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Municipalities Fight a Proposal to Tax Muni Bond Interest

December 19, 2012 by Leave a Comment

The average annual property tax bill in his affluent suburban Washington county would ultimately rise by at least $100, he estimates, as a consequence of a proposal by the Obama administration to modestly tax the interest that wealthy investors receive from municipal bonds. That’s because, he says, if investors see less of a tax break, they will demand higher interest to make up the loss, and higher interest rates will mean higher borrowing costs for governments.

Mr. Firestine is on the front lines of a lobbying campaign by local and state governments, bond dealers, insurers and underwriters that is trying to pre-empt any attempt to limit or even kill the tax exemption. The administration has proposed capping the tax break that America’s highest earners now receive from municipal bonds, as part of its campaign to close loopholes and enlist more of the rich in fighting the federal deficit. Analysts expect such a cap to be part of a comprehensive tax overhaul package that Congress will take up next year, under a broad fiscal framework now being negotiated by President Obama and House Speaker John A. Boehner.

“This is the most serious threat to tax-exempt bonds since Roosevelt, in the late 1930s, tried to repeal the exemption across the board,” said John L. Buckley, a professor of taxation at Georgetown University and former chief counsel to the House Ways and Means Committee.

At present, the federal government forgoes about $32 billion a year in taxes by exempting the interest that investors earn from municipal bonds.

A wealthy couple in the highest tax bracket who receive $100,000 a year in municipal bond interest currently pay tax on none of it, effectively lowering their total tax bill by $35,000 under the current rates. But under the administration proposal to limit tax breaks for households whose taxable income is more than $250,000, the same couple would see the savings on their tax bill reduced to $28,000, effectively resulting in a $7,000 tax payment. (People in lower tax brackets would not be affected by the change.)

There are other proposals for taxing muni interest. The National Commission on Fiscal Responsibility and Reform, known as the Simpson-Bowles commission, has suggested taxing all municipal bond interest, not just the interest paid to people in the top bracket. Other experts have suggested taking the exemption away from municipal bonds that raise money for business, while still allowing it for bonds that finance public works.

Mr. Firestine, the president-elect of the Government Finance Officers Association, has been following developments, through conference calls arranged by the White House, and calling members of Congress.

Officials of some other government groups, like the New York City Housing Development Corporation, have formed a coalition with Wall Street groups like the Bond Dealers of America to lobby on the issue. But there is the sense of an uphill battle. Last week, Mr. Boehner said he accepted Mr. Obama’s proposal to limit various tax deductions and exemptions to the value now received by people in the 28 percent bracket. By implication, that includes municipal bonds.

President Obama’s proposal would not “grandfather” existing bonds, but would apply to all of the $3.7 trillion worth of municipal bonds now outstanding, most of them held by individual investors, directly or through mutual funds.

High-bracket investors who hold them would have to start paying an effective tax of 7 percent of the interest — or even more if the highest tax bracket increases from the current 35 percent.

“This would be the first time that a tax law has affected existing debt,” said Chris Mauro, head of municipal bond strategy at RBC Capital Markets.

Investors are anxious because they bought the bonds, often issued for 20 to 30 years, in the expectation that they would be tax-exempt until maturity.

Article source: http://www.nytimes.com/2012/12/20/business/municipalities-fight-a-proposal-to-tax-muni-bond-interest.html?partner=rss&emc=rss

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News Analysis: A Simpler Tax Code, for Stronger Growth in the Long Run

December 1, 2012 by Leave a Comment

But a number of prominent economists cautioned that, while cleaning up the code is a worthy goal, it would do little to stimulate the flagging economy.

The kinds of changes being discussed in the heated back-room negotiations between President Obama and the House speaker, John A. Boehner of Ohio — raising $800 billion to $1.6 trillion in additional tax revenue, along with significant down-the-road spending cuts — would most likely depress growth in the short term.

Longer term, economists said, streamlining the code might improve the allocation of capital enough to raise growth modestly. The overall economy might be 1 to 2.5 percent bigger than it otherwise would be after five or 10 years, translating into perhaps more than one million jobs.

While that growth would certainly be welcome, it falls far short of claims from some tax reform evangelists, who predict that adding certainty and simplicity to the tax code would by itself ignite an economic boom.

“This religious faith that a broader base gives you a better tax system and economy is overly optimistic and simplistic,” said Alan J. Auerbach, the director of the Robert D. Burch Center for Tax Policy and Public Finance at the University of California, Berkeley. “I think the benefits can be overstated.”

