Tuesday, July 19, 2011


I guess political astuteness is not a prerequisite in the financial markets:

The market reacted very favorably to the emergence of a compromise deficit reduction plan in the U.S. Senate and President Obama's tacit endorsement of it.

At around 1:15 -- when the White House said the President would be making a statement at the daily briefing -- the market began to rally.... The Dow finished up more than 1.6 percent....

Does someone want to explain to Wall Streeters that the overlords of our political system, the Norquistian Republicans, will not accept the Gang of Six plan under any circumstances whatsoever?

Gang of six plan raises taxes by $3 trillion

The Gang of Six "Bipartisan Plan to Reduce Our Nation's Deficits" claims their tax reforms would be scored by the Congressional Budget Office as a $1.5 trillion net cut. But no details are provided on how they arrive at this number other than saying they will abolish the Alternative Minimum tax. So how can this plan claim to be a "balanced approach" (which means higher revenues), yet also claim to be a $1.5 trillion tax cut?

This probably means they are using a CBO baseline that assumes the AMT continues as written today and that the current Bush rates expire. Last August, the CBO said those policies would amount to a $4.8 trillion tax hike. Which means the the Gang of Six plan probably raises taxes by about $3+ trillion over current rates.

That's the assessment of The Washington Examiner. Over at The Wall Street Journal, we get a different take on whether this is a tax cut or a tax increase -- and the Journal's take makes it even clearer that the plan is doomed:

Measured against current law, the Gang of Six plan is a [$1.5 trillion] tax cut. The law currently says that the Bush tax cuts expire at the end of 2012 for everyone and that the pesky Alternative Minimum Tax will reach deeper into the middle class (because it doesn’t automatically adjust its thresholds for inflation)....

But no one expects current law to prevail. Congress every year, for instance, puts a patch on the Alternative Minimum Tax so it won't hit more families. And both the White House and many Republicans want to extend the Bush tax cuts for taxpayers with incomes under $250,000 a year. (The argument is over expending them for taxpayers with higher incomes.)

... Against [a "realistic"] baseline, the Gang of Six raises about $1 trillion revenue over 10 years, roughly the same sum that the Bowles-Simpson plan did. That's how it's also a tax increase.

"That's how it's also a tax increase"? No, that's how it's a tax increase -- no "also" involved. Our Norquistian overlords would rather have a global nuclear holocaust than the expiration of the Bush tax cuts -- all of them -- so they will see to it that those tax cuts are renewed forever (unless lower tax rates are negotiated as a substitute). Therefore, only one kind of baseline is acceptable for the Gang of Six plan: one that assumes continuation of those Bush cuts.

Therefore, to the Norquistians, the G6 plan is a tax increase. And thus it has zero chance of passage.

(Which doesn't necessarily mean, as I'm sure Lawrence O'Donnell will claim tonight on MSNBC, that President Obama's positive response to the plan is "rope-a-dope." But it may as well be, because the thing is DOA.


ON THE OTHER HAND: Grover Norquist himself has responded to the plan, and his me4ssage is "wait and see":

... The Gang of Six 'plan' is not written in legislative language. It is an outline. It punts many decisions to the Senate Finance Committee. It deals in ranges rather than specifics. When it is eventually written down in legislative language and every American can read it, taxpayers will then learn whether the 'plan' raises taxes or cuts taxes and seriously reduces spending or fails to mandate spending reductions. It is a mistake to invest one's hopes or fears while the 'plan' remains unclear and subject to change by a Senate Finance Committee selected by Democratic leader Senator Harry Reid (D-Nev.)....

So he's not murdering it in its crib -- yet. That's too the left of where I thought he'd be. But he still reserves the right to order his minions to oppose it -- and I'd have to wonder if some of the teabag members of Congress are more Norquistian than Norquist, and would want to block it in any case. But if he's not unalterably opposed already, that's a bit of a surprise to me.

Though this Norquist blog post does appear on the same site that still demands complete Republican abandonment of the Gang of Six. That message is till on Norquist's front page: "Tell Senators Crapo and Chambliss to Leave the Tax-Increasing Gang of Six." You'd think a guy having a shift in attitude about the G6 would take that down.

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