Budget Taxes and Public Investment

Do We Need a Grand Bargain?

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As part of the deal that keeps the government running until January and raises the debt ceiling until February, Democrats and Republicans have agreed to sit down in a budget conference committee to discuss the fiscal year 2014 budget. Once again, this raises the specter of a “grand bargain” that would replace the sequester and spending caps in the Budget Control Act with changes to mandatory spending and taxes. This raises two questions. First, where do the parties disagree and, more important, should there even be a “grand bargain?”

President Obama and Speaker of the House John Boehner have come within striking distance of a deal several times, only to have the deal fall through at the last moment. And the 2011 Supercommittee failed to come to an agreement, which is why we have sequestration and stringent budget caps. As far as adopting mandatory spending cuts, both the GOP and the White House appear to be on the same page. Rep. Tom Cole (R-Okla.), for example, noted:

“When I look at the president’s budget, I look at things like chained CPI, I look at things like means-testing for Medicare, and Medicare savings. Those are awfully similar to things in the Ryan budget.”

They are on somewhat different pages regarding taxes—the president wants to raise taxes on higher-income taxpayers and the GOP wants to lower them, or at least ensure that tax reform is revenue neutral.

Most of the discussion around a “grand bargain” involves reductions to two mandatory spending programs—Social Security and Medicare—and increases in tax revenue. Lost in all the posturing over budget deficits is what specific changes are under consideration and how the American public feels about these proposed changes. The bottom line is the public appears to support the president’s position on taxes and neither party’s position regarding Social Security and Medicare. A “grand bargain” that includes Social Security and Medicare benefit cuts is likely to be unpopular with American voters.

The following fact sheets explain some of the topics that will be discussed in upcoming budget negotiations.


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