The Republican counter-proposal: it's good we have a counter-proposal, but the two sides are very far apart. Obama still wants tax hikes, Republicans don't want any. Obama does not want any changes to Social Security or Medicare, Republicans propose a modest change in how inflation is measured to adjust Social Security payments and appear to want to raise the eligibility age for Medicare to 67 from 65.
Still, the markets were little changed on the news. Why? The Street still believes a deal will be made, regardless of how far apart everyone is.
But it's a little more complex than that. There is, as I have noted, a realization that no matter what happens, we are entering a new era: The era of American Austerity. There will be less room for big fiscal stimulus programs.
There will be higher taxes and less government spending. There will be lower consumption and lower growth.
And that will make 2013 -- and beyond -- a bit more difficult, regardless of what kind of deal will be made.
Here's a breakdown of the two proposals.
Obama: $1.6 trillion in tax hikes, including raising top tax brackets
Republicans: $800 billion in higher revenues, but keeps Bush-era tax cuts for everyone, including the wealthy
Obama: $400 billion in cuts, but exempt Medicare and Social Security
Republicans: $1.4 trillion in cuts from:
- Health savings: $600 billion
- U.S. agency cuts: $300 billion
- Change CPI measurement for Social Security benefits: $200 billion
- Other savings (farm subsidies): $300 billion
President Obama's proposal also includes additional stimulus.