Sen. Patty Murray, D-Wash., a member of the congressional “supercommittee” that tried unsuccessfully for a grand bargain on the budget last year, vowed never to sign onto a budget deal that relies on spending cuts without new revenues.
At a Brookings Institution panel on the so-called “fiscal cliff” facing lawmakers and President Obama at the end of this election year, Murray blasted Republicans for acting on a “flawed vision” that is “dominated by an ideological extreme” and makes a priority of tax cuts for the wealthy under the guise of deficit reduction. “If we want a different outcome for a deal the American people deserve, something will have to change,” Murray said at the Monday event, challenging Republicans to permit a Senate vote this month on renewing the soon-to-expire 2001 and 2003 tax cuts for the middle class only, separate from those for higher-income taxpayers.
Murray said she viewed the budget through the prism of her own family’s struggle to gain education, training and employment using federal government services so that her parents and six siblings all became productive taxpayers. She also reviewed her experience on the bipartisan supercommittee that was set up under the 2011 Budget Control Act to seek a budget compromise to avoid the law’s threatened across-the-board spending cuts.
“The budget is not just a synonym for deficit reduction or just charts and graphs,” Murray said. “It tells the story of what kind of nation we are and want to be.” Yet after Democrats on the super committee proposed a “balanced” budget deal that included $1.3 trillion in revenue increases as well as $1.3 trillion in “painful” cuts in discretionary and entitlement spending, Murray said, Republicans immediately “took defense cuts off the table” and recommended a smaller deal based mostly on “low-hanging fruit” -- spending cuts from previous budget talks.
The GOP counter offer, articulated by Sen. Pat Toomey, R-Pa., proposed less in spending cuts and a permanent lowering of tax brackets for the wealthy, offset by what Murray called “vague” loophole closings” and “fuzzy” revenues. “It was a “gimmick, a bait-and-switch” that Murray found “offensive.”
Hence, the senator added, she will not sign onto a deal to avoid the fiscal cliff that “throws the middle class under the bus.” Murray hopes, however, for a “grand bargain” before the end of the year. She cited “encouraging signs” that some Republicans are shedding loyalty to the no-new-taxes pledge imposed by anti-tax activist Grover Norquist and are acknowledging, behind closed doors, the need for new revenues as part of any budget deal.
Asked to react, panelist Bill Frenzel, a former Republican congressman from Minnesota and now a guest scholar at Brookings, faulted Murray’s implication that a budget deal should include a 50-50 split between spending cuts and revenues. “Her plan is a little thin in that she gets only halfway” toward the $5 trillion in debt reduction featured in other proposed budget deals, he said. Her willingness to go to the edge of the cliff to force Republicans to give on the revenue question “is the same adventure” Republicans embarked on last year when they forced a default on the federal debt ceiling, Frenzel said, adding that he hoped the Republicans who pursued that strategy would “mature in the coming years.”
Alice Rivlin, a longtime federal budget expert now a senior fellow in economic studies at Brookings, called Murray’s plan “a brilliant and bold negotiating tactic, to let the whole kit and caboodle expire.” Though it would bring some risk to the economy, Murray’s approach would “buy a little time to find a grand bargain solution,” Rivlin added, saying it was less scary than threatening to not raise the debt ceiling.
She also said the current set of pressures might mean “it’s time to blow up the whole tax code and start over” to make the code more pro-growth, with fewer tax expenditures and deductions.
William Gale, co-director of Urban-Brookings Tax Policy Center, said Murray’s approach was more substantive than “just playing poker,” but noted that the anti-tax pledge is hardly an extremist position for a Republican party in which it is accepted by 90 percent of the party. He said allowing the George W. Bush tax cuts to expire is “not a bad idea” in the short term because it would bring a revenue surge while the suddenly higher rates would intensify incentives for crafting a long-term deal that would include a tax reform that is separate from the need to raise revenue.
Robert Greenstein, founder and president of the liberal-leaning Center on Budget and Policy Priorities, said the outcome will hinge on whether Republicans take seriously the new resolve among Democrats -- including President Obama’s promise to veto any extension of the Bush tax cuts for high-income Americans. “Democrats now realize they must change the terms of the debate,” he said.
And though he doesn’t favor a policy of going off the fiscal cliff, the Congressional Budget Office and Wall Street experts say that while allowing the tax cuts might increase volatility in the markets, the economy could stay afloat for several months under such conditions. This would increase the incentives for a long-term deal, perhaps by the end of January 2013, if not by the Jan. 2 deadline under the Budget Control Act, Greenstein said.
All panelists agreed that prospects for a grand budget deal are best under a political situation similar to the status quo, in which both parties control part of the government and get say. A final plan could link higher revenues with entitlement cuts -- a deal where, in Gale’s words, “both sides give and both sides get.”