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Specifics in Debt Limit Deal Pretty Minor

The Biden debt limit talks seem to be moving toward some specifics, based on published reports. They are in line with what Eric Cantor offered a couple weeks ago when he essentially gave up on moving Medicare in the direction of the Ryan budget.

People familiar with the negotiations led by Mr. Biden say they are looking at cuts to agriculture subsidies and federal retirement programs, stepped-up antifraud efforts, increased premiums for pension plans backed by the Pension Benefit Guaranty Corporation and the sale of wireless spectrum and government properties.

The talks are at an early stage and potential areas of agreement are preliminary, officials warn. But Democrats have not ruled out some thorny issues, according to people familiar with the negotiations, including reforms to the pension program for federal workers.

The areas being examined amount to a sliver of the $4 trillion goal officials have set for deficit reduction over the next 10 years.

“Sliver” is being generous. I don’t agree with cutting federal retirement plans or adding pension contributions, but you couldn’t get much more than $100 billion out of that. Selling spectrum and government properties are one-time events that will generate far less than that. Ag subsidies of the kind that Republicans would allow to expire are relatively minor. And anti-fraud efforts sounds like a classic Washington solution, and by the way the fraud prevention would have to be funded to begin with.

As for the tax conundrum, Jim Clyburn, a member of the deficit talks, says that tax loopholes are being targeted, but not rates:

“If you’re closing loopholes, I don’t think that you’re increasing taxes. And the American people want us to close up these loopholes,” Clyburn said on MSNBC. “They want everybody to put skin in the game, and I think that’s where we’re headed.” […]

Clyburn disputed the notion that these would constitute tax hikes.

“You call them tax increases, we call them eliminating subsidies and really having an effective tax collection,” he said.

Keep in mind that closing loopholes sounds great and pristine when you have staffers in a room writing the policies, before lobbyists get their hands on them and find new loopholes where the others left off. It’s just not that durable a solution.

What this appears to be drifting toward is a “down payment” of $200 billion or so in cuts from the above-mentioned provisions, and then a cap of some kind, which the CBO would at least score as a reduction, since it supposedly mandates reductions in spending or tax increases if the cap is not met. But this Congress cannot bind the hands of future Congresses. A cap of this kind is more of a wish and a hope. They’re non-specific, which allows for maximum back-patting and minimum actual choices. And when the choices have to be made, frequently they get sidestepped.

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David Dayen

David Dayen

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