POWIP Piece of Work In Progress

OK, today we have the “gang of six” putting forth their debt ceiling plan

The Gang

Apologies, kind reader, as we bring you yet another permutation of a debt ceiling compromise plan, this time from the Senate's erstwhile "Gang of six".  Recently rejoined by the reliably staunch Senator Tom Coburn, who proferred his own plan just yesterday, and therefore fully staffed and reconstituted, the "Gang" has jumped headlong into the parliamentary furball.  I know this is all getting very dizzying, but with the witching hour fast approaching plans are being put forth faster than drafts of a slacker undergrad's term paper the night before it's due.  From The Hill:

Democratic and Republican senators are rallying behind a $3.7 trillion deficit-reduction plan announced Tuesday morning by the five remaining members of the Gang of Six.

Sen. Tom Coburn (R-Okla.), who pulled out of the Gang of Six in May, has rejoined the group and praised the plan as something that could win the 60 votes needed to pass the Senate.

“The plan has moved significantly, and it’s where we need to be — and it’s a start,” Coburn said. “This doesn’t solve our problems, but it creates the way forward where we can solve our problems.”

Sen. Mark Udall (D-Colo.), in saying he would support the gang’s plan, added: “There’s a lot of support for turning the gang into a mob.

Coburn said the plan would reduce the deficit by $3.7 trillion over the next 10 years and increase tax revenues by $1 trillion by closing a variety of special tax breaks and havens.

He also noted, however, that the Congressional Budget Office would score the plan as a $1.5 trillion tax cut because it would eliminate the Alternative Minimum Tax. It would generate a significant amount of revenue out of tax reform and reduction of tax rates, which authors believe would spur economic growth.

Coburn said he expected a “significant portion of the Senate” to support the plan: “maybe 60 members.”

According to an executive summary, the Gang of Six plan would stabilize the debt by 2014 and reduce publicly held debt to 70 percent of gross domestic product by 2021.

It would involve two separate bills, one implementing $500 billion in immediate deficit cuts and another implementing larger reforms. Conrad said that he has held off marking up a budget in committee to use the normal budget process to move the Gang of Six plan.

On entitlements, the plan would fully pay for the Medicare “doc fix” over 10 years, allowing doctors to avoid a drastic cut in Medicare payments under the law which is regularly avoided but never paid for.

Conrad said 74 percent of the plan’s deficit-reduction goal would come from spending cuts and 26 percent from higher revenues. Conrad said that the framework addresses Social Security but does not use savings for deficit reduction.

The fallback plan being discussed by Senate Majority Leader Harry Reid (D-Nev.) and Republican Leader Mitch McConnell (R-Ky.) would include $1.5 trillion in spending cuts and set up a special committee that would put together a larger deficit-reduction package that would come straight to the Senate floor. But some lawmakers see such a committee as a waste of time that would merely replicate the work already done by President Obama's fiscal commission and the Gang of Six.

“I think what happened this morning is that the Gang of Six began to turn into a bipartisan majority of senators who want to solve a national problem rather than play partisan politics,” Lieberman said. “I am ready to sign up.

A lot to take in, I know...But on the upside, at least the controversial McConnell-Reid plan seems to be fading as a broad consensus of Senators come over to this newest scheme.  More details on the deal from Politico:

To enact a comprehensive deficit plan, the group calls for congressional committees to report legislation within six months that would “deliver real deficit savings in entitlement programs over 10 years,” the plan says.

It calls on the Finance Committee to permanently reform or replace Medicare’s Sustainable Growth Rate - an outdated formula aimed at determining the amount to reimburse doctors for treating Medicare patients - by $298 billion.

The Finance Committee would be instructed to deliver “real deficit savings” through simplifying the tax code and raise as much as $1 trillion. It would do this by establishing three tax brackets with rates of 8-12 percent, 14-22 percent and 23-29 percent. It would permanently repeal the $1.7 trillion Alternative Minimum Tax. And it calls for establishing a single corporate tax rate, between 23 percent and 29 percent, and to move to a competitive territorial tax system.

Overall, the group claims it would result in a $1.5 trillion net tax decrease.

The group punts many of the specifics to other committees, which would be asked to find savings in discretionary and mandatory spending. This includes: $80 billion out of Armed Services; $70 billion out of Health, Education, Labor and Pensions; $65 billion out of Homeland Security and Government Affairs; $11 billion out of Agriculture; $11 billion out of Commerce; $6 billion out of Energy and Natural Resources. The Judiciary Committee would be asked to find savings through medical malpractice reform.

The tax reform part sounds pretty darn solid to me. Eliminate loopholes? Check.  Lower the personal rates? Check. Perhaps more importantly, lower the Corporate rate and eliminate the verdamnt AMT? Check, baby !  Overall, from the tax side it sounds to me like a package that will foster growth by leaving businesses and consumers more of their own money to spend how they see fit; hopefully, at least on the business side, by expanding and creating jobs.

Am I happy with the notion of $500 billion in immediate cuts with another $1.7 trillion to come later. Not at all.  Too many times in the past we've had deals that relied on cuts-to-be-named-later, and frankly, later never came; the most glaring examples being as part of the tax deals of 1986 and 1990.  As a first impression, though, I'm tempted to trust Senator Coburn's honesty, candor, judgment, and record of dedication to fiscal responsibility and austerity; at least until I can read through the details myself.  An executive summary can be found here, in the form of a downloadable scribd pdf file at zerohedge; where Tyler  Durden is skeptical that an accounting game is being played, at least in part, by redefining a new CPI index to use in determining social security increases.

That's all for now, kind reader.  Isn't it enough?  You have this plan by the "Gang of Six", yesterday's plan by Senator Coburn himself, and the Cut, Cap, and Balance plan due to be voted on in the House of Representatives today.  While there will no doubt be exhaustive analysis of these offerings done in the next 24 hours, to be sure, we strongly urge you to familiarize yourself with the details so that you can separate the sweetness from the shinola in all the coming blather.

Tell us what you think.  As always, we value the insight of our informed commentariat...

[Cross posted at The Conservatory]

Rocketman