As time runs out for negotiations, the Democratic and Republican Members of the joint Select Committee on Deficit Reduction have reportedly developed substantially different proposals for addressing the federal deficit. Democrats proposed a “grand bargain”— as much as $3 trillion in spending cuts and new taxes on wealthier households. The Democratic Members’ plan, likely to face stiff opposition from many Congressional Democrats, contains substantially smaller revenue increases and much larger cuts to Medicaid and Medicare than previous bipartisan proposals. According to press reports, under their plan, Medicaid and Medicare together would be cut by $475 billion over the next decade, though details of the plan have not been released. When considered with the cuts to discretionary programs enacted in the Budget Control Act, the Democratic plan provides for a 6:1 ratio of spending cuts to revenue increases.
Republicans responded with a $2.2 trillion package of steep spending cuts but gave no ground on their resistance to including revenues. Republicans pushed instead for an overhaul of the corporate tax code that would lower tax rates in a way they believe would spur economic growth and generate higher revenue.
Democrats have been willing to put on the table cuts to the Medicare and Medicaid health entitlement programs, but only if Republicans will meet them partway and agree to rein in tax breaks for upper-income earners. Republicans have consistently resisted new taxes, and most Republican lawmakers, including the 6 Republicans on the Joint Select Committee, have signed an anti-tax pledge from Americans for Tax Reform.
The 12-member committee of Republicans and Democrats is racing the clock to produce a compromise before its Thanksgiving deadline. Failure to cut at least $1.2 trillion from deficits over the next 10 years would force mandatory cuts, split evenly between defense and nondefense spending, that both sides want to avoid.