt the impact of the so-called “fiscal cliff.” But, as always in these Washington negotiations, a lot depends on whether the two sides actually agree on the bottom-line numbers.

Thus we were struck by White House spokesman Jay Carney’s assertion that President Obama had met the GOP “halfway” on revenue and “more than halfway on spending.” How does the White House figure that — and does the GOP agree? Here’s what the two sides say, based on interviews with officials in both camps.

The Facts

We are going to get into a numerator-denominator problem fairly quickly because the two sides simply don’t start from the same place. And these are just the numbers — there may be real policy differences behind these figures.

Tax Increases

Obama version

Initial White House offer: $1.6 trillion

Initial GOP offer (Boehner Dec. 3 letter): $800 billion

Current White House offer: $1.2 trillion

The White House perspective: We have met them halfway!

GOP version

Initial White House offer: $1.6 trillion

Current White House offer: $1.3 trillion

Initial GOP offer: zero

Revised GOP offer (Boehner letter): $800 billion

Current (unofficial) GOP offer: $1 trillion

The GOP perspective: We have moved dramatically, while they have barely budged. The GOP values the White House offer at nearly $1.3 trillion because Republicans also count the revenue gain from shifting to a different inflation calculator known as chained consumer price index.

Much of the reporting on the chained CPI has focused on its potential to reduce benefits in programs such as Social Security. But the Congressional Budget Office estimates that the shift to a chained CPI also adds about $1 in revenue for every $2 in spending cuts, so spending savings of about $130 billion yields another $70 billion revenue.

(Note: White House officials do not count this revenue as additional tax increases because, from their perspective, the debate is over higher taxes for the wealthy. Chained CPI revenue, which affects all income groups, is simply a by-product of a Republican spending-cut preference and so shouldn’t count as part of the tax package, they say.)

Spending Cuts

Obama version

Initial Obama offer: $600 billion

comprised of:

— $350 billion in health-care entitlement cuts

— $250 billion in other mandatory cuts

Initial Boehner offer: $1.2 trillion

comprised of:

— $600 billion in health-care entitlement cuts

— $300 billion in other mandatory cuts

— $300 billion in discretionary spending cuts

Current Obama offer: $930 billion

Initial offer plus:

— $50 billion more in health-care cuts (total of $400 billion)

— $200 billion in discretionary cuts (split between defense and nondefense)

— $130 billion in benefit cuts because of shift in inflation calculator. (In doing so, the administration removed $50 billion from its original mandatory spending offer, so the total “other mandatory” is $330 billion.)

White House perspective: $930 billion is more than the midpoint of the two initial offers ($900 billion). Moreover, interest savings from reduced deficits would bring the total savings on spending to $1.22 trillion, thus just roughly equal to the tax increases. (The White House would also like to count the $1 trillion in spending cuts reached in 2011 during the debt ceiling fight, but Republicans have refused.)

GOP version

Initial Obama offer: $400 billion (net after spending increases)

Comprised of:

— $350 billion in health-care cuts

— $250 billion in other mandatory cuts

— $200 billion in stimulus spending increases

Initial Boehner offer: $1.35 trillion

Comprised of:

— $600 billion in health-care cuts

— $300 billion in other mandatory cuts

— $300 billion in discretionary spending

— $145 billion in benefit cuts because of the shift in inflation calculator

Current Obama offer: $850 billion (net)

— Revised offer from above of $930 billion, offset by $80 billion in infrastructure (stimulus) spending and unemployment insurance. (Obama cut his request for new spending from $200 billion to $80 billion, Republicans say; administration sources indicate the figure is more like $55 billion, for a net of $875 billion.)

GOP perspective: Obama has not met us more than halfway. Republicans view their initial spending-cut plan as a “middle-ground” offer, so they argue that Obama needs to move much more to make a deal.

(Note: White House officials dispute chained CPI being part of the initial Boehner offer since it was not listed in his Dec. 3 letter. However, a net $875 billion figure would be the exact midpoint of $400 billion and $1.35 trillion.)

The Bottom Line

We seemed to be headed to a solution in which an equal set of new spending cuts are matched by a similar size package of tax increases. With the Republicans now at $1 trillion in tax increases, they would argue the White House needs to cough up another $150 billion in net spending cuts. The White House would claim that they have already met that goal when interest savings are counted.

Given the distances the two sides have traveled, one would think the final numbers would be in reach. But not always. The last few miles are often hardest in any Washington deal, especially when the two sides are still arguing about where the journey started.

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    About the Blogger

    Glenn Kessler has covered foreign policy, economic policy, the White House, Congress, politics, airline safety and Wall Street.

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