Economists from across the political spectrum concur that the nation’s complex tax code most likely hampers growth. Tax rates Americans pay are so uneven that they not only raise fairness issues, but also cause distortions in the economy, inducing financial decisions that individuals might not otherwise make, and might not be the most efficient use of capital.

Tax rates on different kinds of individual income vary by 20 percentage points. More than $1 trillion a year in breaks — as varied as a tiny effort to aid domestic makers of toy arrows and the huge exclusions for state and local taxes — riddle the code.

The cumulative effect of those loopholes, preferential rates and special programs distorts how investors invest, economists said. “You put money in less-productive investments,” said Joel B. Slemrod of the University of Michigan, summarizing the problem.

For instance, analysts say generous tax breaks on home mortgage interest encourage Americans to buy bigger and more expensive houses, with little long-term benefits to innovation and economic growth. They also believe generous tax breaks on employer-provided health care spur higher health costs overall.

The bulk of economists agree in principle in the sensibility of “broadening the base” — or eliminating deductions and exclusions, to make more income taxable and allow for lower rates — to improve the overall investment climate.

Hypothetically, economists said, the growth effects of broad tax reform could be enormous. Huge overhauls, like replacing the income tax with a consumption or value-added tax, could increase economic output in the long run by as much as 9.4 percent.

But a consumption tax has few supporters in Washington because many warn that it would be regressive, shifting too large a portion of the tax burden onto lower- and middle-income Americans. Moreover, few politicians think that Congress could agree on passing such a big reform.

In the scheme of things, economists said, the kinds of changes on the table in Washington are far too small to make much of a difference, meaning in the long run they might inject a meager-to-modest boost to growth.

“Nobody’s talking about reforms that big,” said R. Glenn Hubbard, the dean of the Columbia Graduate School of Business and a top Republican economist. “Limiting deductions to raise revenue? That’s not going to raise growth at all. And raising rates would hurt growth.”

“I’m not even sure that the academic literature on tax rates and growth maps well onto what people are talking about now.”

Several experts cautioned that changes to increase taxes on investment and savings income might hurt long-run growth, even if it improved the progressivity of the code.

Article source: http://www.nytimes.com/2012/12/01/business/a-simpler-tax-code-for-stronger-growth-in-the-long-run.html?partner=rss&emc=rss

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Senate Passes Worker Aid Program

September 23, 2011 by Leave a Comment

WASHINGTON (Reuters) — The Senate handed President Obama a victory on Thursday by passing a program to help workers displaced by foreign competition, paving the way for action on three long-delayed trade deals.

The Senate voted to approve a bill containing a revamped Trade Adjustment Assistance program, which Mr. Obama had demanded as his price for sending free-trade pacts with South Korea, Colombia and Panama to Congress.

“Today’s vote is a major victory for American workers and a key step forward in our efforts to approve the job-creating free-trade agreements,” Max Baucus, Democrat of Montana and head of the finance committee, said in a statement.

The Senate Republican leader, Mitch McConnell of Kentucky, urged Mr. Obama to now show some “trust” in Republicans by submitting the agreements to Congress before the House has voted on the Trade Adjustment Assistance bill — a view that was echoed later by the House speaker, John A. Boehner of Ohio.

The retraining and income assistance program, which dates back to 1962, was expanded in the 2009 stimulus bill to cover more workers and provide more generous health insurance benefits.

However, the expanded provisions expired at the beginning of this year, and Republicans bent on reducing government spending balked at renewing them.

The bill passed by the Senate renews many of the 2009 provisions through 2013, like covering service industry workers in addition to those in manufacturing.

But it reduces the number of weeks of income support to 117 from 156 in the 2009 law, with up to 13 additional weeks available only under certain circumstances.

It also scales back a tax credit to help unemployed workers pay for health insurance, and makes it harder for people to receive income assistance if they are not in a retraining program.

The package costs about $900 million over three years, compared with about $2.1 billion for the 2009 bill.

During Senate action, Democrats defeated several Republican attempts to further reduce program costs or explicitly tie the program to approval of the pending trade deals.

