The Deficit: How a Whiff of Compromise Was Buried
Policy + Politics

The Deficit: How a Whiff of Compromise Was Buried

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The Federal deficit was the talk of the towns—both New York and Washington as different factions struggled to convince, cajole and even compromise on the thorny issues driving the nation’s debt.  In D.C., a bipartisan negotiating team, known as the ‘gang of seven,’ reported progress in fashioning a comprehensive plan. At the Economic Club of New York, House Speaker John Boehner told business leaders that Republican wouldn’t consider raising the debt ceiling without trillions in spending cuts. Boehner’s speech nettled the White House, which accused Republicans of endangering the economy by insisting on the dramatic spending cuts  and no tax increases as the price for raising the  debt ceiling,  

After badly stumbling over their more conciliatory political message last week, House Speaker John Boehner, R-Ohio, and House Majority Leader Eric Cantor, R-Va., took a much harder line Monday. They sounded much as they did over a month ago when they forced President Obama to go along with tens of billions of dollars of spending cuts for the remainder of fiscal 2011 or risk a government shutdown.  Tuesday, Boehner declared in an interview on NBC’s “Today” show that raising taxes is “off the table”

Cantor was in New York Tuesday morning to ring the opening bell of the New York Stock Exchange and later said he was emboldened by his conversations with members of the financial community.  “I heard verbatim, ‘Hold the line on cutting spending, don't give in,’" Cantor said at an afternoon news conference on Capitol Hill.

Boehner’s and Cantor’s tough talk brought complaints from the White House of “maximalist positions” and gamesmanship that could lead to the first Treasury default in U.S. history and spark an international economic crisis. Press secretary Jay Carney compared the GOP demands to a hostage taking, telling reporters, “It is folly to hold hostage the vote to raise the debt ceiling . . . to any other piece of legislation.” He said increasing the debt limit is intended to prevent the United States “from defaulting on its obligations.”

Since early last month, following a last minute spending cut deal for the remainder of the year, the two sides have been positioning themselves for the next battle over raising the $14.3 trillion debt ceiling. Congress has until August 2 to reach agreement before the Treasury begins defaulting on federal borrowing. Over Democratic protests, Republicans are insisting on linking approval of a new debt ceiling to a long-term deal on deficit reduction to make good on promises to conservatives and tea party members to take firm fiscal action.

While many are seeking to influence the outcome, the main arena for negotiations at this point is a bipartisan group of House and Senate members chaired by Vice President Joseph Biden, which met for the second time yesterday afternoon and appeared to make some headway.

Biden told reporters following a two-hour meeting at the Blair House , across the street from the White House, that “We had a really good discussion. “All of the facts are being laid on the table,” he said. “We are going through what we agree on, disagree on and then we will go back after that is all over and figure out what are the big chunks left, whether we can make any compromise.” He added that while the small groups of lawmakers, including Cantor, agreed on many things, “Whether we get to the finish line with this group is another question.”

The group also includes Rep. Chris Van Hollen, D-Md., Rep. James Clyburn, D-S.C., and Sens. Jon Kyl, R-Ariz., Daniel Inouye, D-Hawaii, and Max Baucus, D-Mont. Also in attendance: Secretary of the Treasury Timothy Geithner, Director of the Office of Management and Budget Jacob Lew, and Director of the National Economic Council Gene Sperling.

The group was scheduled to meet again on Thursday. Obama, meanwhile, took time off for an immigration speech in El Paso, Tex., but planned to focus on the budget talks for the remainder of the week.  He will meet with Senate Democrats on Wednesday and Senate Republicans on Thursday.

The Treasury technically runs out of borrowing authority next week, but Geithner and other Treasury officials have taken a number of steps to effectively extend the deadline to early August. Cantor did not specify when a vote on the debt ceiling would be scheduled on the floor or by how much they would raise the Treasury’s borrowing authority.  Treasury officials have said they would need an additional $2 trillion of borrowing authority to get through the remainder of the year.

“We will make a decision when we feel there is an agreement on the kind of savings we need. There is a lot of work that needs to be done to achieve the real results that we are looking for. I can’t tell you exactly when it’s coming to the floor, but we are earnest in our attempt to try and produce a product that actually produces real savings.”

When asked about a “clean” extension of the debt limit, with no amendments dealing with spending, he said, “It’s still under discussion.”  Cantor also would not explain what Boehner meant in calling for “trillions” of dollars in spending cuts – or over what period those spending cuts would go into effect.

“You are looking at a time horizon, no matter how you look at it we operate under a 10 year budget window,” he said. “So we are looking to try and achieve maximum savings this year. On the discretionary side, without a doubt, we are doing so in the next fiscal year and the next.  On the discretionary side, it’s here and now. Even on the mandatory side it’s here and now, but obviously over the 10 year period we will accumulate savings that can help us change the curve and trajectory out into the future.”

During his interview with NBC, Boehner appeared to rule out any compromise with Democrats on allowing the Bush-era tax cuts for wealthy Americans to expire or ending tax breaks worth billions of dollars to large oil companies making record profits. Republicans define both steps as tax increases.

“What some are suggesting is we take the money from people who would invest in our economy and create jobs and give it to the government,” Boehner said. “The fact is you can’t tax the people we expect to invest in the economy and create jobs. Washington doesn’t have a revenue problem. Washington has a spending problem.”

Get rid of tax subsidies for oil and gas companies, the Senate's top Democrat urged on Tuesday, staking out a deficit-cutting stance bluntly at odds with House Speaker John Boehner's insistence on no tax increases as the parties exchanged opening debt-crisis salvos.

"It's a no brainer," Senate Majority Leader Harry Reid said in support of his plan to go after   oil and gas companies. The idea is "batty," retorted Boehner's representative.

Related Links:
Battle Lines Harden Ahead of Budget Talks (Reuters)
Amid Fresh Barbs, Biden Still ‘Optimistic’ About Deficit Talks (Chicago Tribune)
Democrats and Republicans Spar over US Debt Ceiling (Voice of America)