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Medicare Benefit Cuts, Tax Hikes Taken Off Table in Dwindling Debt Limit Talks

Both sides played one of their cards in the battle over the debt limit and a deal on the nation’s budget deficit today. First, Senate Minority Leader Mitch McConnell told National Journal that there will be no tax increases in any deal that results in an increase in the debt limit. He also spelled out what the deal would look like in his perfect world, and even managed to offer some political advice to the President.

“I can say pretty confidently, as the speaker has, that we are not going to raise taxes in this agreement,” McConnell told National Journal during a lengthy interview in his Capitol office. “And what the president ought to say to his own political left is, ‘Those crazy Republicans won’t let me raise taxes, but we need to do this for the country.’ That would be my advice to him. I’m not his political adviser.” […]

McConnell told NJ for the first time what the deal needs to look like. He said that there’s not enough time to consider comprehensive tax reform and that he wanted spending caps for eight years of any 10-year deal to resemble those created in the mid-1980s by the Gramm-Rudman-Hollings legislation.

“We would have to do something significant. A top-line for at least ’12 and ’13 on our annual discretionary spending that continues to send spending downward,” McConnell said. “Caps beyond that; it’s better to have them than not. Out-year caps are worth having, even though we all know some people view those as a promise to something someday maybe. But the next two years would be clearly real and enforceable.” […]

“Out of this debt-limit discussion we need entitlement changes. I’m not going to get into what kind,” he said. “But we need entitlement changes that bend the trajectory significantly downward. I’m not going to negotiate the details of that with you, but this whole package would have to be viewed by Moody’s and Standard and Poor’s and foreign countries and the American people.” He said that the changes need to be dramatic enough to convince everyone that Washington is serious about the problem, “that adults are in charge in Washington and we’re going to get our house in order. We’re talking here about trillions, not billions.”

The demands on entitlements are actually less stringent than McConnell’s prior remarks, which demanded cuts to Medicare. Senate Democrats slammed the door shut on that today, sort of, by saying that benefit cuts would not be allowed. Other cuts, along the lines that Democrats have already described, such as the kind of cuts to corporate welfare in the Affordable Care Act, or allowing Medicare to negotiate for prescription drugs, or moving dual eligibles to Medicaid, could be part of a deal. But benefit cuts are straight out.

“Three weeks ago Leader McConnell proclaimed he would not support a debt ceiling agreement unless it included cuts to Medicare, but he refused to specify what types of cuts he had in mind beyond the House-passed plan that would end the very program as we know it,” said Sen. Chuck Schumer (D-NY). “So Senator McConnell is saying if he can’t get the full Ryan plan, he at least wants a plan that makes major cuts to seniors’ benefits. Basically he’s saying if he can not dismantle Medicare all at once, he wants to do it in pieces.”

Schumer, joined by Senate Majority Leader Harry Reid (NV) and DSCC chair Patty Murray (WA) said Democrats could support more Medicare savings along the lines of those in President Obama’s health care law — cuts which Republicans attacked to great political advantage during the 2010 midterm campaign. But no benefit cuts.

So there you have it. One side says no tax increases whatsoever; the other side says no benefit cuts to Medicare. The deal will have to come from appropriations, or possibly Medicaid, although 41 Democrats have vowed not to vote for any crippling of that program.

If these debt limit negotiations are political theater, and I actually think they are, everyone’s doing a good job of acting.

UPDATE: Of course, there’s also this:

Yes, it will be raised, Donohue answered, mainly because the country can not afford to not pay its bills. To those newly-elected representatives who say they aren’t going to raise the debt ceiling and will shut down government, Donohue said the U.S. Chamber has its own message: “We’ll get rid of you.”

He then went on to praise U.S. House Speaker John Boehner for his Congressional leadership.

“He’s growing into his shorts,” Donohue said. “He’s put on his big boy pants.”

One cannot know how serious Donohue is being about this. And I’m not sure there’s a group of pro-debt limit Republicans the Chamber can just take off the shelf to beat the more intransigent members. But it’s worth noting.

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David Dayen

David Dayen