Article source: http://feeds.nytimes.com/click.phdo?i=404b8244030ed8c46fdc7d26ab4dbc77

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Economic View: Taxing and Spending, in Balance

July 23, 2011 by Leave a Comment

The very term “fiscal stimulus” has become tainted. John Boehner, the House speaker, refers to a “misguided ‘stimulus’ spending binge.” It’s a label that reflects how many people have come to think of government expenditures to stimulate the economy — as a binge, maybe like an overdose of amphetamines. For amphetamines, the aftereffects are mental fatigue and depression. For fiscal stimulus, it is the headache of national debt — or at least that is the all-too-common view.

Fiscal stimulus is actually very useful and appropriate in the current circumstances. But rather than despair, we should at least consider what more we should be doing to deal with the pressing issue of unemployment. Let’s never give up proposing sensible economic policies.

Over the long haul, we should engage in balanced support of the economy, find worthwhile jobs for the unemployed and not inject stimulus for its own sake. That means we need tax increases matched by higher expenditures on public goods. Of course, both ideas aren’t very popular right now — but they should be. Granted, they won’t balance the budget immediately; trying to do so would damage the economy. Instead, we should plan to restore budget balance eventually, with matching additions on both sides of the ledger.

In December, I wrote about the concept of the balanced-budget multiplier and of raising taxes and government expenditure by the same amount, dollar for dollar. These ideas were first put on the national stage in 1943 by Paul Samuelson, the Nobel laureate. He argued that such a policy would be one-for-one expansionary: each dollar spent is a dollar of new national income. As long as interest rates are near zero — as they were then and are now — there should be no “crowding out” of private expenditures by government ones.

We can restore some worthwhile projects that have already been cut significantly, including programs in health care, education and other social services, infrastructure, the environment, and the arts and sciences. Beyond that, we should create major new programs, all paid for by additional taxes.

Ideally, these programs should involve real expenditures on goods and services that will immediately create jobs. With enough such support, we should be able to bring down unemployment until increased demand starts taking care of the problem itself.

This is an expansionary change in fiscal policy that won’t require additional increases in the national debt. We should start a dialogue right now about taking such action, before the damage of protracted unemployment worsens.

The fighting over the debt ceiling, the concerns about America’s credit rating — about the United States somehow going the way of Greece — have all taken a toll. Many people oppose raising the national debt. But the broader public has accepted tax increases many times before, and, with the right leadership, may do so again.

There are good arguments for balanced-budget tax increases. They don’t lower average after-tax income, since every tax dollar goes directly to providing someone with income. Even those hurt by a tax increase may accept the sacrifice if they know it improves the chances that unemployed friends or relatives will find jobs.

As a matter of simple math, balanced tax and expenditure increases would lower the ratio of debt to gross domestic product. That’s because the numerator (debt) is unchanged while the denominator (G.D.P.) increases. As a result, the policy would tend to strengthen the Treasury’s credit rating and restore confidence in the government.

Such a policy needn’t make government substantially bigger. Instead, the government would act as a kind of investment banker specializing in public goods. It wouldn’t need a lot of employees itself. It would seek private-sector proposals for building infrastructure and other useful projects, and bring in private-sector panels to review them. This would be akin to the role government already plays for science with the National Science Foundation.

We need to start work now on a shelf of ready-to-go plans. The government’s Public Work Reserve of the early 1940s provides an interesting precedent. In 2008, Martin Shubik, an economist and emeritus professor at Yale, proposed a Federal Employment Reserve Authority, which might work well. The government’s core roles would be simple: to make sure that informed parties participate in selecting projects and, eventually, to come up with the money through its power to tax.

SOME people say there are no big, useful projects for government spending these days. That’s absurd. We are already cutting important programs. And we’ve never run out of ideas for what to do with our private spending, despite the manyfold increase in personal income over the last century. The same should be true of public goods.

The problem with the fiscal stimulus that began in 2009 was that there weren’t enough worthwhile shovel-ready projects at the time. But this just means that Americans should start thinking now about what to do in a few years if the economy is still in trouble.

Fortunately, this is a resilient country, and some people are already thinking ahead. For example, the Rockefeller Foundation has an initiative that is researching how we can invest in a more efficient, effective transportation system — helping to reduce our time stuck in traffic or waiting in airports, and encouraging a more sensible use of land.

The John D. and Catherine T. MacArthur Foundation has an initiative supporting community-based services for juvenile delinquents, and has shown that such services could reduce the number of offenders under correctional supervision — recently more than seven million people in the United States.

These examples offer models for how we can start thinking about new projects to improve our national well-being — and how we don’t need to wait for Congress to act first. But our ideas have to be more concrete. We need big projects for which government support would be truly worthwhile; we shouldn’t rely simply on a revival of consumer spending to create more jobs.

