June 30, 2011
Sen. Chuck Schumer, D-NY, on Thursday accused Republicans of “bluffing” in their spending cut demands and suggested it’s only a matter of time before they succumb to the political reality of needing to compromise on taxes -- or risk failing to garner enough votes to increase the $14.3 trillion debt ceiling by the Treasury’s deadline. He characterized Republicans’ limited focus on achieving deep spending cuts in order to raise the debt ceiling as a politically dishonest ploy to derail the economy and damage President Obama’s 2012 reelection prospects. “It is becoming clear that insisting on a slash-and-burn approach may be part of this plan—it has a double-benefit for Republicans: it is ideologically tidy and it undermines the economic recovery, which they think only helps them in 2012,” he said. “We have been playing entirely on Republicans’ field for six months and the recovery has only slowed.”
But that dynamic could all be about to change, Schumer said. According to Schumer, Democrats have more ammunition in the debt ceiling negotiations than they did this past spring, when the two parties arrived at an agreement to keep the government operating for the rest of the fiscal year, narrowly averting a government shutdown. A sizeable number of House Republicans who identify with the Tea Party, many of whom were elected into office this past fall, reject the concept of raising the debt ceiling under any circumstances. “There are enough Republicans like this, that Speaker Boehner is not going to be able to cobble together 218 votes from his own party on a final deal,” Schumer said. “In the end, he’s going to need Democrats — he knows he has to go to Democrats to get the 218 votes or we’ll have a default. This means we (Democrats) have some real leverage.”
That dilemma, combined with the President’s support for eliminating tax breaks for the ultra-wealthy and oil and gas companies, means it’s “much more likely than people think,” that some tax increases will be part of a final deal, Schumer said.
The Treasury Department says Congress must raise the $14.3 trillion debt limit by Aug. 2 or risk a default on U.S. obligations — a possibility that economists say could roil the U.S. economy and international markets.
So far, Republicans have shown zero sign that they will entertain tax increases. Last week, the deficit reduction talks led by Joe Biden crumbled after House Majority Whip Eric Cantor, R-Va., and Sen. Jon Kyl, R-Ariz., abruptly pulled out of them, rejecting Democrats’ insistence on including some tax increases in the package.
According to Republican leadership, Schumer’s logic is completely flawed. “The reality is that the hundreds of billions of dollars in tax hikes that Sen. Schumer and the President are demanding can’t pass either the House or the Senate,” said Don Stewart, a spokesman for Senate Minority Leader Mitch McConnell, on Thursday. “Members of Senator Schumer’s own caucus oppose those tax hikes. It was his great idea to put a tax hike in millionaires. The Senate had 59 Democrats, and it still failed. It’s no different this time.”
More on the debt ceiling from The Fiscal Times:
The Dubious Threat of a U.S. Debt Default
What Debt Limit? Plan B is the 14th Amendment
Obama Chastises GOP over Taxes, Debt Deadlock