Budget Talks Collapse over Demands to Raise Taxes
Policy + Politics

Budget Talks Collapse over Demands to Raise Taxes

AP Photo/Harry Hamburg

Bipartisan budget negotiations fell apart Thursday as two key Republicans involved in the Joe Biden-led deficit discussions pulled out over Democratic demands that tax increases be part of the deal.

House Majority Leader Eric Cantor, R-Va., announced Thursday morning he would not attend today’s meeting. Cantor said progress has been made and the group has been able to identify trillions in spending cuts as part of a framework to reduce the nation’s $14.3 trillion deficit. But Biden's "Gang of Seven" is deadlock over raising taxes.

“Regardless of the progress that has been made, the tax issue must be resolved before discussions can continue,” Cantor said in a statement. “Given this impasse, I will not be participating in today's meeting, and I believe it is time for the President to speak clearly and resolve the tax issue.” Earlier this week Cantor had repeatedly expressed frustration that President Obama had not been more directly involved in the budget negotiations.

An aide for Sen. Jon Kyl, R-AZ., who represents Senate Republicans in the meetings, confirmed that he would also pull out of the meetings, citing the same concerns as Cantor. Subsequently, scheduled budget talks for the afternoon were cancelled.

Kyl and Senate Minority Leader Mitch McConnell of Kentucky issued a joint statement on the issue of taxes. “The White House and Democrats are insisting on job-killing tax hikes and new spending. That proposal won’t address our fiscal crisis, our jobs crisis, or protect and reform entitlements. And a bill with new spending and higher taxes would fail with bipartisan opposition – as it should. President Obama needs to decide between his goal of higher taxes, or a bipartisan plan to address our deficit. He can’t have both. But we need to hear from him.”

In response to Cantor’s announcement, House Speaker John Boehner, R-Ohio, chimed in,“I understand why he did what he did,” he said at a press conference. “I think those talks could continue if they are willing to take tax hikes off the table.” Boehner added that there are not enough votes in the House to pass a measure that would raise taxes.

Boehner, McConnell, Cantor and Kyl raised the stakes and put the onus on the President to personally inject himself into the budget negotiations. “If we are going to meet the President’s timetable by the end of this month, then he needs to engage,” Boehner said.

Beyond the Back Nine--Obama and Boehner
"This means that the group is no longer effective and the only way to get a deal done is through Obama and Speaker Boehner,” said Ron Bonjean, a GOP consultant. “By sticking to their guns, Republicans are sending a message to the tea party and conservative independents that this group will not hold spending cuts hostage to tax increases."

Since the beginning of May, Biden along with six Republican and Democratic House and Senate lawmakers have been negotiating a deal aimed at taming the spiraling national debt and raising the $14.3 trillion debt ceiling. The Biden group had hoped to reach an agreement on a deficit reduction package by a self-imposed July 1 deadline. It was unclear where the group now stands on this deadline.

The Treasury Department says the U.S. will be unable to pay its bills after August 2 unless the debt ceiling is raised, which could lead to the first default in U.S. history and deal a catastrophic blow to an already fragile economy. Republicans are demanding that the level of spending cuts match the increase in the debt ceiling dollar for dollar.

Cantor’s announcement came as a surprise to Democratic leaders, many of whom were meeting with the President Thursday morning. Rep. Chris Van Hollen, D-Md., and House Minority Leader Nancy Pelosi, D-Calif., said at a press conference they were told of Cantor’s exit after they left their meeting.

Van Hollen told reporters no one indicated during yesterday’s budget talks that anyone would pull out of the meetings. “I’m disappointed Leader Cantor chose to leave the talks,” Van Hollen said at a press conference Thursday afternoon. “There is no doubt that there were some very difficult issues.”

Pelosi was less sympathetic. “Yes, we do want to remove tax subsidies to big oil,” she said. “We want to remove tax breaks for corporations that sends jobs overseas. I don’t know if that is a reason to walk away from the table when we are trying to find a balanced approach.” She added she had been optimistic over the past few weeks that the budget negotiations were headed in the right direction.

But some budget experts say the Republican withdrawal from the seven member commission was not unexpected. “I thought all of the happy talk over the last couple of weeks was just that,” said Stan Collender, a federal budget expert and partner at Qorvis Communications.

It was inevitable at some point that the explosive and ideological differences over taxes and Medicare would have to be “kicked upstairs” to Boehner and Obama as these were not issues that could be resolved by the Biden group alone.

Last month, debt talks from a separate bipartisan group of six senators fizzled, adding pressure for the Biden committee to produce a substantive deficit framework. Now it appears unlikely either group will be able to produce anything before the August 2 deadline, which is less than 6 weeks away.

Related Links:
Bipartisan Talks Now Resets with Obama and Boehner (Huffington Post) 
Debt Talks Collapse, Republicans Walk out over Taxes (Reuters) 
Debt Talks in Danger as Eric Cantor Bails (POLITICO)