From listening to all the conversation today, it boils down to this: Republicans want entitlement reform and the Democrats want an increase on taxes (35% to 39.4%) for incomes over $250,000. One is certainly more complicated than the other, but everyone - Mr. Geithner, Congressman Van Hollen, Senators Corker and McCaskill - seemed to think that a deal will get done. The reason is that one has to get done. It would be the height of irresponsibility if they didn't get a deal done especially since it was noted that the economy grew 2.7% in the 3rd quarter. It's in everyone's best self-interest to make to make this politically theater end its run.
However, when asked about a tax rate increase on the wealthiest Americans, Senator Corker would not answer that question directly, reason being that no Republican can be seen or heard as raising tax rates, optically/politically it's goes against the Republican orthodoxy and if anyone of them said publicly they would do as much, then the party would lose any leverage it has. Even Grover Norquist, when asked directly by David Gregory if there were going to be new tax rates, he wouldn't answer.
He wouldn't answer because what Grover Norquist wants is unrealistic and he knows it. Understand that the pledge that he has Republicans sign is for no tax increases of any kind and that means no closing loopholes, no increasing individual rates, no elimination of corporate tax subsidies, farmer subsidies ($23 billion a year) and no increases on dividends or capital gains. Given that, Senator Corker has already violated this pledge saying that his proposal closes loopholes, which isn't enough to get the job done. And to be clear about the pledge that Republicans sign - Mr. Norquist says that it is a pledge that representatives make to the citizens of their states and constituents, and not to him or Americans for Tax Reform, the organization that he heads. There are two basic problems with this and the first is that the pledge to the oath of office - to the country as a whole - trumps a special interest pledge. This is something that a number of Republicans have been falling back on as their way to circumvent the signing. The second problem is that the pledge doesn't realistically represent all of the electorate, only the conservative part of the constituency, and we're not really sure if even all those people would go along with every provision of the Norquist pledge.
So is Mr. Norquist's influence over? His response to that was that the headlines that suggested that were last week's news, and additionally that Republicans were briefly seduced by the President and Democrats into violating the pledge, but in the end it won't happen. Mr. Norquist said that the President has unreasonable positions because
he won't budge so they won't hold. Always being in full debate mode,
Mr. Norquist basically attacked the President using his own weakness,
indeed it is Grover who really has the unreasonable positions that won't
hold. Statements from Republican politicians lately suggest otherwise - Senator Corker is today's upfront example - and they are certainly trying to marginalize Mr. Norquist's influence in the negotiations. That much is clear. Secretary Geithner believes that the climate in Washington has changed because Republicans realize that there has to be new revenue, thus pushing Grover Norquist to the sidelines as much as they can. What they also push aside it should be noted are the big monied interests that fund American for Tax Reform.
It's because of those monied interests that would prompt CNBC's Jim Cramer to say to Mr. Norquist that Republicans are afraid of his views. Mr. Cramer is more of an overt partisan toward the President and Democrats but the bottom line is still money. Unlike his colleague, Maria Bartiromo who strikes us as socially liberal, but who is very fiscally conservative (a true New York business person) was calling for structural changes to the entitlement programs while warning that dividends and capital gains shouldn't be touched in tax reform. Capital gains were something that Senator Corker specifically mentioned during the program as something on the table. But Ms. Bartiromo has a point that in those capital gains and dividends are 401K accounts and pensions. However, the drastic nature of her alarm is a bit of crying wolf because an increase on capital gains, even a modest one, wouldn't adversely effect markets in the long term, perhaps for a quarter or two, but the market would adjust.
It's a banal fact that Social Security, Medicare, and Medicaid are the biggest drives of our debt, but we disagree that structural changes are necessary, reform for sure but to structural change these programs is to eliminate these programs all together. These are too big and complex to get done sufficiently in the next 29 days so sticking to tax reform, which is big enough, would be the right call. There are some things that can be done around the margins such as means testing which Senator McCaskill and Secretary Geithner mentioned - something that everyone seems to think makes sense. However, to avoid this fiscal cliff, these programs should be left until after the 1st of the year. And despite what Mr. Norquist says about Obamacare being a big tax increase, the savings in payments to providers (the $716 billion) are real. And as Congress Van Hollen mentioned, the focus should be on quality of care and not volume/quantity. That's the right course but is still tricky because Tort reform would have to be part of that. What Mr. Van Hollen is referring to is that hospitals adopt a Mayo Clinic model where doctors are paid a salary instead of paid by procedure. The savings in that alone would be huge, by the way.
Senator Corker said that it wasn't Speaker John Boehner's political base that was holding up a deal but a willing partner on the other side, meaning the President. Secretary Geithner said that the only thing standing in the way of a deal is a tax rate increase on the top 2% of Americans, and Jim Cramer heatedly asked Mr. Norquist if he would like to see a recession instead of said increase. (His answer unfortunately is probably yes.) As Ms. Bartiromo stated, the time for opening salvos is over, which means that special interest representatives such as Mr. Norquist and pundits such as herself have to get out of the way if anything is going to be done.
Round Table: Grover Norquist, the top Democrat on the House Budget Committee, Rep. Chris Van
Hollen (D-MD), and CNBC’s Jim Cramer and
Maria Bartiromo
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