America’s Collision Course With The Debt Ceiling
As the nation counts down to default, Diane talks to longtime Congress watcher Norm Ornstein about the debt limit negotiations, what's at stake and whether he sees a way forward.
Since 1921, the White House has been required to submit a budget. But this year marks the first time that Congress, not the president, will begin the budget process. Republican Congressman Paul Ryan offers his party’s budget today. His plan cuts overall spending by nearly five trillion dollars and transforms Medicare and Medicaid. The Ryan budget would also repeal the new health care law. Senator Patty Murray will offer a Senate Democratic version tomorrow, which is expected to call for higher taxes on the wealthy and corporations, and more spending on education and infrastructure. Diane and guests discuss competing visions for the federal budget.
MS. DIANE REHMThanks for joining us. I'm Diane Rehm. Today, Republican Congressman Paul Ryan proposes a 2013 budget that would cut spending by nearly $5 trillion over 10 years. His plan would turn Medicare into a premium support program and repeal Obamacare. Senate Democrats will unveil a budget tomorrow that has very different priorities. It calls for higher taxes on the wealthy and new spending for infrastructure and education.
MS. DIANE REHMHere in the studio to talk about two budget plans and prospects for compromise: E.J. Dionne of The Brookings Institution, Chris Frates of National Journal and Vin Weber of Mercury/Clark & Weinstock. That's a bipartisan public strategy firm. Of course, you are always part of the program. Give us a call, 800-433-8850. Send us your email to firstname.lastname@example.org. Follow us on Facebook or send us a tweet. Good morning, everybody.
MR. E.J. DIONNE JR.Good morning, Diane.
MR. CHRIS FRATESGood morning, Diane.
REHMGood to see you. Chris Frates, I'll start with you. Talk about this latest Ryan budget plan, what it says, how it differs from last year's version.
FRATESWell, sure. Well, I mean, this is a very big, complicated document that Chairman Ryan plans to unveil later this morning. The summary alone is 90 pages. So I got an early look at it last night. And the big takeaways here are that it balances the budget over the next 10 years, which is a shorter timeframe than some of the other balance budgets that the House Republicans have put out over the last few years, and it does that by cutting $4.6 trillion in spending. That's all cuts.
FRATESThere's no new taxes in the Republican plan. And the biggest way that it does that is it repeals Obamacare, completely gets rid of the entire program, and that's $1.8 trillion in savings. And some of the savings, it repeals, for example, the expansion of the Medicaid program for the poor and disabled. It eliminates the subsidies that would have help people pay for health care insurance in the new exchanges that it would set up.
FRATESThe second biggest cut that gets to a balanced budget is what they call mandatory spending, and that's $962 billion in cuts. And these affect a wide range of programs that the federal government must pay for, things like food stamps, federal civilian and military retirement, farm support programs, welfare programs, unemployment insurance, flood insurance, student loans, Pell grants, all these kinds of things -- very long list there. You know, the food stamps, it would turn it into a block grant.
FRATESAnd it calls for time limits and work requirements if you're on the food stamp program. Pell grants, for instance, the kinds of grants that college kids get, it would freeze the maximum amount they could get at $5,645. So that's -- the maximum amount you could get this year would be the maximum amount you could get for the next 10 years. Medicaid is the third biggest thing on the cutting block here.
FRATESThat's $756 billion, and it turns Medicaid from a program where the federal government covers about 57 cents of every dollar that's spent in that program into a block grant, a lump sum that would just be paid to each state. And then fourth is the Medicare cuts, and that's the big one. We'll hear a lot about this. They get $129 billion out of that program, and this is -- implements what Republicans call premium support but what a lot opponents will call the voucher system.
FRATESAnd it gives seniors a fixed subsidy and a choice whether they want to go on to the traditional Medicare program, or you'll use that subsidy to pay for other private insurance plans, and it will also means tax to seniors. So the wealthiest seniors would pay more than lower-income seniors. And then they also outline tax reforms. So those are kind of the five big ways that the Republicans balance their budget here, and that's what we're looking at.
REHMAnd not a single dime of new taxes?
REHMAll right. Now, give us a sense of how Patty Murray's Senate Democratic budget differs.
FRATESOK. And when I talked to the Senate Democrats up there, the sense is that there'll be $1 trillion in new revenue and $1 trillion in cuts. And they plan to unveil this plan tomorrow, so they'll come right after the Republicans.
FRATESAnd they've played their cards pretty close to their chest. But here's what, you know, I expect. I expect to hear a lot about a balanced approach. This is the Senate Democrats and President Obama's talking point here. And this means that they want a mix of spending cuts and tax increases to balance the budget. Budget Committee Chairwoman Patty Murray hasn't said it explicitly. But Senate Democrats I talked to say that they're not going to increase anymore tax rates.
FRATESWhat they're looking for is closing of loop holes, tax deductions, and that's in line with what President Obama has said. And, you know, one big loophole that the Democrats love to talk about is this corporate jet loophole. It was created back in the '80s, and it lets corporate jets be depreciated over five years instead of seven years, and it costs $300 million annually.
