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Grand Bargain Republicans Take Tax Increases Off the Table

You may have heard about the power play by leading Senate Democrats to stop Dick Durbin from negotiating on Social Security in the “grand bargain” Gang of Six talks. But there was also some power play action on the right as well, between the anti-tax movement leader Grover Norquist and the Republicans negotiating on the bargain. Norquist reminded them that any tax increases, even as part of a larger bill that would cut spending, would be seen as a violation of the anti-tax pledge. The response was genuinely puzzling. Tom Coburn, Saxby Chambliss and Mike Crapo told Norquist that “the solution to our economic and fiscal problems will be based on spending reductions and economic growth.” They claimed that tax increases hinder that growth, and as a result, they only support revenue increases that come as a result of growth projections, not from increases in tax rates. They point to the effort to broaden the tax base and lower the rates, but basically say that will not result in raw tax increases. The government might collect more revenue, but only because it’s growing faster.

Ramesh Ponnuru writes that “It is hard to believe (a) that tax-policy changes would generate as much increased growth and thus revenue as the dealmakers are aiming for or (b) that Democrats would ever sign a deal that includes no net tax increases and large reductions in planned spending.” Well, yes. So this is one of two things. Either Coburn, Crapo and Chambliss are lying – by attributing tax increases to increased growth – or they are playing the Democrats on an epic scale.

I have to say, the latter looks like what’s happening here. The Democrats are as terrified of raising taxes on anyone making under $250,000 as the Republicans are of raising taxes on the rich. So a grand bargain that even hints at tax increases will have negative reactions from almost all Republicans and probably a good number of Democrats. Remember, the Administration’s first offer on corporate tax reform was a revenue-neutral approach. This “but it’s not tax increases, it’s revenue from increased growth!” nonsense isn’t going to fly with the Republican base, either. In addition, nothing in the history of the three Republicans suggests they would bend in any way on tax increases. Two of them took a free vote in the cat food commission that got us to these talks, where they can now pull the rug out from tax increases.

So when you take all that in, you have a set of talks where tax increases are increasingly off the table, while massive cuts in spending and even Social Security remain on. And of course, the entire plan is pretty much imaginary, because it binds future Congresses with automatic triggers and other measures that future Congresses can simply reject.

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David Dayen

David Dayen