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'Gang of Six' Plan: Illusory Cuts, No Entitlement Reform, Trillions In New Taxes

When the bipartisan 'Gang of Six' announced its initial framework on Tuesday, I considered its supposed benefits with a jaundiced eye.  I worried that it fell unacceptably short on specifics, expressed suspicion over its promised "net tax reduction," and raised concerns over a number of Washington weasel words embedded within the document.  Yesterday, we posted a battery of red flags about the proposal, as enumerated by former OMB official Jim Capretta.  Today, former White House economic advisor and Hoover Institution fellow Keith Hennessey wades into the debate, and his verdict is unambiguous: The 'Gang' plan is completely unacceptable to conservatives, and must be stopped.  Hennessey lists 17 substantive objections to the proposal, each of which is worth your time.  Here are a few of the most alarming elements of a deal that has the press corps -- and even some conservatives -- panting with excitement (emphasis mine):


It cuts defense spending while hiding the ball on nondefense spending: The only discretionary spending number provided is $866 B in defense (security) discretionary savings over the next 10 years.

The promised deficit reduction is both overstated and less than is needed: Their $3.7 trillion of claimed deficit reduction is bogus. It includes an unspecified amount of savings from a future legislative fast-track process that would require further Congressional and Presidential action if health spending growth exceeds a certain target.

It is a huge net tax increase: The Gang of Six plan would increase taxes by $2.3 trillion over the next 10 years relative to current policy. That’s roughly a 6.5 percent increase in total taxation. Put another way, the Gang of Six plan raises taxes $830 B more than would President Obama’s February budget.

It trades a permanent tax increase for only a temporary respite on spending: The plan proposes permanent increases in net taxation levels in exchange for a temporary slowdown in spending. The consequence of this would be kicking the can down the road. Deficits would be smaller for the next 5-10 years while the higher tax levels offset entitlement spending growth. But since the plan does nothing to flatten the curve of Social Security, Medicare, or Medicaid spending, 5-10 years from now we will be right back where we are now, but with higher levels of taxation.

It precludes structural reforms to Medicare and Medicaid: The Plan says “while maintaining the basic structure of [Medicare and Medicaid].” That language precludes needed fundamental reforms to these programs, as contemplated in Bowles-Simpson, Rivlin-Ryan, or the House-passed budget resolution.

It leaves the core trillion dollar ObamaCare health entitlement in place: This problem is not specific to the Gang’s proposal, but it’s another reason for me to oppose it. Why are we talking about raising taxes and cutting defense spending at the same time that we are creating a new trillion health entitlement promise?

It locks in the net tax increase, then hopes to deliver on the stated tax reform policies: Procedurally the Gang’s plan would be turned into a budget resolution that can only commit the Senate to a total level of taxation, one that is way too high. After the budget resolution has been passed, then tax reform legislation would move (the plan says “within six months.”) If you are tempted by the promised details of tax reform, remember that those details would be negotiated after the Senate had already committed to a $2.3 trillion tax increase.Even if I could swallow a $2.3 trillion tax increase, which I can’t, I don’t trust the tax reform process enough to take that risk. The plan offers no procedural guarantees to prevent the tax policies described within it from being ignored by the Senate Finance Committee.


That last point is especially disquieting.  From a conservative perspective, one of this proposal's key selling points is its slashing and flattening of marginal income tax rates.  Hennessey reveals that there is absolutely zero guarantee that this will ever come to pass.  The deal calls for the passage of tax increases (not to mention a huge debt ceiling hike) almost immediately, in exchange for future, promised tax code reform -- crafted by the Democrat-controlled Senate Finance Committee, the people who brought you Obamacare.  And how will this magical feat come about?  Slate's Dave Weigel, hardly a right-winger, notices that a majority of the Gang-plan's cost-saving mechanisms are hypothetical, or will be ironed out at some later date by "working groups:"

What does the Gang have so far? There are lots of "ifs" and working groups -- they outnumber the clear decisions.

Is there any reason under the sun to agree to a deal featuring trillions in tax hikes and phony/unspecified/unlikely spending cuts (except for the explicit military cuts, of course) based on the word of Senate Democrats?  These are the same Senate Democrats who have willfully ignored the law by refusing to introduce a budget for the last 813 days -- for the express purpose of escaping criticism and deflecting the public's attention to their deceitful scare-tactics against conservative solutions.  Democrats have proven themselves willing to flout federal statute for more than two years to gain a short term political advantage.  It therefore borders on mind-numbing naivety to believe they won't find a way to wriggle out of, drag their feet on, or straight-up abrogate, a back-room handshake deal that happens to offend a left-wing article of faith. 


Under this plan, Democrats get what they want first.  Republicans cross their fingers and hope the best.  This is madness.  If Cut, Cap, and Balance fails to become law -- which it will -- and if the House doesn't pass a cagey and tenable back-up plan very soon, Congressional Republicans may be forced into the political Sophie's Choice I described yesterday.  Given all the information we've gathered in the last 24 hours, it's becoming clear that even the McConnell plan (hell, almost anything, including Bowles-Simpson, for that matter) would be preferable to this egregious "framework."

Just say no.

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