This has been President Obama’s preferred option, and so far he appears to be sticking with it, even though House Speaker John Boehner (R) of Ohio late last week backed away from it because it calls for “job-killing” tax increases to help bring down the runaway US budget deficit.
This plan has something for everyone to love and something for everyone to hate. It would reduce the US deficit by at least $4 trillion over 10 to 12 years – by far the biggest bite out of the deficit of all the options. It would include spending cuts, tax increases (which Republicans detest), and cuts in the cost of entitlement programs such as Medicare, Medicaid, and Social Security (which Democrats abhor).
Once the “grand bargain” is struck, Congress would agree to raise the national borrowing limit, now set at $14.3 trillion, before Aug. 2, thus averting default. Fed Chairman Ben Bernanke said Wednesday that debt default would “throw the financial system into enormous disarray and have major impacts on the global economy.”
The sticking points: Republicans oppose any tax hikes, and Democrats are blocking benefit cuts to Social Security and Medicare, especially if tax breaks for the wealthiest Americans are off the table. Republicans say Obama also refuses to consider cuts in his signature health-care reform law, which Republicans have vowed to defund.
“The president and I agree that the current levels of spending, including entitlement spending, are unsustainable,” Mr. Boehner said July 11. “The president and I do not agree on his view that government needs more revenues through higher taxes on job creators.” Moreover, spending cuts must be bigger than any increase in the debt limit, he said. And measures to restrain future spending must be part of the deal.
Meanwhile, Obama persists in his pursuit of the grand bargain because it is an “opportunity to do something meaningful on debt and deficits,” he said at a July 11 press conference. “Now is the time to deal with these issues. If not now, when?”