Current trends suggest that we may be dealing with high unemployment for years. We should be prepared to provide balanced support to the economy.

Robert J. Shiller is professor of economics and finance at Yale.

Article source: http://feeds.nytimes.com/click.phdo?i=045e4a28c956269795af930dd2ca450c

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Stocks & Bonds: Earnings Propel Tech, And Subdue Industrials

July 23, 2011 by Leave a Comment

The broader market was up more than 2 percent for the week, largely in response to the deal European leaders reached on Greece’s debt on Thursday. For the week, the Dow Jones industrial average was up 1.6 percent. The Standard Poor’s 500-stock index rose 2.1 percent, and the Nasdaq composite was 2.4 percent higher.

On Friday alone, the Dow closed down 43.25 points, or 0.34 percent, at 12,681.16. The S. P. was up 1.22 points to 1,345.02, and the Nasdaq was up 24.40 points, or 0.86 percent, to close at 2,858.83.

Investors were also warily watching the deficit-reduction talks in Washington, where President Obama and the Republican House speaker, John A. Boehner, were trying to shape a deal and avoid a government default in less than two weeks.

Quarterly corporate earnings moved the markets on Friday. Caterpillar, which reported that second-quarter revenue was up 37 percent, said earnings per share were $1.72, slightly below expectations of $1.75, analysts noted. It also reported softening demand in China.

Caterpillar was trading about 5 percent lower through the day and closed down 5.78 percent at $105.15.

“It’s basically cause and effect,” said Lawrence Creatura, portfolio manager at Federated Investors.

Timothy Hoyle, vice president for research at Haverford Investments, said the results “disappointed the market.” But he added: “I think the market might be overreacting.”

Another major industrial company, General Electric, reported results that slightly surpassed Wall Street’s expectations in both profits and sales. G.E. stock fell 0.63 percent to $19.04.

Technology shares did well, helping to bolster the Nasdaq.

SanDisk exceeded expectations in its earnings report late on Thursday. The company said second-quarter revenue was $1.375 billion, up 17 percent from a year ago. It closed up more than 9 percent at $45.57.

Advanced Micro Devices on Thursday reported $1.57 billion revenue and net income of $61 million, or $0.08 a share. It rose more than 19 percent to close at $7.75.

Interest rates were lower. The Treasury’s benchmark 10-year note rose 14/32, to 101 12/32, and the yield fell to 2.96 percent, from 3.01 percent late Thursday.

“Debt deals in Europe, debt deals in the U.S., debt deals at home,” said Kevin H. Giddis, the executive managing director and president for fixed-income capital markets at Morgan Keegan Company, in a research note. “The potential ‘rise and fall’ of these is causing investors to take a more conservative approach on the last day of the week before what might or might not happen over the weekend.”

Financial markets in Europe on Friday continued to give a positive reception to the deal reached in Brussels by European leaders that gave Greece more time to deal with its mountain of debt. Bank stocks in particular benefited, and Greek, Irish and Spanish bonds continued to rally.

In Europe, the package of measures approved by euro zone leaders includes a reduction in interest rates for the two other bailed-out countries, Ireland and Portugal.

The Euro Stoxx 50 index of blue chips opened strongly but gave up some of its gains and ended the day up 0.3 percent. Greek 10-year yields dropped below 16 percent for the first time since June 8, sinking 137 basis points to 15.12 percent, according to Bloomberg News. Irish 10-year yields tumbled 52 basis points to 11.83 percent. Spanish 10-year bond yields fell eight basis points to 5.65 percent while yields on Italian debt of the same maturity declined eight basis points to 5.27 percent.

The euro rose against a number of currencies including the Swiss franc and the pound, but fell slightly against the dollar, to $1.4370. Analysts said a report showing German business confidence declined by more than forecast in July and was holding back stronger gains.

Article source: http://feeds.nytimes.com/click.phdo?i=45fe20e5ba1d364f3026df858765efed

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News Analysis: War of Ideas on U.S. Budget Overshadows Job Struggle

June 4, 2011 by Leave a Comment

Republicans said the slow pace of hiring in May underscored the need for sharp cuts in federal spending and regulation to spur corporate investment. They have refused to increase the debt ceiling, the maximum amount the government can borrow, without an agreement to make such cuts.

They argue that Democratic efforts to revive growth through public spending programs have failed as the economy remained weak and unemployment high almost two years after the end of the recession.