FRATESThey love it because it's an idea that, you know, if you want a corporate jet, you're very, very rich, do you really need this deduction? Those are the kinds of things that they're focusing on. They say that none of their cuts would affect beneficiaries. And they think because House Speaker John Boehner, during the fiscal cliff discussions at the end of last year, put $800 billion on the table in potential savings of loopholes and deductions that they can get there through those kinds of reductions.
FRATESPatty Murray will also reverse the so-called sequester, those very deep automatic spending cuts that went to effect at the beginning of the month through her budget. You know, Democrats will talk a lot about how that will help the economy. It will avoid, you know, 750,000 jobs that are predicted to be lost because of those spending cuts. And that is really what we should look for is Democrats talking about how their budget will help grow the economy, and the Republican's austerity is going to, you know, put a halt on any kind economic growth reasoning.
REHMChris Frates, if I were your professor, I'd give you an A-plus. I thought that was terrific.
REHMAll right. E.J. Dionne, why is Paul Ryan going back to Obamacare? Isn't that a settled issue?
DIONNE JR.Well, you know, when you look at the reports of the Ryan budget, it's like party like it's the day after the 2010 election and the 2012 election never happened. This is very conservative. Some of us might say reactionary budget. There are a whole bunch of things here that are going to raise questions. I think one is that he repeals Obamacare. And, by the way, the congressional budget office argues that a full repeal does not save money.
DIONNE JR.It actually -- if you repeal it, you add about 100 billion to the deficit. And I don't know where those numbers are now, but it's not clear that it saves you a dime. Secondly, Paul Ryan and Mitt Romney ran against the Medicare cuts in the -- in Obamacare in 2012. Republicans ran against the Medicare cuts in 2010. And, guess what, Paul Ryan pockets those very same Medicare cuts to help balance the budget.
DIONNE JR.This is, depending on your point of view, chutzpah, audacity or hypocrisy. We could debate which of those words is most appropriate. The other thing, I think, and it's -- this is the fundamentally conservative or right-wing nature of this budget. Ryan says he wants to get the top income tax rate down to 25 percent. He wants to cut -- you have two rates, 10 percent, 25 percent.
DIONNE JR.If you're going to do that, you need to be a magician or have Harry Potter's calculator, or you have to eliminate virtually every deduction for the middle class and make a lot of cuts. It's going to be very interesting. He's not going to come out with the details right away. He's leaving that to Dave Camp on the Ways and Means Committee. I have great sympathy for Dave Camp trying to make that one work.
DIONNE JR.And there were going to be deep cuts in programs for poor people. He talks about it as block granting. But there were going to be cuts in Medicaid, cuts in food stamps, cuts in Pell grants. In the last Ryan budget, the Center on Budget and Policy Priorities -- is a liberal group whose numbers are very respected, I think, across the board -- said that at least 62 percent of the Ryan cuts came from low-income programs. I'm very interested to see how this new budget is going to score.
DIONNE JR.So I just gave my dear friend Vin Weber a lot to talk about.
REHMAnd thank goodness, Vin Weber got here, so E.J. didn't have to give your side, too.
FRATESI was right to give your side as well.
MR. VIN WEBERHe certainly give (unintelligible) and he probably does it better than I do.
REHMSo, Vin Weber, what happened to the president's meal time coming together? What happened to the notion of we're going to find a way through this and compromise? This Ryan budget doesn't sound like compromise.
WEBERWell, I'm more optimistic than your question is and...
WEBER...maybe more than E.J. and Chris are in looking at this. I do not look at the process we're going through this week as a throwback or a continuation of the gridlock that we've been concerned about could end up in that. Paul Ryan has done his job. He's produced a document the House Republicans like. The good news is, in my judgment, tomorrow, Sen. Murray, a serious person chairing the Senate Budget Committee, is going to produce a Senate document.
WEBERThat's a big change in the process from what we see in the last freeze. We're going to have these two competing and, no question, conflicting visions from Republicans and Democrats. And the first look of that is going to be, my gosh, they're so far apart, how can they ever come together? Well, but you have to start some place. And in the past, we really never began that discussion. So in my view, I think it's going to be tough. I'm not Pollyannaish about this.
WEBERBut the way I look at it, and I'd be interested if Chris and E.J. don't think the same way about this, but we've tried super committees. We've tried Gangs of Six. We've tried summits between the speaker and the president, and it hasn't worked very well. We've gotten, you know, sort of fits and starts, and we've gotten to some significant deficit reduction but not in a ways that anybody like it. What we have the opportunity to try now is regular order.
WEBERThe Senate produces a budget. The House produces a budget. They get together in a room. One of my best -- better friends, Bill Hogan, one of the best budget analyst of this town, says, if we get Patty Murray's committee and Paul Ryan's committee together, we should sell tickets at the Verizon Center. But it's a start, and there are two serious people who could lead us to something.
