04/10/2013 10:01 am ET Updated Jun 10, 2013

Another Day, Another Budget...

Up early, amply caffeinated, and already mixed it up with Joe Kernan on CNBC on the president's budget due out later today, though details are trickling out.

Here are the White House's bullets:

  • Creates jobs by responsibly paying for investments in education, manufacturing, clean energy, infrastructure, and small business.
  • Includes 1.8 trillion dollars of additional deficit reduction over 10 years, bringing total deficit reduction achieved to 4.3 trillion dollars.
  • Represents more than two dollars in spending cuts for every one dollar of new revenue from closing tax loopholes and reducing tax benefits for the wealthiest.
  • Deficit is reduced to 2.8 percent of GDP by 2016 and 1.7 percent by 2023 with debt declining as a share of the economy, while protecting the investments we need to create jobs and strengthen the middle class.
  • Includes 400 billion dollars in health savings that crack down on waste and fraud to strengthen Medicare for years to come.

The shift to the chained CPI, a benefit cut for Social Security, is embedded in the $1.8 trillion in savings in the second bullet, as is the cost of a benefit bump up for older workers to help offset the cut (i.e., they reverse some of the impact of the cuts with revenues from the switch to the slower growing price index).

I'm glad to see them leading with the jobs measures, though hard to see them getting very far. But once the actual budget numbers come out later this morning, I suspect its architecture will reflect more of an "accelerator now, brake later" in terms the competing imperatives of near-term job growth and long-term debt reduction.

Re the latter, they lay out the $1.8 trillion in deficit reduction as follows:

  • $580 billion in additional revenue relative to the end-of-year tax deal, from tax reform that closes tax loopholes and reduces tax benefits for those who need them least;
  • $400 billion in health savings that build on the health reform law and strengthen Medicare;
  • $200 billion in savings from other mandatory programs, such as reductions to farm subsidies and reforms to federal retirement benefits;
  • $200 billion in additional discretionary savings, with equal amounts from defense and nondefense programs;
  • $230 billion in savings from using a chained measure of inflation for cost-of-living adjustments throughout the Budget, with protections for the most vulnerable;
  • $210 billion in savings from reduced interest payments on the debt; and
  • $50 billion for immediate infrastructure investments, as noted earlier, to repair our roads and transit systems, create jobs, and build a foundation for economic growth [this is a cost, if you're keeping score].

The first bullet raises revenues though a 28 percent cap on deductions for households in the top 2 percent of the income scale, above $250,000, and the "Buffet rule," a 30 percent minimum effective tax rates on incomes above $1 million (most of the revenue comes from the cap).

This is the price to the Republicans for the cuts to Medicare and Social Security, and thus far, they've been adamant that they will not compromise. If that's so, then they should never be able to speak the words "grand bargain" again, as that's what's on offer here: entitlement cuts for new revenues.

The $230 billion there refers to the chained CPI, including savings from program cuts and about $100 billion from revenue increases. Remember, under this price index, the tax brackets grow less quickly, so more income passes into higher brackets than under the current price adjustments.

Also, see that $200 billion in additional discretionary cuts? Very bad idea. The caps on this spending, at least on the non-defense side of the ledger, are already too deep.

Two observations. First, there are two budgets in here. The Boehner offer that comprises the second set of bullets above, and a lot of stuff that's been in President Obama's budget since he came on the scene but has never been enacted, along with some new initiatives, like his very cool pre-school idea, paid for through higher tobacco taxes.

I think the important point to emphasize, with the huge caveat coming in a moment, is that when the White House says, "this is not a menu -- Republican's don't get to choose the chained CPI from column A and reject the revenue increases in column B," they're referring to the Boehner offer. The other parts, like the pre-K plan, can be ordered a la carte.

OK, let's be clear. It's highly unlikely that any of this is going anywhere soon. Republican intransigence on tax revenues will continue to produce the gridlock that's ground fiscal policy to a halt, though perhaps now even the most misguided commentators will not be able to frame this as "a pox on both their houses!" Clearly, the White House is open to compromise, more open, in fact, than many of their Democrat allies.

So we'll slog along under the various patchwork solutions ("continuing resolutions"). There will be an ugly dustup around the next debt ceiling, though my sense (or at least my hope) is that enough Republicans are burned out on default threats to avoid that dismal fate. In which case we end up with some agreement that gets Democrats to swallow something they don't like -- maybe some more hacking away at the discretionary caps (ugh) -- in exchange for another temporary increase in the ceiling.

I'm sorry if none of this is uplifting. But like I said last night, we're stuck with the worst fiscal policy process and outcomes I've seen in decades in this business. I obviously get the importance of getting into the weeds of all these budgets, but at this point it's more important to get out the weed whacker and figure out a way out of this mess.

This post originally appeared at Jared Bernstein's On The Economy blog.