A plan, a plan! We have a plan, we just aren’t telling you what it is, not just yet.
And just because you and I don’t know what’s in it doesn’t mean that this budget plan from the Group of Six might not be a solid foundation for building a way to get the nation’s budget out of the ditch, and maybe get support for a debt ceiling increase before the government defaults on its loans in two weeks.
Today, a bipartisan group (or Gang) of six senators that has been meeting privately for months looking for a way out of the federal budget quicksand briefed Senate colleagues on a plan to cut about $4 trillion dollars from the budget deficit over the next 10 years. The plan is said to be similar to the one presented by the president’s deficit study commission, and calls for spending cuts and tax increases (yeah, I said it—tax increases). A number of Republicans and Democrats came out of the meeting with positive things to say about this effort.
President Obama praised the plan, noting that it’s “consistent” with the approach he’s been pushing in recent negotiations. Now, that may be all it takes to doom the plan in the eyes of Obama-haters, but there’s still hope. This plan will be there waiting for both houses to pick up after the GOP’s “Cut, Cap and Balance” plan fails to win approval; it wouldn’t be ready to be implemented right away, but could show enough good faith for enough Republicans to do what has to be done right away—raise the debt ceiling by August 2 to prevent government default and all the consequences that will bring to the economy, and to you and me.
Just for good measure, on that proposal for a balanced budget amendment: Dahlia Lithwick and Doug Kendall make an interesting case that amending the Constitution to require a balanced budget, in the way that Tea Party members are proposing to do, would actually “crash headlong into the very constitutional principles the Tea Party purports to cherish” and that if successful could hamstring the nation’s ability to defend itself. Here’s hoping they’re still capable of seeing the irony of this situation.
HEY, IT'S PAT RYAN'S BLOG! 
The sad thing here is all these adults equating increases in tax rates with increases in tax revenue — which is what we really want. Increased tax rates only work if every other factor is held constant… which is impossible since tax rates are drivers of many of the other factors such as investment strategy, hiring, relocation, etc. There are many econometric models indicating that tax rate increases have a suppressive effect on tax revenue because fewer people are employed, wealth/businesses flee, etc. The Laffer Curve.
I can’t help but think lawmakers, or at least somebody on their staff, know this but it’s deemed too complicated for the requisite sound bites. So we’ll have posturing and declarations of victory based on rates, up or down, and none of it will have much to do with whether we will have increased tax receipts.
Cuts, are slightly less ephemeral. Many cuts tend to come back…or can’t take effect for years…or it’s later determined that the money is a legal obligation, etc. We live in shades of gray. But, in general, “cutting” is more likely to deliver the expected value than “raising.”
A good point, that higher tax rates don’t automatically mean increased revenue. That’s not to say that lower rates automatically mean increased revenue, though; there are econometric models to make that point, and we’ve seen it come true in real life. Right now I think we need a combination of more revenue and lowered expenses to pull the economy back from the brink; then we need Congresses that will stop blithely spending more than we have, which is probably contingent on having more citizens who are realistic about what government can afford to do.