Who’s to blame if we go over the fiscal cliff?
Sen. Pat Toomey, R-Pa., on Tuesday shot back at a Democratic colleague with whom he pursued a bipartisan budget deal in 2011 on the unsuccessful super committee. Toomey labeled as “cynical” the suggestion by some Democrats that Congress should do nothing to head off the coming expiration of the 2001 and 2003 tax cuts rather than sign onto a plan that fails to raise revenues.
Toomey was invited to appear before a panel of tax and budget experts at the Brookings Institution after Sen. Patty Murray, D-Wash., speaking there on July 17, characterized Toomey’s 2011 proposal to break the fiscal stalemate as “offensive” for containing “vague loophole closings [and] fuzzy revenues.” Murray called Toomey’s plan a “gimmick, a bait-and-switch.”
In describing his own proposal for avoiding the series of tax, spending and debt deadlines known as “the fiscal cliff,” Toomey said: “We need to have an honest debate on facts, which means history, arithmetic and actuarial tables. Then, if we can find common ground, we end up with a deal, not just another fight.”
The key, in Toomey’s view, is curbing entitlement spending. He quoted President Obama from a July 2011 press conference agreeing that changes were needed to stabilize Social Security, Medicare and Medicaid. Their growth -- about 5 percent annually in Social Security and Medicare and 11 percent in Medicaid, Toomey said -- is “pretty close to the definition of unsustainable, and no significant program can grow faster than our economy.”
Going into the super committee talks, Republicans were willing to consider new revenues, but only if the agreement included “architectural entitlement reform,” Toomey said. “I didn’t feel revenues were fiscally necessary, but I did recognize they were politically necessary, essential for our friends on the other side.”
But Republicans were disappointed with the Democrats’ counteroffer, which Toomey described as $1 trillion in tax increases, $1 trillion in mostly unspecified spending cuts (mostly to health care providers) and no entitlement reform. So he asked himself whether “there was another paradigm for common ground,” and the Republicans “gave up on architectural entitlement reform, a big concession,” he said.
He then designed a $1.2 trillion package that, while avoiding any increases in marginal tax rates, included “meaningful entitlement curbs,” such as means testing Medicare and recalculating the inflation adjustments for Medicare and Social Security benefits (the so-called chained Consumer Price Index). The plan offered revenue raisers in the form of fees and asset sales along with spending cuts -- the “low-hanging fruit”-- drawn from the work of previous fiscal commissions and study groups, all at the same 3-1 ratio of spending cuts to revenue hikes that the Simpson-Bowles fiscal commission called for in 2010.
Toomey described his tax plan as “progressive” in that it would raise revenue only from the top two brackets, though it included a previous Senate proposal to reform and trim the estate tax. “I’m being candid here, and you cannot say it would be taking from middle class to pay for tax cuts for the rich,” he said. “We met the Democrats halfway on the scoring of revenue.” He called all the components “dialable,” meaning they can be adjusted. The plan “would have demonstrated to American people that we are capable of governing,” Toomey said.
The Democrats' decision to balk, he said, shows that they were “motivated by politics and ideology and a certain level of cynicism.” Their flirtation with allowing all the impending tax and spending cut deadlines to expire at the end of this year “would do unclear damage” to the economy that might be difficult to reverse, he said, and it could easily cause a new recession.
The best solution now, Toomey said, is to extend all the current tax rates one more year and “use the time for pro-growth” tax reform. “I know I won’t get my way on everything, but we do have to agree on the fundamental problem,” he said. “A strong economic recovery is well within our reach, but it’s up to us.”