REHMAll right. Vin Weber is former Republican member of Congress representing Minnesota's 2nd district. Short break here. We'll be right back.
REHMAnd welcome back. Here in the studio with me: Chris Frates, he's national correspondent for the National Journal, Vin Weber, co-chairman of Mercury/Clark & Weinstock. That's a bipartisan public strategy firm. And E.J. Dionne, he's senior fellow at The Brookings Institution, author of "Our Divided Political Heart: The Battle for the American Idea in an Age of Discontent." Before we go any further, I want to ask you, Chris Frates, about the deficit idea, the deficit reduction, how important does it seem to be to Americans now.
FRATESI think it's been very important, and part of the reason that we've seen this issue leap to the forefront was the presidential campaign. And you saw that both sides put out their vision and talked about this problem. Generally, the deficit is not something that rates with people, and it has rated these last few years. And we had a political battle over that both in the presidential and the congressional races.
FRATESAnd when you look at the polling, it still is at the top when it comes to things people are worried about. And what's also interesting if you dig down into that polling is that the president's approach, this idea that a tax increases on the wealthy combine with spending cuts tends to be more popular than the idea of just slashing programs.
FRATESBecause while everybody says, it's great, let's reduce the deficit, once you start reducing their programs, whether they're seniors on Medicare, whether they're food stamp recipients, whether they're people who just depend on a government service, that number plummets. It's, let's balance the deficit, but don't do it out if my pocket. And that's the problem.
REHMExactly. Vin Weber, just before the break, you heard E.J. Dionne say that Obamacare would actually reduce that deficit and, therefore, should not have been included in Paul Ryan's budget. Why do you think he did that?
WEBERWell, first of all, the GAO, a different entity, has -- came out with a report, I think a week ago, that called -- said that Obamacare will add $6 trillion to the deficit over a 75-year projection. So we don't -- but we're required to project for 75 years on Social Security and other entitlement programs. So that's not -- it's not clear to me which direction we're going in terms of -- I understand the CBO has marked it as a savings in the short term.
WEBERBut, you know, the budget is, as we hear a lot of discussion this week, basically a political document. The Republicans -- I will grant, of course, that President Obama won the election. But all the Republicans ran on appealing Obamacare. Should they get into office and simply say, no, everything I ran on the last campaign, never mind. I didn't really mean it. They have to at least stake out the position. This is what they believe is right.
WEBERAnd they do believe that we're going to have serious problems with Obamacare, which I agree with down the road in squeezing providers too hard. We'll see what that's going to do down the road and maybe putting up with pressure on premiums and forcing people out of the private health insurance market, particularly in small businesses.
REHMAll right. Chris, I want you to add to that.
FRATESThe idea of the Obamacare cutting the deficit, that's been out there a lot. And that's largely because when the House Republicans had passed the repeal legislation, you know, they tried 30 times. They passed 30 different kinds of repeals in the last Congress that didn't go anywhere in the Senate. The CBO, which is the, you know, the independent...
FRATESYeah, nonpartisan independent scorekeeper here in Congress. And they said the last repeal, which would've repealed all of Obamacare, would've increased federal budget deficits by $109 billion. And that was largely because it reduces the direct spending by $890 billion and reduces the revenues, all the new taxes in Obamacare by a trillion, which leaves you the difference of $109 billion. So to say that repealing Obamacare increases deficits, well, it does. But...
DIONNE JR.But what? It increases deficits.
FRATESBy 109 billion, which...
WEBERAll right. Over 10 years.
DIONNE JR.But then so this is supposed to be a budget...
FRATESOver 10 years.
DIONNE JR.Look, there a whole bunch of things on the table. I salute Vin for not trying to defend the particulars of the Ryan budget very much because I think they're hard to defend. Secondly, I agree with him, and we can get to this that there are -- there is reason to believe that there is a path out of this. And what I really agree with him on is regular order is a whole lot better than a whole bunch of fake crisis and deadlines, which I think have come mostly out of the Republican House.
DIONNE JR.But I hope we can put those days behind us and have a real budget debate. I disagree with Chris on one thing, which is he says that the deficit is the biggest issue on the minds of Americans. Actually, with the polling I have looked at over the last several years shows is job creation and economic growth is more important to more Americans than deficit reduction.
DIONNE JR.And I think one of the problems we're having here is that we're focusing almost entirely on the deficit when we should be focusing on getting out of the economic mess. Nothing could help us more. And heck, this is an old conservative talking point. Nothing could help us more to reduce the deficit tan economic growth. And with all of these cuts, we are going to endanger the recovery that finally seems like maybe it's getting off the ground.
REHMAnd what -- to you, Vin Weber -- and this is a tweet -- "What do you think of the Paul Krugman viewpoint that addressing debt and deficits can wait for a stronger economy?"
WEBERComplicated question. In the very short term, which is a few years, I'll surprise everybody and say, I don't disagree with Paul Krugman. The -- where I disagree with Paul Krugman is when he basically says we don't need to address the long-term debt problem for several years now 'cause that just says to me, we're not going to address it.
