Democrats and Republicans are as divided as ever over how to shrink the federal budget deficit as President Obama plans a second round of White House talks aimed at striking a deal to raise the nation’s debt ceiling by the Aug. 2 deadline. With the House on a weeklong recess, four Senate Democratic leaders are scheduled to meet with Obama on Wednesday to determine how they could rein in the massive budget deficit and shrink the national debt.
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“We believe there is the opportunity here for a substantial compromise on a significant deficit reduction agreement that is done in a way that is balanced, allows the economy to continue to grow and create jobs even as we get our fiscal house in order,” White House spokesman Jay Carney said Tuesday.
But no new presidential talks have been scheduled with Republicans. Sen. Minority Leader Mitch McConnell, R-Ky., met with Obama on Monday, but the two made no significant progress toward an agreement.
Lawmakers remain very much at odds over how to shape a compromise, with Republicans on Tuesday calling again for deep cuts in domestic spending and Democrats insisting that the solution include tax increases on big oil, corporate jet owners and higher income earners.
Conservative Republicans, including Sen. Tom Coburn of Oklahoma, want at least $4 trillion in spending cuts in exchange for a $2 trillion increase in the nation’s borrowing capacity that Treasury Secretary Tim Geithner is likely to request.
“It’s tough right now,” Coburn said of the talks. “Obama’s demands are a nonstarter in the House.”
Among the possible revenue raisers Democrats have put on the table is a 10 percent cap on tax deductions for households earning $500,000 a year or more. Economists say such a move would result in a significant tax increase for upper income earners that would funnel billions of dollars to the treasury.
“Republicans should start accepting the hard truths they face and work with us to do the right thing for the middle class instead of protecting millionaires and big corporations,” Senate Majority Leader Harry Reid, D-Nev., said.
But such a plan cannot possibly pass the House, where Republicans far outnumber Democrats. And even among Senate Democrats there could be some disagreement about tax increases.
When asked about the plan to cap tax deductions on higher income earners, Sen. Charles Schumer, D-N.Y., the No. 3 leader in the Senate, said the proposal “comes from the House” Democrats, and declined to comment on it. He instead called on Republicans to back the elimination of deductions “which shouldn’t be there for corporations and high-end individuals,” as well as a tax “on high-end individuals, people earning above a million or whatever.”
Sen. Ben Nelson, D-Neb., a moderate, said he is against raising taxes but would consider the Democratic plan to close tax loopholes, depending on what they are.
“One person’s tax break is another person’s loophole they are identifying,” Nelson said. “The question is how did that loophole get there in the first place? Some tax benefit of purpose that was achieved by creating it.”
Nelson added that if the individual tax loopholes are not eliminated as part of an overall tax reform package, “it’s probably not going to happen.”
