Home Budget, Economy Coburn’s latest statement could sink Gang of Six proposal

Coburn’s latest statement could sink Gang of Six proposal

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by Paul Goldman

If Senator Tom Coburn thought he was helping Mark Warner and his fellow “Gang of Six” members, it sure doesn’t add up that way.

“It’s not a tax hike, it’s a $1.5 trillion net tax reduction,” Coburn told the National Review about how the Gang of Six proposal adds up. He said this is why Democrats and Republicans should back it.

Except for one thing: This would mean the Gang of Six plan would cut $5.2 trillion in spending over a 10-year period, MORE THAN DOUBLE what the President of the United States called totally  irresponsible just a few days ago!!!!

Remember: President Obama said the $2.4 trillion in spending cuts in the House GOP plan passed last night would require draconian slashes to Medicare, Social Security, the safety net of programs which are the basis of the Democratic party legacy.

Do the math: If the Gang of Six proposal does indeed have $3.7 trillion in net debt reduction over 10 years and also a net reduction of $1.5 trillion in revenue, then this means it has to slash spending by $5.2 trillion (5.2- 1.5 = 3.7).

This would be the House GOP plan on STEROIDS.

“It’s going to take some time for them to consider this,” Coburn predicts. “But with a net tax cut in it, and you get some significant spending relief, what’s not to like?” he told the National Review.

So there: He said it twice!  

Sooner or later, someone has to produce the real numbers so we all can look at them.

The trouble with all the proposals is that they are based on projections over 10 years developed by making all kinds of assumptions. Frankly, it would be easier to hit the moon than the precise net debt reduction number produced a decade from now through whatever proposal is under discussion. In that regard, it is a leap of faith for the country no matter what is done.

So Coburn, rightly or wrongly, has shaken some faith in what the Gang of Six presented yesterday.

Mark Warner is a serious guy, so I think he deserves to have his proposal given serious analysis.

But Coburn now makes me wonder what the heck is going on and whether Coburn will again change his mind once he learns the true facts. He is a puzzle for sure.

  • aznew

    in the baseline each plan uses for determining the size of the revenue increase/cut.

    The dispute lies in how the pending expiration of temporary provisions of the tax code are treated, in particular the Bush Tax Cuts and the AMT. If one assumes that all of those provisions will, indeed, expire, then the Gang’s plan is indeed a tax cut.

    The Bowles-Simpson Plan used a different baseline, one that assumed Congress would enact an AMT fix as it does every year, and would renew the BTCs for all taxpayers making less than $250K.

    Using those baselines, the Gang’s plan would apparently raise taxes by about $1 trillion over the next 10 years, about the same as the BS plan.

    While that adjusted baseline was developed by the Obama WH, it isn’t clear to me what baseline is being used in the Obama proposal, which includes $400 billion of revenue increases through taxes.

    See here:

    http://blogs.wsj.com/economics

    You are correct that projections made over a 10-year period are inherently unreliable, but that is not the specific problem here causing confusion over whether this is a revenue increase or reduction.

  • KathyinBlacksburg
  • The proposal by the Lynch Mob of Six should be sunk and they should be sunk with it.  Warner has stabbed working people and middle class folks in the back.

    The “Gang of Six” is trying to piss on our boots while telling us it’s raining.

    Their plan will:

    — Lower the corporate tax rate from 35 percent to between 23 and 29 percent.  (So — in view of the fact that some corporations aren’t paying any taxes, I guess this means the Treasury will pay them.)

    — The plan also recommends “reforming” Social Security in ways that will even affect current retirees. But not a penny of the money saved will go to deficit reduction, which begs the question – why include Social Security at all? The Gang of Six has said all the changes will go toward securing the long-term financial security of the program, but Social Security is already solvent until 2037 and does not contribute to the deficit.

    — Here’s another casualty of the Gang of Six (besides reality): Sen. Ted Kennedy’s CLASS Act, a provision he authored that was included in the Affordable Care Act to create a voluntary federal long-term care insurance program.

    This thing needs to go away.  Sadly, it’s likely to be adopted out of desperation.

  • Goldmanusa

          There is a phrase the “tyranny of large numbers.”

    We are now experiencing it.

    You all may be experts dealing with trillions on the revenue side and trillions on the expense side, but numbers with 12 zeroes are a little more than I normally write on a check [nine zeroes is my limit, I told Warren Buffet just today.] Okay, I agreed to make an exception. But no more checks with 10 zeroes, a one time thing.

           Most Americans get this: we have some serious problems on the finance side, immediate and structural, and they are willing to do their part to help set things straight. They blame Washington but they don’t moan constantly about this unfairness as Sarah Palin.

           But in the end, with the blizzard of stats along with differing points of reference, they are going to need to trust someone to assure them it is a fair and balanced.

           So it isn’t just a question of whether Coburn used one baseline and someone else looking at the same plan used another to explain it.

           You need to be straight with the public because you are asking them to do something they aren’t going to like, either pay more, accept less, give someone else a break as they see it, one they don’t get.

           Social darwinism rules. They suspect the bigger interests will win out at their expense. The polls show this clearly for decades.

           Whatever you want to say about Cantor, he is protecting what he sees as his constituency. So yes, he is being unreasonable, that’s what his constituency wants because they figure net, net: it will get them the best deal they could hope for. They might be wrong, but so far, they haven’t been. In politics, you keep doing it until you lose. All the Democratic Senators voted against raising the debt ceiling in 2006 I believe, or at least most of them. This is politics, let’s not be naive.

           I ask you: Despite all the whatever I read on the “progressive” blogs, what is the “progressive” plan, with people like Cantor in Congress saying they won’t cave in? And remember, Cantor is a leadership guy, he isn’t just a backbencher. Is there someone opposite him on the Democratic side in Congress standing up for Medicare, Social Security, education, minorities, etc?

           I read criticism of Warner. But he too has never been bashful about letting people know his priorities here and has pursued them.

           Bottom line: The Gang of Six plan, the GOP House plan, the Obama plan, are works in progress, as will be the one that is passed. They will be based on projections based on assumptions which can not be proven.

           A lot of Americans are going to be mad no matter what. They all vote next year. The “cuts” and the “revenues” are all out-year things except for some immediate cuts which are the low hanging fruit.

           Bottom line: Being as straight as possible with people seems to be the best course of action. If it looks like you are manipulating numbers, that’s a huge problem. .

           As long as everyone can choose their baseline and whatever, the confusion could create a perception that turns the country even more against Washington than the polls show right now.

           And remember this: No one is talking about the debt not growing in the near term.

           I have an article coming out in USA Today sometime soon discussing some of the political ramifications of different scenarios. Hopefully they will use it soon.

           It is a fun read.