WEBERI agree with people, and I probably agree with E.J. The problem we have is not this year's deficit or next year's deficit, and that means the problem, in my view, is not domestic discretionary spending or even defense spending. The problem is long-term entitlement reform and revenues.
REHMBut hasn't the press...
WEBERAnd -- but Paul Krugman doesn't acknowledge even that. He basically says...
DIONNE JR.Oh, yes, he does.
WEBER...we do not. But he says we put off dealing with it forever.
DIONNE JR.No. I think -- see, I think one of the issues about...
WEBERJeffrey Sachs took him apart pretty effectively from the left.
DIONNE JR.Yeah. Well, I think one of the issues here is, do you need the kind of Medicare cuts that everyone is talking about? There is evidence -- I mean, it's just a fact that health care cost inflation has been going down.
WEBERIn the last three years.
DIONNE JR.Now, we don't know yet how much of that is the recession and how much of that is changes in practice. There is evidence that some of it may be permanent. And the notion that we are going to make steep cuts in Medicare, throw some older people 10, 15 years from now under the bus before we actually know the size of the problem, I think, is a big mistake. I think we do need some short-term deficit reduction that doesn't kick in early so we don't wreak the recovery to get us at a sustainable deficit.
DIONNE JR.And I think that's the underlying argument here. There are those who say, we need to deal with everything now, and there are those -- and I'm in this camp -- who say, let's with cuts and tax increases of around a trillion and half, you know, which a lot of money. But actually, in the broad run of things over a decade not a hard to reach...
WEBERIncluding the $600 billion we got or -- and on top of that?
DIONNE JR.No. On top of -- if we get about a trillion and a half over a decade, we can...
WEBER$2.1 trillion tax increases over the next 10 years.
DIONNE JR.No. I'm saying a balance. We can do a split. Obama's plan is about 50-50. You know, he raises almost six -- it actually tilts on the cut side rather than tax increase side. He gets about $600 billion out of tax reform.
REHMHow does he get cuts in social spending?
DIONNE JR.What the -- Obama does have some Medicare cuts. They are mostly not -- they're mostly cuts in providers. He does a little bit of means testing for a higher income Medicare recipients. Very controversially, he changes the indexing of Social Security, and I think that causes him problems in his own party.
DIONNE JR.Bernie Sanders, Harry Reid introduced a bill saying, wait a minute. We can solve the Social Security problem by lifting the tax, the cap, on income where the taxes levied to somewhere around -- I think it's around $230,000. That's -- that'll be debate within the Democratic Party. But Obama has been serious about dealing with the entitlement problems without wreaking the Pell grants.
REHMDo you agree with that, Vin?
WEBERPartially, the president's come forward, as E.J. pointed out, with some meaningful advances in terms of entitlement reform.
WEBERI would point out 107 Democrats in the House send him a letter saying absolutely no to any change in entitlements. So you're right. There is a debate in the Democratic Party. The only good news about that is you still got 90-some Democrats that didn't say no. So you could get Democrats to vote for some meaningful entitlement reform.
WEBERBut I want to emphasize one last thing. E.J. sort of passes over the fact that most of the president's Medicare cuts, not all the ones we're talking about here, most of them are coming from providers. That is not without cost. We seem to have this notion that if we're just nailing the doctors and nailing the hospitals and nailing the producers of medical devices and pharmaceuticals, nobody's more soft. That's the supply of health care. At some point, reductions in those payments will end up affecting the quality and quantity of health care...
DIONNE JR.So are you against cutting Medicare, Vin? You know, that would be great. The point is you either do it there or you throw all of the burden on recipients and you reduce the coverage that people actually have. We do have a health care cost problem...
WEBERWe're going to end up with some mix of squeezing providers, which Republicans won't like, and making it more competitive for consumers, recipients, which Democrats won't like.
FRATESDemocrats have been very cagey about what kinds of cuts they're going to expect, what kind of cuts they'll put on the table. They use a lot of adjectives -- reasonable, responsible -- but there's not many nouns and verbs about we're going to cut Medicare. And...
DIONNE JR.But the president has been really specific. I mean...
REHMWhat about mortgage? What about mortgage?
DIONNE JR.The president has been really specific, and Patty Murray is about, I think, to get very specific.
FRATESWell, she's about to get very specific, but that's why you have to watch tomorrow because that -- then you're going to see where are Democrats really as a caucus. And part of what the president was specific about in the fiscal cliff, he couldn't sell to Senate Democrats the idea that we would change the inflation on Social Security and decrease those benefits through that change. He said...
REHMAnd raise the income level.
FRATESAnd raise -- he couldn't sell it. He said it in talks with Speaker Boehner. National Journal had a big tick-tock on this that we did right after the fiscal cliff, in those closed-door talks. He couldn't sell it. So what we'll see tomorrow...
DIONNE JR.And so I'm glad the deal fell apart, but that's another thing.
