December 3, 2012

John Boehner, and the entire House leadership, including Budget Committee Chair Paul Ryan, have now put something resembling an offer on the table in the fiscal cliff talks, in the form of a letter to the president.

Is it a real offer? Maybe.

Here’s the deal. Boehner’s letter really boils down to following a framework that Erskine Bowles informally argued for a while ago (not the formal Simpson-Bowles commission plan). On top of the savings in last year’s debt limit deal, Boehner calls for $900 billion in entitlement cuts; $300 billion in discretionary spending cuts; and $800 billion in new revenues “generated through pro-growth tax reform that closes special-interest loopholes and deductions while lowering rates.”

Boehner and the Republicans specify nothing about where those cuts would come from. Following Bowles would mean some $600 billion in Medicare cuts, including raising the eligibility age and $300 billion in other mandatory program cuts, from things such as farm programs.

At least this puts Republicans on the record asking for something, which beats demanding that Dems propose every unpopular part of the deal. However, the key to whether this is a real offer or not is on the revenue side.

First: it’s extremely difficult, perhaps impossible, to generate $800 billion in real new revenues given that Republicans would not only keep the low Bush-era rates on everyone but actually lower them further. And second: it  is impossible to draft such a massive overhaul of the tax code in the next several weeks, meaning some sort of mechanism would be necessary to guarantee that the revenues would really materialize. Another key question: Are Republicans asking Dems to temporarily extend all the Bush tax cuts for, say, a year while all this is worked out?

Now, perhaps Boehner’s letter will be backed up with further details, which will make it into a real offer. Moreover if — if! — the revenues here are real, then it’s certainly news that the entire GOP leadership is publicly committing to those revenues. On the other hand, the wording certainly makes it possible that all they are really accepting are fictional revenues magically generated (that is, not generated at all) by tax reform.

Real negotiations require both sides to put real proposals with real numbers on the table. Even if it has no chance of getting Republican support, Barack Obama’s proposal did this. The Republican proposal hasn’t — so far. It is possible that it is a real offer. But the key here is really very simple: are they willing to commit to real revenues or not? We’ll need more than this letter alone to find out.