President Obama unveiled his “deficit reduction” package yesterday, and it has drawn scorn from Republicans and praise from Democrats. The President proposes “savings” of $3.61 trillion, which would include $1.5 trillion in additional revenue, principally from tax code changes that would force top earners to pay more. An additional $1.1 trillion comes from the anticipated draw-down of troops from Iraq and Afghanistan, $570 billion in cuts to programs, principally Medicare and other health care spending ($248 billion), but inclusive of changes to federal workforce pension rules, and other governmental changes. The President also counts about $430 billion in interest savings from his proposal. Against that $3.61 trillion the President proposes to fund his American Jobs Act at $447 billion, bringing the deficit reduction package to $3.2 trillion.
So the Republicans are howling, and if the truth be told this package will not be where we end up. But the President has finally realized that negotiating with yourself does not work, and he is not giving away anything up front. The Medicare changes are minor, and Social Security is left untouched. Either Republicans get serious about a real grand bargain on deficit reduction, or they will be forced to eat the expiration of the Bush tax cuts. The President mocked Speaker Boehner for his earlier statement that the President should not insist on a “my way or the highway approach” while later saying (in the same speech) that any revenue increases were off the table, take it or leave it.
If the President plays hardball then he is holding some big cards, including the prior mentioned Bush tax cut expiration. Obviously the move is a political one, and in and of itself will bring no progress. But it will certainly get his negotiating partner’s attention, and for once it will be decision time for Republicans, and not Democrats. This is not the endgame, but the opening salvo.