Ugh. What a day today. Not much time to blog. I’m cooking up a post for the weekend, but I’ll pre-season it with Ezra Klein’s wonkbook from this morning:
The Biden group is readying itself for the final sprint towards a debt deal. “Now we’re getting down to the real hard stuff,” Biden told reporters. “I’ll trade you my bicycle for your golf clubs.” The hope is to get to $4 trillion in deficit reduction eventually, and at least $2 trillion in the deal to raise the debt ceiling. But perhaps the strongest sign that they’re likely to succeed isn’t coming from inside the room, but from outside of it.
Earlier this week, Senate Republicans voted to close out some ethanol subsidies in the tax code and use the savings to reduce the deficit. That was an explicit signal that they’re willing to increase revenues so long as the mechanism is closing loopholes, ending tax breaks and shaving expenditures. Now, it’s a lot easier to close $6 billion of reviled energy subsidies than raise hundreds of billions in new revenues by attacking popular tax breaks like the mortgage-interest deduction. But it’s at least clear we can now move onto that discussion.
Meanwhile, AARP has quietly dropped their blanket opposition to Social Security cuts. The reason? They figure they’re inevitable. “The ship was sailing,” John Rother, AARP’s policy chief, told the Wall Street Journal. “I wanted to be at the wheel when that happens.” That makes it much likelier that Social Security will see reform later this year. But perhaps more importantly, it shows that the major players in Washington are entering dealmaking mode. And that’s usually a pretty good predictor that some deals are about to be made.
This is good news. The goal of $2 trillion in budget closing has apparently been met and they’re eyeing off $4 trillion. I’m also glad the GOP is showing some flexibility in taxation, which is a tribute to Tom Coburn. I love having taxes low but I love low deficits more. And closing loopholes and credits is the best way to increase revenue. It doesn’t raise marginal rates and it broadens the tax base, making us less susceptible to huge swings in revenue. And if the economy picks up, it could set the table for a broader overhaul of the tax system that could dramatically reduce the deadweight loss.
If ethanol and Social Security are on the table, we’re looking good. Both of these have powerful interests behind them. The only way to stand up to them is to get both parties in on it, so that neither can demagogue. Let’s hope we see yet more sanity emerge.