Congressional Republicans appear to be quietly but methodically executing a plan that would a) avoid a federal bailout of spendthrift states and b) cripple public employee unions by pushing cash-strapped states such as California and Illinois to declare bankruptcy. This may be the biggest political battle in Washington, my Capitol Hill sources tell me, of 2011.
President Barack Obama’s debt reduction commission defined tough fiscal choices for Washington, though its members weren’t unanimous enough to force the ideas on lawmakers. But even if they had, the panel pulled punches on healthcare cuts. Reducing that burden may be central to the next presidential election.
As you can see from the chart below, this plan — if you exclude interest savings — actually depends quite a bit on revenue as opposed to spending cuts — 45 percent to 55 percent. The UK austerity plan is more like 3-to-1 spending over tax increases. Of course, when healthcare is basically off limits, it kind of limits your options:
Alice Rivlin (who is on the Obama deficit commission) and former Senator Peter Domenici have cooked up their own plan to restore America’s long-term fiscal solvency. But first, a chart from the plan itself that says a lot: