After several weeks of back and forth, new reports suggest that John Boehner and President Obama may be closing in on a possible fiscal cliff deal. Here's Ezra Klein, with the rumored details:
Boehner offered to let tax rates rise for income over $1 million. The White House wanted to let tax rates rise for income over $250,000. The compromise will likely be somewhere in between. More revenue will come from limiting deductions, likely using some variant of the White House's oft-proposed, oft-rejected idea for limiting itemized deductions to 28 percent. The total revenue raised by the two policies will likely be a bit north of $1 trillion. Congress will get instructions to use this new baseline to embark on tax reform next year. Importantly, if tax reform never happens, the revenue will already be locked in.
On the spending side, the Democrats' headline concession will be accepting chained-CPI, which is to say, accepting a cut to Social Security benefits. Beyond that, the negotiators will agree to targets for spending cuts. Expect the final number here, too, to be in the neighborhood of $1 trillion, but also expect it to lack many specifics. Whether the cuts come from Medicare or Medicaid, whether they include raising the Medicare age, and many of the other contentious issues in the talks will be left up to Congress.
The deal will lift the spending sequester, but it will be backed up by, yes, another sequester-like policy. I'm told that the details on this next sequester haven't been worked out yet, but the governing theory is that it should be more reasonable than the current sequester. That is to say, if the two parties can't agree on something better, then this should be a policy they're willing to live with.
In addition, the deal will likely accept Rep. Boehner's offer to lift the debt ceiling for a year without a fight, putting off another big budget battle for a year or so. Indeed, that's what a deal like this would do: delay big fights until later. Yes, there would be some substantive policy changes: Raising income tax rates on super-high earners, changing the way Social Security benefits are calculated. But for the most part, a deal like this would be about getting past the fiscal cliff, temporarily, not fixing the country's budget woes or resolving any of the stubborn differences between the two parties on the size and role of the government.