As President Barack Obama and Republican leaders encourage each other to “do something big” on lowering the deficit, Time’s Jay Newton-Small explains what such a “grand bargain” might entail.Obama is already giving in to Republican demands for steep spending cuts that will form the backbone of a deal to raise the debt limit, even agreeing to steep cuts on the “delivery-side” of Medicare and Medicaid.
The fate of the “grand bargain” rests with Republicans, as Obama’s cuts are conditional on there being at least some revenue increases in the final deal.
The GOP remains unmoved in its opposition to any tax increases — with most lawmakers also opposing any revenue increases.
If Republicans can move past a few hundred billion dollars of cuts to corporate subsidies — which is an open question — then a “grand bargain” might just be in reach.
- $1-1.3 trillion in cuts to discretionary spending, including $400 billion from the Pentagon’s budget
- $150-275 billion: cuts to farm subsidies, spectrum sales and other mandatory spending, such as requiring federal workers to put in more toward their pensions
- $200-$400 billion: cuts to Medicare and Medicaid providers
- $325-$350 billion: interest savings
Total: $1.7 trillion to $2.3 trillion
- $290 billion: capping mortgage and charitable deductions at 28% for individuals who make more than $200,000, or couples who make $250,000
- $60 billion: eliminating last-in-first-out (LIFO) accounting for businesses
- $45 billion: eliminating oil and gas subsidies
- $20 billion: treating as regular income the “carried interest” rate most hedge fund managers are taxed at
- $3 billion: eliminating tax breaks for corporate jet owners
- $2.5 billion: eliminating ethanol subsidies
- $1 billion: eliminating tax deductions for yachts and vacation homes
- $162 million: eliminating tax break for racehorse owners
Total: $422 billion
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