House Majority Leader Eric Cantor said on June 23 that he can no longer negotiate on behalf of his party in bipartisan budget talks led by Vice President Joe Biden, because he does not have the ability to move past a current impasse over taxes.
At issue is whether taxes should be cut, or increased. Republicans have been saying from the beginning that they will not accept any increases, while Democrats are holding that the solution must include a mix of both spending cuts and revenue increases.
Cantor told the Wall Street Journal that he believed it was time for the negotiations to move past the small group of six lawmakers—four Democrats and two Republicans. They are working with administration representatives Biden, Treasury Secretary Timothy Geithner, and Director of the Office of Management and Budget Jack Lew.
“It is up to the president to come in and talk to the speaker. We’ve reached the end of this phase. Now is the time for these talks to go into abeyance,” Cantor said.
The decision on taxes is one of the final hurdles to agreement on a plan for deficit reduction that purports to save at least $2 trillion over the next 10 years.
Lawmakers are under pressure to raise the debt ceiling before an Aug. 2 deadline, when the government would begin to default on its debt obligations.
In April, rating agency Standard & Poor’s downgraded its outlook of the United States debt to negative, citing the possibility that lawmakers might not reach an agreement on the debt ceiling.
The limit has never expired in the past, but most experts are in agreement that it would not be a good idea, as the worse case scenario, a default, would trigger another financial crisis.
Until now, the six weeks of bipartisan talks have focused mainly on finding common ground on areas where spending can be reduced. The framework for around $2 trillion in cuts has basically been hammered out, but the revenue issue has become difficult to ignore, Cantor said.
So far, Republicans have been unwilling to budge on the issue.
In a press conference Thursday morning, House Speaker John Boehner (R-Ohio) said, “Job-crushing tax hikes are off the table.”
A series of fiscal proposals from a number of policy think tanks, as well as a bipartisan commission ordered by the president, have all recommended a mix of spending cuts and revenue increases. To achieve something acceptable, they all say that taxes are key.
Cutting part of the numerous deductions, exclusions, and loopholes, which currently cost the government over $1 trillion yearly, could offer much needed revenue and areas for bipartisan give and take, without a complete overhaul of the tax code in the short term.
On the Senate floor today, Budget Committee Chairman Kent Conrad (D-N.D.) spoke passionately, asking his colleagues to be “honest” with the American people about the fact that spending is not the only culprit contributing to the nation’s historically large deficits.
Using charts, he showed that the last five times the budget was balanced, revenues were around 20 percent of GDP. But largely due to a decline in economic activity, as well as the Bush tax cuts’ extension and payroll tax holiday, current revenue is just 14 percent of GDP.
Conrad appealed for negotiators to work on a bigger compromise, one that includes entitlement reform and puts everything on the table.
“Now is the time for principled compromise. Now is the time to come together to put in place a plan that deals with the debt threat fundamentally and assuredly. We’ve got that opportunity. We should not let that opportunity slip by,” Conrad said.
It cannot be confirmed whether Speaker Boehner or President Obama will join the talks as Cantor has requested, but pundits have predicted that sooner or later, the two must become involved. It is just a matter of when.
