So the next round in the deficit battle relates the congressional supercommittee, which is assigned finding about $2 trillion in additional cuts by the end of the year. And right off the bat, we see a dispute over which baseline the CBO should use in assessing the effect of any proposals.
Paul Ryan's cynical jockeying on the matter is almost laughable. As I understand it, he says the CBO should use current law as the baseline, which means we should assume all the Bush tax cuts will expire. In that context, any Dem effort to extend the cuts for the middle class would drive up the deficit (because it shrinks revenues).
But how insane is that? If baselines are supposed to be the best estimate of how the real world will look, the corollary would be that Republicans actually believe all the cuts will expire. [If that were the case, the actual deficit would come down 40%, given the central role the Bush tax cuts have played in creating shortfalls.]
Of course, Ryan's real goal is the exact opposite: he wants to create an uphill battle for those wishing to untether the top rates from the rest of W cuts -- i.e., head off any attempt to do that within the committee, even though we know for certain Republicans would never let all rates expire.
This makes me believe that the committee won't even get out of the starting gate. So more and more, I see the next meaningful battle to be over the expiration of the Bush cuts themselves. I foreseee a scenario where they all expire, and then, assuming Obama gets re-elected, the president immediately sends a middle class tax cut bill to Congress in early 2013.
At that point, if Republicans vote against the package, they really would be sacrificing average Americans to protect the very wealthy; the default paradigm will have shifted, in that all rates will be higher pending passage of that middle class tax cut.
The big wildcard is how Republicans plan to use the debt limit again. If our credit rating is held hostage during what I describe, how do Democrats respond? Maybe Obama as a second-termer will at least keep handy a constitutional option, so we're not watching helplessly as the hostage has a gun held to his head.
And of course, the outcome of the election itself will matter too. If voters rebel against tea-partiers, it's possible Congress will be more friendly.