News that President Obama and Republican House Speaker John A. Boehner have reached a deal on a plan that would raise the ceiling on the amount of money the country can borrow and cut the national deficit by $3 trillion over 10 years is causing heartburn among minorities and middle class Americans.
Details are still sketchy and both the White House and Boehner’s office deny that a deal is in place. However, reports based on leaks by those who say they were briefed about the deal suggest the plan already exists.
The plan is not getting a warm welcome from African-Americans and other minorities and progressive groups and with good reason. It grants most of what Republicans have been calling for, including deep spending cuts upfront on key entitlement programs, such as Medicare, and significant changes to Social Security, while short-changing the Democrats by deferring any revenue increases to a future date.
Instead of raising taxes, the plan attempts to close tax loopholes used by major industries, such oil and ethanol, to avoid paying their fair share of taxes or benefits from government subsidies. Revenues of about $1 trillion would come from a rewrite of the tax at a future date, according to those who know of the deal.
The fate of the Bush tax cuts, especially for the top earners, is still in dispute. The plan must be completed and voted on by the Aug. 2 deadline when the government is expected to run out of money to meet its debt obligations and pay its bills. If there’s no agreement by then, the U.S. government would default, which would have serious consequences.
President Obama is working around the clock to craft a deal that would be acceptable to Republican leaders of the House so that they can agree to raise the ceiling on the counry’s $14.3 trillion debt. Standard & Poor’s issued a second warning on Thursday that there’s a 50 percent chance the triple-A credit rating for the U.S. government will be cut to double A, a lower investment-grade rating, because there doesn’t appear to be any sign that a deal will be reached by the deadline.
Both the Progressive Caucus and the Congressional Black Caucus have denounced the plan, saying it amounts to asking the poor to shoulder the burden while letting the rich get off scot-free. The spending cuts would start immediately and would affect key programs that help the poor and the elderly, including Medicaid, Medicare and Social Security. Means testing for Medicaid recipients, which means reducing medical payments for those with higher earnings or the well-off, has been floated, as well as raising the retirement age by a year or two.