“You talk to job creators around the country like we have,” House Speaker John A. Boehner said Friday. “They’ll tell you the overtaxing, overregulating and overspending that’s going on here in Washington is creating uncertainty and holding them back.”

Democrats counter that Republicans are unnerving businesses by sowing uncertainty about the government’s willingness to pay its debts, and that immediate budget reductions would cut jobs and undermine growth.

Since the end of the recession in June 2009, private employers have added roughly a million jobs. During that same period, however, governments have cut 1.1 million jobs, underscoring the impact of reductions in public spending.

“Republicans in Washington are making it harder to create jobs,” said Representative Sander Levin of Michigan, the top Democrat on the Ways and Means Committee. “They threaten to shut down the government, they threaten to default on our nation’s debts and they threaten the jobs of teachers, police officers and many others. Creating this kind of uncertainty hurts our economic recovery.”

Almost 25 million Americans could not find full-time work during May, but their plight has not gripped Washington. Neither party has suggested that the issue deserves the kind of urgent response that might require ideological compromises.

The Federal Reserve, charged with minimizing unemployment, has indicated that it intends to stand back, waiting on further evidence about the health of the economy before considering new steps to stimulate growth. The central bank is immobilized by the same political forces as Congress, with conservative members of the Fed board and outside critics demanding that it withdraw the money it has pumped into the economy, and liberals arguing for additional aid.

The deadlock actually means that the government will steadily reduce its support for the economy during the second half of 2011. The Fed will complete a plan at the end of June to bolster growth by buying the last of $600 billion in Treasury securities. More than 80 percent of the president’s $800 billion stimulus plan has been disbursed. Last year’s package of $225 billion in tax cuts and jobless benefits will expire at the end of the year.

Both parties seized on the latest economic data as evidence for their positions on deficit reduction, an issue that has displaced jobs as the focus of public debate.

The government must borrow money to pay its bills, the amount it can borrow is set by Congress, and the present limit — the debt ceiling — will be reached in early August. Since taking control of the House and gaining Senate seats last year, Republicans have seized on the need to raise the debt ceiling to demand a broader deal on deficit reduction, including immediate cuts in spending.

Representative Jeb Hensarling, a Texas Republican, said the “administration doesn’t understand that one of the biggest impediments to job creation today is the lack of confidence, a lack of confidence in the future that comes from an administration where regulators have gone wild, from an administration threatening the largest single tax increase in America’s history and an administration that doesn’t take seriously the debt that is threatening our job creators.”

Democrats have been forced into the defensive argument that threatening not to raise the debt ceiling is irresponsible and will certainly shake the confidence of financial markets.

They argue that public spending programs like the stimulus and expanded jobless benefits have provided an incomplete but important response to the devastation wrought by the financial crisis. Representative Chris Van Hollen of Maryland, the top Democrat on the Budget Committee, noted that employment has risen for 15 consecutive months.

“With millions of Americans still out of work and families struggling to make ends meet, there is still more we must do,” said Mr. Van Hollen, a participant in bipartisan budget deal talks. “Unfortunately, Washington Republicans have failed to make job creation a priority. In fact, economists of every political stripe have said their budget would threaten our fragile recovery.”

Republicans have also embraced the argument of business trade groups that regulation is impeding economic growth.

“Today’s increase in the unemployment rate underscores the need for dramatic action to break down barriers to job creation. First among these are unnecessary regulations,” said John Engler, president of the Business Roundtable. “We need action by government agencies to clear out obsolete rules and streamline permitting to reduce delays and impediments for companies to invest and grow.”

“The private sector is the only hope for future job creation,” he said.

House Democrats have tried to seize momentum by rolling out a series of bills intended to bolster domestic manufacturing and construction under the rubric of “Make It in America.” The measures promote initiatives like high speed rail and other public transit projects, call for a permanent research and development tax credit and direct the government to develop a national manufacturing strategy.

But the proposals have little chance in the Republican-controlled House and represent a long-term view rather than an immediate fix for unemployment.

Article source: http://www.nytimes.com/2011/06/04/business/economy/04assess.html?partner=rss&emc=rss

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Budget Battle to Be Followed by an Even Bigger Fight

April 3, 2011 by Leave a Comment

Even as the two parties struggled over the weekend to reach a deal on federal spending for the next six months and avert a government shutdown at the end of the week, House Republicans were completing a budget proposal for next year and beyond. It is likely to spur an ideological showdown over the size of government and the role of entitlement programs like Medicaid and Medicare.

