Trial Balloon on Deficit Cuts: Cut Defense Spending Instead of Increasing Taxes on Wealthy

Republicans Signal Willingness to Compromise with Republicans

As details emerge from the closed, private deficit reduction meetings between Democrats and Republicans, (in Washington, is anything ever kept secret?) Republicans are exploring cuts in the Defense Department as a way of keeping out increases in taxes on wealthy Americans.  Based on reports in the Washington Post and others, here is what is known at this time.

1. The planned spending cuts would take place over 10 years.

2. The Democrats have offered $1.3 trillion, or $130 billion per year, the Republicans want $1.7 trillion or $170 billion per year.

3. Republicans are saying that “everything is on the table” meaning everything they want is on the table.  Tax increases on wealthy Americans are not on the table.  The term “everything” for Republicans does not mean “everything”.

4. Defense cuts of an unknown amount might be offered by Republicans in place of any tax increases.  These cuts would be very small relative to the overall package.  The WP article touts a Republican program that saved $100 million, which is great but $100 million is less than one hundredth of 1% of the deficit.

5. $60 billion in savings from ending ethanol subsidies could be included.  However, the program will expire at the end of this year anyway, so this is a freebie for both sides.

6. A tax change in inventory valuation (presumably ending LIFO for you tax accounting geeks) could generate another $7 billion a year in savings.  Wow!

For Republicans, we finally get some true insight into what they really want to cut.

But House Majority Leader Eric Cantor (R-Va.) pressed for as much as $1.7 trillion in cuts. And he wanted an overall cap on spending that would leave the door open to slashing the entire sum from domestic programs -- such as education, food safety, health research and criminal justice – when lawmakers draft spending bills next spring.

Yes, that is education, food safety, health research and criminal justice (criminal justice is a nice way of saying catching bad people and locking them up).  All sacrificed in the name of preserving low taxes for the wealthiest of Americans.

For Democrats we see the beginning of their looking for a face saving way out of not having any revenue increases to close the deficit. A miniscule cut in Pentagon spending is now on the table.  Good luck with that boys and girls.

Oh, and the debt ceiling increase is only good for about a year and a half.  That’s right, at the end of next year we get to go through this all over again. 

 Anyone looking forward to that?