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This Game of ‘Debt Chicken’ Is Getting Scary

Ideally, the two sides would have started work last December on the $3.9 trillion proposal of the president’s debt commission. The plan envisioned spending cuts of $2.2 trillion and revenue increases of $995 billion from 2012 to 2020 — a ratio of more than 2-to-1 spending cuts — with $785 billion of the revenues coming from tax reform. Obama could have embraced that proposal in his State of the Union and used it as the basis for his bid for a “big deal.” Instead, he ignored it and proposed a budget that would actually have enlarged the nation’s debt.

He proposed increasing spending on research, infrastructure and education — worthy investments in the country’s future — but no reductions in Medicare, Social Security or Medicaid benefits.

He is late arriving to the idea that those programs should be “on the table.” He’s saying he’s now for 2-to-1 spending cuts over tax increases, but he wants to hit Republicans squarely where they live by raising rates on couples making more than $250,000 in 2013 and offering few tax reform or spending specifics.

Obama has been saying he’d veto any short-term debt extension. Now Boehner and others are urging a renewed attempt to go for a $2.4 trillion package of the kind that was being negotiated by Vice President Joseph Biden until Republicans walked out of the talks.

The administration has put it out that the Biden group had agreed on $1.4 trillion in spending cuts and $300 billion in interest savings, leaving a $700 billion gap to be closed with revenues. Republicans dispute that Democrats actually came up with cuts that big — and they also balked at any tax increases.

And there are other options. Next week, former Comptroller General David Walker will be out with a few that he says will avoid the need for Republicans to vote for tax rate increases.

It could be done, he says, by changing the formula by which benefits are indexed for inflation — which will also increase tax revenues without hiking tax rates and by means-testing Medicare.

Walker also advocates imposing goals for future deficit reductions and triggers for automatically slicing spending and increasing revenue if the targets aren’t met.

Both Republicans and Democrats say they will vote to raise the debt limit and won’t let the country default. But how? Time is getting short and they are both roaring toward the cliff, not away from it.

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