FRATESBut the fact, E. J., is that he -- Democrats have not been particularly clear about what they're going to cut, and we're going to see that tomorrow. The other thing that Vin points out about providers and the squeezing of providers, you know, the Democrats in health care reform cut the Medicare Advantage program, which is a program that gives private insurance companies $700 billion to run a Medicare-like program. They cut that, and they said, we're going to put that money to traditional Medicare. The -- after that happened, Republicans attacked Democrats for cutting Medicare.
WEBERWhich they shouldn't have done.
FRATESIn this budget, Paul Ryan takes that same $700 billion, applies it to cost savings and expects that Democrats aren't going to then turn around and say, well, you cut Medicare. So the idea that both sides are not playing games here is just not -- it's a little fatuous.
DIONNE JR.I'm sorry. I just don't think that -- I think there's kind of phony balance here. The president has come out with a proposal that includes some things his side doesn't like and some tax increases, and the Republicans are just unwilling, so far, to vote for any more tax increases. So this isn't a balance thing. If Republicans will come to the table and talk about revenue increases, then we could talk about other stuff.
REHMAnd you're listening to "The Diane Rehm Show." We're going to open the phones now, hear what listeners have to say. First to John in Vernon, N.Y. Good morning to you.
JOHNGood morning, Diane. Thank you very much. I'd just like to have some of the people around the table comment on how Obamacare's had two effects, particularly on this five-member family with a $57,000 a year AGI. The first thing is that the medical flexible benefits pre-tax deduction would have, resulting in an increase in our income taxes and reducing our ability to pay increasing cost of health care.
JOHNAnd if I'm not in the middle class and my wife and my family isn't in the middle class, I don't know who is. The second thing is that my wife works part time, now has to look for another part-time job because companies like Wal-Mart and the Olive Garden last -- at the end of last year and the beginning of this year announced that they were reducing hours for part-time work below 30 hours. That's a 30-hour cutoff, beyond which -- above which a company has to...
JOHN...pay for health care benefits.
FRATESWell, I mean, those things were certainly in the health care reform law, and part of what we're seeing is that that law has not been fully implemented yet. And so the exchanges that are set up to help families pay for health care reform that will be state-run don't come into effect till 2014. So while a lot of the changes are being phased in, we've not seen the full effect. And will there be a balancing that will happen once things are implemented still remains to be seen.
REHMTo Camp Hill -- hold on.
REHMTo Camp Hill, Pa. David, you're on the air.
DAVIDThank you, Diane. I appreciate your show.
DAVIDI was just listening to the highlights, if you can call it that, of the Ryan budget ideas. And first of all, I think this guy is just unbelievable, but, on the other hand, he is believable. It's just -- socially and culturally and so forth, ideas like his are just so out of touch with what's happening in the United States in terms of the immigration and ethnic complexities and...
REHMOK. Let's just focus, please, on the budget.
DAVIDWell, that's part of the budget, though. His -- what -- his ideas on the budget are largely aimed at people who are not in his mission in life. And I'm just really tired of hearing from representatives and senators who just don't seem to realize what the budget is like every day for people.
REHMAll right. Vin Weber.
WEBERWell, we just -- the previous caller had just told us what the budget was like for his income, $57,000 adjusted gross income.
WEBERAnd Paul Ryan, I would argue, is concerned about the costs to middle-income people, of increasing taxes and complying with government programs.
REHMBut he's also been talking about cutting Medicaid...
REHM...cutting Medicare, making block grants available to states, and everybody knows the states have no money to begin with.
WEBERI understand that. I also understand that if -- let's get back to the basic question. Do we need to do something about the long-term deficit in the country? You're not going to do it by not affecting anyone. I mean...
REHMYou could do it by raising taxes.
WEBERWell, we're going to do something with it by raising taxes. We've raised $600 billion in the first of the year. My guess is if we get to a grand bargain, it will include another tax increase. I think, though -- this is a -- off the topic a little bit. I think Sen. Murray, who I really commend as a serious person, is going to have a hard time getting to a $1 trillion in loophole closings. And that's what I'm told they're going to say tomorrow is that we're going to raise $1 trillion in revenues through loophole closings.
REHMAnd we have no idea what those are.
DIONNE JR.Well, first of all…
FRATESWe don't, but...
WEBERIt's going to be hard without getting some that are very popular and affect the same middle-class people that we're concerned about with spending cuts. You can't -- you're not -- if we could balance the budget by getting rid of the special deal for private jets, we'd all agree to do that. We can't.
REHMBut what about mortgages on upper-income people?
FRATESAnd Senate Democrats have said that's off the table.
FRATESThey're not talking about those kinds of things. And they're -- and Senate Democrats will point to Speaker Boehner, who said we can get $800 billion.
REHMAll right. And we've got to take a short break. When we come back, more of your questions, comments and more of this discussion.
