As part of a “grand bargain” to avoid the fiscal cliff before the end of the year, Sen. Chuck Schumer, D-N.Y., told reporters on Tuesday that Democrats might be open to “hundreds of billions of dollars” in new cuts in Medicare payments. The cuts -- actually reductions in the rate of increase in Medicare spending – would be part of a $4 trillion deficit reduction plan. If Democrats had their way, that plan would increase taxes on high-income earners while maintaining current tax rates for households earning less than $250,000 a year.
Schumer said the type of tax overhaul that has support from Republican presidential candidate Mitt Romney as well as bipartisan deficit-reduction groups including the Senate “Gang of Eight” promises “to hurt more than help in an age of record budget deficits and rising income inequality,” The Washington Post reports.
Romney has proposed restoring the $716 billion in cuts to Medicare providers called for under the Affordable Care Act and repealing most of the remaining legislation. His own Medicare reform plan would not kick in until 2023 at the earliest since he has promised not to change the program for anyone over 55.
“Certain conservatives will pocket the rate reductions and never follow through on finding enough revenue elsewhere in the code to reduce the deficit. Or, if they do, it will almost certainly come out of the pockets of middle-income earners,” Schumer said during a speech at the National Press Club. “This is the trap of tax reform, and we must not fall for it. It is an alluring prospect to cut taxes on the wealthiest people and somehow still reduce the deficit. But you can’t have your cake and eat it, too.”
Separately, Ezekiel Emanuel, a former adviser to the Obama administration, told a forum at the Institute of Medicine on the high cost of cancer care that officials in his party were talking about $400 billion in new reductions in Medicare spending over the next decade, according to Merrill Goozner of The Fiscal Times. That would come on top of the estimated $716 billion already taken out of projected increases under the Affordable Care Act.
WALL STREET IN WASHINGTON
Anxious over economic uncertainty, Wall Street executives are frantically pouring millions of dollars into an ad campaign to build support for a year-end congressional budget deal that does more than merely kick the can down the road. JP Morgan CEO Jamie Dimon and Goldman Sachs CEO Lloyd Blankfein say that even tax increases are on the table, according to a report by Politico’s Ben White and Jonathan Allen. “Naturally, that pits them against some powerful forces in Washington — namely, the Tea Party and anti-tax activist Grover Norquist, who for years has had conservative lawmakers sign a pledge to never raise taxes.” -- Read more at Politico
BIG CUTS AHEAD FOR TRANSPORTATION
Even if Congress steers the country away from the fiscal cliff, cuts to transportation may be unavoidable. The National Journal reports that a sequestration alternative created by Taxpayers for Common Sense includes $188 billion of cuts to federal transportation funding over the next decade, with $110 billion coming out of general revenue transfers to the Highway Trust Fund. Similarly, the advocacy group proposed a $50 billion cut to the Airport and Airway Trust Fund and a $22 billion reduction in Airport Improvement Program grants. -- Read more at National Journal
IMF: FISCAL CLIFF THREATENS GROWTH
The International Monetary Fund’s Carlo Cottarelli urged Congress to scale back its ambitions to reduce the budget deficit for fear that automatic spending cuts set to take effect in early January will threatenen the economic recovery. Bloomberg’s Scott Hamilton and Sara Eisen report that the IMF’s forecasts released Tuesday predict a smaller narrowing of the deficit on the assumption that a political compromise will be reached. -- Read more at Bloomberg’s Business Week
PHARMACEUTICAL GROUP PROPOSES PRESCRIPTION SAVINGS
In a letter to House and Senate leaders, The Pharmaceutical Care Management Association, proposed an alternative solution to sequestration that it claims will save more than $100 billion in prescription drug costs over ten years. "The solutions we outline would save more than $100 billion, improve prescription drug benefits, and increase access to these benefits," said Mark Merritt, President and CEO of PCMA. "During these difficult economic times, it is more important than ever to offer meaningful cost-saving solutions instead of special interest mandates that add to the deficit." -- Read the PCMA’s letter and proposal