From an editorial in Thursday’s Washington Post:
The House-Senate conference committee on federal fiscal policy opened for business Wednesday amid appropriately diminished expectations. After this month’s disastrous Republican-provoked clash that resulted in a 16-day government shutdown and near-default on federal obligations, no one expects GOP lions to lie down with Democratic lambs, and conference committee members all but dismissed a grand compromise to stabilize the country’s finances.
“The bar is pretty low; let’s see if we can clear it,” House Budget Committee Chair Paul Ryan, R-Wis., said.
The big question is what role, if any, higher revenues should play in the deal-making. Undoubtedly, higher taxes will be required to pay for the costs of an aging society. Republicans generally say “no way,” while Senate Majority Leader Harry Reid, D-Nev., has declared that higher taxes are a must.
The U.S. tax code is riddled with $1 trillion worth of exclusions, exemptions and credits. These breaks distort markets and disproportionately benefit top earners. Eliminating or blunting them would be part of any sensible tax reform.
For the most part, however, revenue is not indispensable to achieve the task at hand: a short-term deal that avoids most or all of the sequester while re-allocating spending among defense and non-defense programs. This could be paid for by savings in entitlement programs not subject to the sequester.
In contrast to the hard line Mr. Reid has voiced, Mr. Obama reportedly told GOP senators that revenue is not a deal-breaker for him, depending on the broader shape of the deal. Given the GOP’s very real political advantage – current law makes a reversion to sequester automatic if the conference fails – this strikes us as a sensible position.
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