REHMAnd welcome back. As we talk about a plan for a budget that's out there, Paul Ryan finally released his last night. So we've got a 90-page summary of that. Patty Murray on the Democratic side is releasing hers tomorrow. So we don't know exactly what's in that budget, but there's lots of speculation going on. Let's go to Houston, Texas. Ryan, you're on the air.
RYANHi. It's so great to have my call taken. I love your show.
RYANI think it's the best one on the radio, honestly...
RYAN...and I'm not at all exaggerating. But anyway, I don't want to sit here singing you praises all day. What I do want to ask is...
DIONNE JR.Oh, she wouldn't.
REHMIt's OK. It's OK. Go ahead, please.
RYANWell, what I wanted to ask 'cause earlier I heard one of your guests are talking about how we don't need to cut military spending. And I wanted to know how he can justify that when our military spending reaching $1 trillion. We spend more than the next 20 countries put together. And the military also had the secret budget, and there's billions of dollars that just disappeared. And we don't know where they're going.
WEBERI -- first of all, if I said we don't need to cut military spending, I misspoke. What I said was went -- meant to say was the entire focus of our budget effort's being on domestic discretionary spending and the military budget is misguided. I think we're cutting too much out of domestic discretionary like National Institutes of Health and infrastructure, and I think we are cutting the military budget too rapidly and in an unplanned way. We are on a trajectory to reduce military spending.
WEBERIt's been happening since this president was elected. Secretary Gates put on the table some substantial downward path revisions in the military budget, and I think that that's appropriate. I think that we're not doing that cutting any smarter than we're doing domestic discretionary cutting. And it's partially just because of the sequester, but mostly it's because we're refusing to look at the long-term problem which paradoxically increases our zeal to attack the short-term problem, which isn't that big a problem.
DIONNE JR.Just -- I want to go all the way back to the gentleman whose wife has having her hours cut at Walmart. And I think this raises some real questions which is if Walmart is cutting these people's hours rather than help them get health insurance, that says, A, something about Walmart, and, B, it suggests that the problem with employer-dependent health insurance is very large.
DIONNE JR.I mean, the way Obamacare was set up, it was intended to work with employers in the private market. If you have employers kind of undercutting the effort to expand health coverage, you're going to have more and more pressure for a solution like single pair. Second point I want to make about...
DIONNE JR....all these discussions of the Murray budget and the Ryan budget, I think there's one very clear difference which is Paul Ryan says his budget is about cutting the deficit, but clearly his greatest interest is getting that top tax rate down. And who does the top tax rate hit? It hits the very, very, very wealthiest people in the country. The more you get that down, the richer you are, the more millions and tens of millions that you save.
DIONNE JR.Murray is saying, no, that's not the way to go. In order to avoid some of these deep cuts, we are willing to raise taxes, and we're going to see what her trillion looks like. We know from Obama that if you simply put a sealing on all the deductions at 28 percent instead of 39 percent, people in the top rates have to pay a little more in taxes, but that raises you already $600 billion. Now, the Senate Democrats may not want to go there, and we're going to see where they raise their money, but this is about as clear a choice about a way forward as we could get.
REHMAnd what are you hearing, Chris?
FRATESI think E.J. is right, this idea that Democrats are going to talk about the middle class. They're going to talk about how Republicans are protecting the wealthy and that their balanced approach is the one that is the best course for the country. Now, Republicans will say, of course, we want to bring the taxes down for the wealthiest. That helps small businesses. That helps people who generate jobs. That helps the economy because that all trickles down, and that is the big discussion that we're going to have with these two documents is that debate.
REHMAll right. Here's an email from Ted in Arizona, who says, "Didn't we just have a national forum four months ago essentially over Paul Ryan's budget priorities versus President Obama's? Wasn't the decision rendered by the public a rather decisive one in terms of both the popular vote in the Electoral College tally? Has something changed significantly since the November election that would alter that (word?) ?"
WEBERNo. Nothing was changed much by the November election. I mean, the fact is we went into the November election with President Obama, a Democratic Senate, a Republican House, and we came out of the election with exactly the same configuration of players. I think that the president had some momentum because he did get re-elected although by a narrower margin than he was elected the first time.
WEBERAnd I think at the end of the day, you know, the president is winning somewhat more than he's losing. He got a $600 billion tax increase as a solution to the fiscal cliff issue at the beginning of the year. That was largely a victory for the president. But the process -- it doesn't -- because you win 51 1/2 percent of the vote doesn't mean that you get 100 percent of the policy.
DIONNE JR.But he won by about 5 million votes. He won an overwhelming margin in the Electoral College. Democrats, by all rights, should've lost seats in the Senate given the configuration the seats up. They gain seats in the Senate...
DIONNE JR....and they got 51 percent of the vote in House races. They lost the House because of a combination of gerrymandering by the Republicans. They happen to have the upper hand in more places, and the Democratic vote is concentrated in big cities...
REHMI want to ask you...
DIONNE JR....so you have an unrepresentative House of Representatives pretending the election didn't happen.
