Among the highlights: It would promise to raise new revenues by closing tax loopholes but not raise any tax rates, and it would set goals for spending cuts by simply choosing a number halfway between what Democrats and Republicans have proposed in the past.
The offer would reduce America’s debt and deficit by $2.2 trillion during the next decade. Including figures that the White House often uses in its deficit proposals – interest savings and the reduced government spending from last year’s Budget Control Act – the savings would reach $4.6 trillion.
Is the offer serious?
At this point, the who-blinks-first negotiating game is still in full swing, but the proposal does cross a Republican Rubicon with its willingness to raise some $800 billion in higher tax revenues. It does not lay out specifically how those revenues are to be achieved but suggests they will be obtained through reducing tax preferences and loopholes during a reform of the tax code next year.
“It’s not as if we haven’t learned anything from the conversations of the last 15 months,” said a senior GOP aide, who gave a background briefing to reporters on condition of anonymity. “We know that they are not going to accept the type of structural reforms to the entitlement programs or other spending reductions without revenue. So, we are prepared to concede on that point.”
On spending cuts, the proposal aims to split the difference between Republicans and Democrats by turning to an idea forwarded by Erskine Bowles, the Democratic co-chair of the president’s own commission on the debt. In testimony to Congress last year, he suggested averaging Republican and Democratic numbers to find middle ground.
In that vein, the deal lays out $1.4 trillion in spending cuts, including $600 billion from health programs, $300 billion from discretionary spending, $200 billion from altering a government formula key to calculating a wide array of benefits, and $300 billion from other mandatory savings.
“The Bowles plan is exactly the kind of imperfect but fair middle ground that allows us to avert the fiscal cliff without hurting our economy and destroying jobs,” according to the formal offer, which was delivered to the White House as a letter from seven top Republican leaders, including House Budget Committee Chairman Paul Ryan.
Republicans pushed back against President Obama's insistence that Congress raise tax rates on the wealthy by year's end. Indeed, they were unbending on the idea of raising tax rates at all.
“In our opinion, how you raise revenue is important – which is why we have been very frank and adamant against raising rates,” said a senior Republican aide.
Regarding closing tax loopholes, they said such new revenues – as well as entitlement reforms – should be considered more fully as a part of deliberations with Democrats next year.
“We will have to figure out a way to work with them … to lay out a way to structure this so we are both moving forward – revenue and entitlement changes … are moving forward at the same pace,” said a senior Republican aide.
There are “ample savings” within the offer to undo the budget-cutting “sequester” – the $109 billion in automatic spending reductions that hit both defense spending and social programs alike, the Republican aide said.
What isn’t in the plan?
A solution to the “debt ceiling,” for one. The US stock market tumbled during the debt-ceiling scrum in 2011, and congressional approval ratings crumbled. The much-loathed sequester was part of Congress's compromise solution. The government is expected to hit that higher debt ceiling within the first three months of 2013.
The Republican offer also does not address two perennial Washington issues – the so-called “doc fix” of Medicare reimbursement rates and the Alternative Minimum Tax (AMT), which would hit some 30 million Americans (instead of the current 4 million) without a fix.
What’s next? The ball, Republicans said, was in the White House’s court. Asked if he might talk to the president about the offer at a White House Christmas party this week, House Speaker John Boehner (R) of Ohio smiled and offered simply: “I might run into him. I don’t know.”