The plan, which is scheduled to be unveiled Tuesday, will be the most ambitious Republican effort since the November elections to put a conservative stamp on economic and domestic policy. It involves far greater stakes for Congress and for President Obama — substantively and politically — than the current fight over spending cuts.

The outcome of that fight was still uncertain on Saturday as Congressional staff members assembled new proposals and the White House said that Mr. Obama had called House Speaker John A. Boehner and Senator Harry Reid of Nevada, the Democratic majority leader, to urge them to find an acceptable compromise. He reminded them that time “is running short.”

The longer-term budget proposal has been led by Representative Paul D. Ryan, a Wisconsin Republican who is the party’s leading voice on budget matters, and will go beyond numbers to provide policy prescriptions.

It will call for deep spending cuts again in 2012, chart a path to reducing the deficit and slowing the growth of the accumulating national debt, and grapple with the politically volatile issue of reining in the cost of entitlement programs, starting with Medicaid, which provides health coverage for the poor.

“We want to get spending and debt under control, and we want to get the economy growing, and we want to address the big drivers of our debt, and that is the entitlement programs,” Mr. Ryan, chairman of the Budget Committee, said in an interview. “We have a moral obligation to the country to do this.”

The efforts of Mr. Ryan, backed by Mr. Boehner and other Republican leaders, are certain to meet serious resistance from the Democratic-led Senate and from Mr. Obama. In many respects, the nasty fight over financing the government for the next six months has been a warm-up for the longer-term budget battle, which could be further inflamed by a debate over raising the federal debt limit.

House Democrats, who are preparing an alternative budget, say the Republican approach would cut off aid to some of the neediest Americans and shortchange education programs vital to staying economically competitive.

“It seems to be the same old, same old,” said Representative Chris Van Hollen of Maryland, the senior Democrat on the Budget Committee. “It is going to be continued big tax breaks for millionaires and big corporate special interests like oil companies and deep cuts in education for kids and health care for seniors.”

“How you get your deficit reduction is important,” Mr. Van Hollen added.

Republicans have been urging Mr. Obama to seize the opportunity provided by a divided government and lead a legislative push to rein in spending on programs like Medicaid, Medicare and Social Security. Emboldened by their election wins and a sense that the public is ready for a new approach, House Republicans say they will push forward on their own and try to draw the president and Senate Democrats into a broader discussion about long-term deficit reduction and the soaring costs of the entitlement programs.

Details of the House budget are being tightly held. But lawmakers and other officials predict serious proposals to change Medicaid and Medicare, with talks continuing about how hard to push for adjustments in Social Security.

“You are going to see major reforms in Medicare and Medicaid; you are going to see a change in the deficit trajectory that is pretty dramatic,” said Representative Tom Cole, an Oklahoma Republican who is on the Budget Committee.

“Ryan isn’t touching the third rail,” Mr. Cole said, employing the expression used to suggest that messing with Social Security and Medicare can be politically fatal. “He is wrapping both hands around it.”

The budget for 2012 and beyond could heighten the partisan tensions surrounding the financing debate for the current year. If Congress cannot settle that issue by Friday, authorization for some government spending will expire and parts of the federal government will be shut down.

Some Republicans had wanted to delay putting forward Mr. Ryan’s plan until this year’s negotiations were completed. They were worried that introducing another set of proposals might confuse the debate and give Democrats two targets to exploit in their effort to persuade voters that Republicans were going too far in slashing programs.

Others argued that the Ryan proposal could help Mr. Boehner gather the Republican votes he needs to get a compromise on 2011 spending through the House. Any deal for the current fiscal year is likely to fall short of what the Tea Party movement and some other fiscal conservatives are demanding, but Republican leaders are already signaling that the big prize is a deep spending cut for next year and a start on reining in the entitlement programs — steps that could involve trillions of dollars over coming decades, as opposed to the tens of billions of dollars on the table in the budget battle for this year.

While Mr. Ryan and top Republican aides would not discuss specifics, there are strong indications that the proposal will draw on deficit reduction plans that Mr. Ryan laid out in his 2010 “roadmap plan” and a second proposal he wrote with Alice M. Rivlin, a director of the Office of Management and Budget in the Clinton administration.

Article source: http://feeds.nytimes.com/click.phdo?i=cdcabcb63ca6b0455e0e0c7283fdb146

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