WEBERBut that's really too simplistic.
REHMI want to ask you about that $600 billion because both John Boehner and Mitch McConnell keep saying the president got his tax break back in January and that's all he's going to get. Chris.
FRATESI think that's very interesting, but part of what we've not talked about is the politics of what's happening here with these two plans. And watch President Obama today, he's going to the Hill, he's going to talk to Senate Democrats, he's going to talk to House Republicans, Senate Republicans and the -- he's talked with moderate Senate Republicans over dinner. He's on this charm offensive...
FRATES...to try to build some kind of compromise. And was -- it is helping, and it was interesting to me on the Sunday shows that the number three Republican in the House, Kevin McCarthy, he said that if Obama is serious about entitlement reforms, then he'll like where we could go on taxes. And so, that, you're starting to see a little bit of movement from both sides.
FRATESAnd you need to watch this week -- aside from the theatrics of the president coming to talk, what I'll be looking for -- there seems to be always this idea that, oh, the president doesn't talk to any members of Congress. He doesn't have them for golf. He doesn't have them for dinner. He doesn't know how to deal with the Hill.
FRATESAnd then he has some dinner, and he has, you know, some meetings. And it's oh, look at this olive branch, it isn't at all bipartisan. What you really need to watch is, is the president and his staff starting to work with House Republican staff in a serious way to try to come together to a grand bargain this summer?
DIONNE JR.Here's -- I think the -- I agree with the broad trajectory. I think there is a chance for something like a real deal here. I don't think it passes through the House Republican leadership, though. I think what the president is doing is he has seen that there are -- there is a group of senators, some of whom really can't stand the defense cuts like John McCain and Lindsay Graham.
DIONNE JR.Others don't like government by crisis, people like Susan Collins and Mark Kirk, who say, all right. We don't want to be sort of held back by the House of Representatives. Let's see what kind of deal we can make with the president. And it's going to be a very tricky thing because he's got to keep Democrats onboard which is going to limit the amount that he can cut the retirement programs.
DIONNE JR.Personally, I think that's a good thing. And the Republicans are going to have to agree to some set of taxes. But if the Senate were to pass a budget, a deal and it went to the House, the Ryan budget's going to be helpful in the following way. There were actually a lot of Republicans particularly in the Northeast, the Middle West and the West Coast who aren't really going to like the Ryan budget. They may not say a lot publicly, but they don't want to pass this budget.
REHMVin Weber, what would the House Republicans be willing to give up to get a deal? There's been some talk about Cantor's plan to merge hospital and Medicare and doctor's coverage.
WEBERPossible but that hasn't extended a lot beyond the majority leader's office yet. I don't -- I think that part of our difficulty in this discussion, and I think it's the right discussion, but we're sort -- we're at -- in the opening round of a fight which we hope ends up in compromise, and we're saying, well, gee, how come Paul Ryan hasn't compromised with himself in issuing his budget? And the Republicans will say much the same thing to Murray, how come Sen. Murray hasn't compromised?
DIONNE JR.But Obama has compromised with himself.
WEBERWell, he's the president and he ought to.
FRATESWell, Obama hasn't put out of budget yet. To be fair, he's late for the fourth time in five years. And this is the first time we've seen the president not put out his budget first. Congress is going first for the first time in 92 years.
REHMSo why is Patty Murray going now?
FRATESShe's going now because there is a requirement under the fiscal cliff deal that the Senate pass a budget. This is going to be the first time it does so in almost four years. And so she has to get something done by April 15, so she's now statutorily required to put a budget out before the president. And that is something that we're waiting to see is what does the president do.
DIONNE JR.And she wants to get rid of the favorite Republican talking point, which is Democrats don't produce a budget. Now, what nobody says is it requires 60 votes Republicans can block a budget. But it's also true that the Democratic caucus is far more diverse than the House -- the Senate Democratic caucus is far more diverse than the House Republican (word?).
FRATESWell, you could...
WEBERIf it's any way true that they didn't true produce a budget.
DIONNE JR.Well, that's why she's producing one.
FRATESRight. It doesn't require 60 votes to pass a budget though. Just 50.
REHMOK. So Maryland Rep. Chris Van Hollen who is a Democrat...
REHM...released this statement today on the Ryan budget. He said, "Today, House Republicans released a totally uncompromising budget that simply represents more the same, undermining job growth, ending the Medicare guarantee and slashing critical investments in our future while protecting tax breaks for special interests and the very wealthy."
WEBERIt's exactly that I said a minute ago. The -- you don't begin with the compromise. And the Republicans are going to say this about Sen. Murray's budget tomorrow.
REHMYeah, yeah, yeah.
WEBERThe question is, and I think, you know, Chris talked about a few minutes ago, has the president helped to create and environment in which we can go forward to the next couple of weeks and maybe try to bridge some these huge gaps? And I think, you know, it's not assured by any means. These are big philosophic indifferences.
REHMBut you're optimistic.
WEBERI am more optimistic than I've been in the long time.
