Go Big or Go Back: Challenge Rises as the Gang of 12 Looks To Old Deficit Reduction Proposals

If finding $1.5 trillion in deficit reduction was a tough task, the job for the Gang of 12 just got much tougher. President Obama’s request last week for the panel to find offsets for his $450 billion job initiative – setting a new bar at nearly $2 trillion in net savings – dwarfs in comparison to the $4 trillion the co-chairs of Obama’s 2010 Bowles-Simpson deficit commission is asking the Gang of 12 in a letter to come up with.

The letter called for the Gang of 12 to “Go Big” was signed on by 60 other business experts. The 2010 Bowles-Simpson deficit committee’s proposed plan to reduce the federal budget by $4 trillion in 10 years failed to obtain the supermajority votes needed to pass it.

Finding $4 trillion in deficit reduction is also supported by a bipartisan group of more than 30 Senators. The group, led by Sens. Mark Warner (D-Va.) and Saxby Chambliss (R-Ga.), also wants the Gang of 12 to draw from other plans that have been put forward, including from the Gang of Six, of which Warner and Chambliss were members.

While it may be too early to judge, it does appear that the Gang of 12 may not be willing to push the envelop with fresh ideas. “It wouldn’t make sense to try to reinvent the wheel,” California Rep. Xavier Becerra, a supercommittee member and the Democratic Caucus vice chairman, told POLITICO.

“We can take a lot of the good work that was done by any of these commissions and groups to give us a set of ideas which we can work off of,” he said. “If we do that, I think that can help us accelerate our time frame.”

According to Scott Wong of POLITICO, this means that there is a "familiar road map for the deficit panel: tax code reform, including closing loopholes for special interests and overhauling the big entitlement programs of Medicare, Medicaid and Social Security. Other cuts to domestic programs are also under discussion, though the Defense Department is fighting deep cuts to military programs.”

  

The Big Three: Medicare, Medicaid and Social Security

• Democrats on the House Ways and Means Committee last week recommended raising the eligibility age for Medicare to 67 from 65, an idea that has the backing of Obama and most Republicans. 
• The Gang of 12 could  borrow an idea from Obama’s Simpson-Bowles deficit committee: “Force drug companies to provide rebates to Medicare recipients, nearly a $50 billion savings.” 
• Obama also recommended hiking premiums for wealthier recipients. 
• President Obama’s recommendation for Gang of 12, however, will not include any changes to Social Security, which allows him to avoid a clash with his Democratic base over the popular retirement program at a time when he needs its support to push for his $447 billion jobs program and to buck up his lagging poll numbers. 

Tax reform

• According to a report by Scott Wong of POLITICO, Sen. Rob Portman (R-Ohio), a Gang of 12 member who served as President George W. Bush’s budget director, is "open to Democrats’ efforts to close tax loopholes — so long as the new revenue is used to lower overall tax rates. That’s an approach adopted by the Gang of Six and the Simpson-Bowles deficit commission."
• Baucus and Ways and Means Committee Chairman Dave Camp (R-Mich.) remains another launching pad for tax reform, according to Scott Wong. Earlier this year, "the two lawmakers launched a joint committee to identify ways to create jobs by simplifying the Tax Code, lowering rates and broadening the tax base."

How much sway do the Gang of Six and Simpson-Bowles have? 

That is yet to be seen. 

Former Congressional Budget Office Director Alice Rivlin, who served with Baucus, Becerra, Hensarling and Camp on the fiscal commission, isn’t discouraged by the fact that none of her former colleagues now on the Gang of 12 backed sending the Simpson-Bowles plan to Congress.

“It’s a new ballgame, and my hope is that they will [realize] this is a big opportunity to do a bipartisan deal because they have extraordinary powers,” Rivlin told POLITICO. “They could get it through the Congress with relative ease.”

The Gang of Six, however may have less influence. Despite having 30 Senate supporters, Congressional leaders have been "traditionally wary of freelancers who work outside the standing committee system [and] 'tend to like things to go in regular order,'" a Senate Democratic aide said in an article by Humberto Sanchez in Roll Call.