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More on the Medicare-for-Revenues Swap Floated in Debt Limit Deal

Last week I noted that Max Baucus gave away the endgame in the debt limit talks – aside from the $1.5 trillion or so in spending cuts already agreed to, further cuts to Medicare would have to be teamed with co-equal increases in revenue. This would destroy the competitive advantage for 2012 by giving Republicans a get out of jail free card for their Medicare-ending budget. Instead, Republicans would excoriate their opponents for this new round of cuts to Medicare, something that won them the election in 2010 and which they continue to try in ads this year. It almost doesn’t matter what the substance of these cuts are; they will be spun by Republicans as “Medicare cuts that hurt seniors,” even though they would be voting for them as part of a deal. Indeed, the $500 billion in cuts through ending Medicare Advantage overpayments and other payment reforms, which were in the Affordable Care Act, are also in the Paul Ryan budget that almost every Republican voted for, but that hasn’t stopped the parade of accusations.

We got a little more information on the Medicare-for-revenue trade today from David Rogers.

For their part, Obama and Reid appear prepared to reach much higher, putting substantial Medicare savings on the table if Republicans would accept added revenues. With the House GOP leadership in New York, all of Monday’s White House maneuvering was Senate-centric. But Obama’s hope is that Speaker John Boehner (R-Ohio), with whom he met privately last week, will be intrigued by a bolder package that might also help neutralize the Medicare issue now hurting the GOP among elderly voters.

The Bush-era income tax rates would not be targeted. Instead, the focus would be more on corporate tax subsidies or capping deductions that most benefit the wealthy. Obama identified close to $760 billion in new 10-year tax revenues as part of his new budget “framework” in April, and the idea would be to pick from this menu and test the willingness of Republicans to consider this approach.

House Republicans have not outright rejected this approach. Much depends on the specific tax provisions that would be affected. But the GOP leadership already knows that it can’t expect to bring all its conservatives to the table, and if the package offered substantial Medicare reforms to help stabilize the program’s finances, it could be seen as a victory for the party.

It would be a victory for everyone but senior citizens, and would represent the last straw in the minds of many with the Democratic Party. You would almost have to be an asceticist to deliberately tank your own competitive advantage in this way. Apparently currying favor among the serious people means more than winning elections.

The greatest hope for the holding together of the safety net are Congressional Republicans, who don’t want this deal despite the political benefit, because they are dead-set against raising any revenues (I discussed what revenues are under consideration earlier) . That could lead to a much narrower deal that relies on triggers and enforcement mechanisms to arrive at the level of deficit reduction arbitrarily set as the marker.

Again, gridlock is the great friend of the average American. It’s also the great hazard, with the debt limit looming in a little over a month.

…from Bloomberg:

Making changes to Medicare, such as asking the wealthy to pay a higher price for their premiums, is one idea that has been raised. Democrats have long opposed such a change, arguing it would undermine popular support for the government-run health care program for the elderly.

Still, there are signs they may be softening, with prominent Democrats like Senator Dick Durbin of Illinois, who holds the party’s No. 2 position in the chamber, saying the issue needs to be on the table.

I don’t know what world they think they can make something like that work in politically.

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David Dayen

David Dayen