So my readers have probably already caught hints and likely are more up on the gossip that I am but let me make this point jumping off of Kevin Drum

The Wall Street Journal reports that means testing of Medicare is one proposal on the table, while the New York Times reports that Boehner might agree to $1 trillion in revenue increases in return for the bigger deal, possibly including an end to the Bush tax cuts for the wealthy. A few comments:

  • Unlike a lot of liberals, I’m open to deals on Medicare and Social Security. Obviously the details matter, but means testing of Medicare has always been a reasonable policy option, while small changes to Social Security’s inflation calculations have a lot of support from both liberal and conservative analysts. This isn’t necessarily a disaster.

Is anyone taking note that if Obama – as he said he would in response to the Modeled Behavior tweet – keeps not only the Bush Tax cuts but his own tax cuts for the middle class; and keeps the structure of Obamacare intact; and means tests Medicare; and cuts the growth rate of Social Security payments for higher income folks; and goes back to Clinton tax levels on the wealthy that this will represent an enormous increase in the progressivity of the US fiscal code.

Though many GOPers seem not to mind, cutting tax expenditures not only makes the tax code more progressive but in the case of deductions actually increases the effective marginal tax rate. In addition, means testing is mechanically equivalent to a marginal tax increase. Slowing the growth of Social Security for higher income folks is similar though not completely equivalent to a marginal tax increase.

I am not coming out for or against any of these. I actually think marginal tax rates per se are not as important as many think. Nonetheless, its important to see what is going down here. If you look at the entire fiscal structure of the US government it looks to become radically tilted in favor of the lower middle class and paid for more or less by marginal tax increases.

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