REHMAnd how about you, E.J.?
DIONNE JR.Yeah. I'm relatively optimistic as well which makes me worry that I'm crazy given that I lived here...
DIONNE JR....in Washington, D.C., for a long time. But I do think that the sequester is going to start biting over time. One of the problems with the sequester as an action-forcing measure is that a lot of these cuts take time to be felt. And I think school districts are going to feel them. I think that people in military communities where that -- have Republican House members are going to feel them. And so the sequester is going to create some pressure. And I also sense in the Senate...
WEBERIt would be in both directions though.
DIONNE JR.I also sense in the Senate that there are maybe some Republicans who want to get off this sort of cycle of crisis. And so we'll see. I think a lot hangs on what in minority of Senate Republicans are willing to do over the next month or so.
WEBERThe sequester is going to probably start biting, but it's not necessarily going to bite in one direction only politically. I suppose people will say, well, the Republicans resisted a solution to the sequester. On the other hand, as time goes on, the management of the government in sequester is the administration's responsibility, and the president has seen a precipitous drop in his approval rating in the last few weeks even though Republicans have not done well by comparison.
REHMAnd you're listening to "The Diane Rehm Show." All right. Let's go Indianapolis. Good morning, David. You're on the air.
DAVIDGood morning, Diane. Thanks for taking my call.
DAVIDHey. My question is for your panel. In the news media, whether it's on MSNBC, CNN, they constantly refer to that $600 million, that one of your guests mentioned in tax revenue from the fiscal cliff, as new taxes. Those aren't new taxes. That was restoring the old rates and were there before the Bush tax cuts, you know, back in 2003 or whatever it was. And that's not new taxes. You know what I mean?
DIONNE JR.No. I think that's absolutely right. And, in fact, the fiscal cliff deal...
WEBERNow, why don't we raise the tax rates to 90 percent and say we're just repealing the Kennedy tax cuts?
DIONNE JR.Nobody's saying that. Right.
WEBERI mean, what point -- at what point does the tax rate become the permanent tax rate?
DIONNE JR.That -- there was -- there -- the Bush tax rates were temporary. What the Congress did is it restored about 18 percent of the taxes in the original Clinton tax bill. It made permanent 82 percent of the tax cuts in the Bush...
WEBERThat was a good thing.
DIONNE JR....82 percent of the Bush tax cuts which means that we only got about $620 million -- $1 billion in revenue. Now, there's an argument among Democrats, was this a propitious time for Obama to make a deal? And I think it's a close question because I was in favor of the deal because I thought it was important to start being able to support some revenue.
DIONNE JR.However, he had more leverage when the entire Clinton tax increase would have come into effect than he has now. And now there -- I think there has been some shift in the leverage toward the Republicans because cuts are on the table. And so the question now is Obama's moves, I think, are all designed to try to figure out can he shift some of the leverage back his way.
REHMAll right. So, the final question, what are the chances for a grand bargain by summer?
DIONNE JR.I think there are chances for a modest bargain, a reasonable bargain. I'm not sure that we're going to have -- and I, personally, don't think we need some whopping big 30-year deficit reduction plan. I think the chances of getting another 1.5 trillion in revenues and taxes, there's a reasonable shot of that.
REHMWhat do you think, Chris?
FRATESI think it's reasonable, but having watched this now for two years, I had to be a little more cynical that they'll be able to get it done. Certainly with the debt ceiling going up and them having to deal by the end of summer, that is going to be the action device that forces these guys together. And if they can continue to talk before we get there and they're having conversations and throughout the spring into the summer, I think the chances increase. But if this is just a couple week thing around the budget and then these talks fall off again, I think we're in for a lot more of the same.
WEBERYeah. I think we are in agreement. I think there's a better chance than we've seen in a long time because I don't think either party anymore sees it in their political interest to lurch from crisis to crisis. They can certainly give those speeches blaming the other party, but the reality is both parties have suffered from this.
WEBERThe president suffers when we reach an impasse, and congressional Republican ratings could hardly be lower. Both parties see some benefit in getting to a deal. That doesn't get us there, but it creates an environment in which we have a greater chance of doing that than we have in many, many years.
REHMIs Vin correct that the president's ratings have dropped precipitously in the last few weeks?
FRATESMaybe not precipitously but they certainly have dropped. They certainly have dropped.
WEBERMore than five points.
WEBERAnd the McClatchy Poll, out today, says that a plurality of Americans trust the Republicans in Congress on the issue of the budget more than they trust the president.
REHMAnd that's the last word. Vin Webber, he is co-chair of Mercury/Clark & Weinstock. That's a bipartisan public strategy firm. Chris Frates with the National Journal, E.J. Dionne of The Brookings Institution, also a columnist for The Washington Post and author of "Our Divided Political Heart: The Battle for the American Idea in an Age of Discontent." People have always said this show is very civil, very calm, very quiet. They'll have another opinion after today.
REHMThanks for listening, all. I'm Diane Rehm.
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