Deficit Talks Continue with ObamaJune 29, 2011
On Tuesday, a day after meeting separately with President Barack Obama, the Senate’s top Democrat and top Republican continue to spar over whether increased tax revenue should be part of a deficit reduction agreement. Both sides are taking a stance in an ideological battle over how best to cut the U.S. deficit that is projected to be $1.4 trillion this year.
Monday’s meetings came after bipartisan talks led by Vice President Joe Biden concluded last week without an agreement, causing Obama to get directly involved. With an Aug. 2 deadline looming to increase the federal debt ceiling or face possible default on debt obligations, pressure is mounting to reach a deal that would prevent market jitters and corresponding harm to the still-recovering economy.
At separate meetings with Obama, both Senate Minority Leader Mitch McConnell (R-Ky.) and Majority Leader Harry Reid (D-Nev.) expressed concern for protecting the economy, although from different perspectives. Republicans say the solution lies in trillions of dollars in spending cuts, while Democrats say the deficit cannot be meaningfully reduced without increasing tax revenues, something their opponents reject.
To McConnell and other Republicans, any kind of an increased tax burden now – even in the form of eliminating loopholes and subsidies rather than raising tax rates – would deter economic recovery. Tax loopholes targeted by Democrats include oil and gas subsidies, as well as some write-offs for people earning more than $500,000 a year. In addition, Democrats call for ending Bush-era tax cuts for people earning more than $250,000 a year.
The Biden-led talks made progress on identifying spending cuts, including defense spending, and laying out a blueprint for possible reforms to entitlement programs such as Medicare and Medicaid, the government-run health insurance for senior citizens, the disabled and the poor. However, Senate Minority Whip Jon Kyl (R-Ariz.) and House Majority Leader Eric Cantor (R-Va.) walked away from the Biden-led talks because of disagreements over the tax revenue issue. Kyl stated his party could live with some revenue boosting measures, but tax hikes were a non-starter.
The tax revenue issue now stands as the main obstacle to an agreement, with both sides showing little indication of easing their positions.
Obama and Biden will both continue to engage congressional leaders, and, while no further meetings have been planned yet, everyone understands they are facing a deadline to get the debt ceiling lifted. Time is running out ahead of the Aug. 2 deadline, when the Treasury Department says it will run out of money to pay the country’s bills. Failure to act risks the U.S. defaulting on its financial obligations, which could push the country back into recession—something neither parties want to see happen.
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