The GOP has not been entirely closed to tax changes, according to people in both parties. They mentioned a proposal to adjust the way business inventory is taxed, which could generate as much as $70 billion over the next decade, as one potential area of compromise. An additional $6 billion a year could be generated by wiping out subsidies for ethanol blenders. A similar proposal passed the Senate two weeks ago with overwhelming Republican support.
The White House may be more interested in such a deal than congressional Democrats, who have been adamant about raising taxes on the wealthy. “Make no mistake, there needs to be revenues in any deal,” Sen. Charles Schumer (D-N.Y.) said in a conference call with reporters Friday. “Republicans cannot insist on protecting tax breaks for millionaires at the expense of our economy.”
Still, some Democrats said they place a higher priority on defense cuts.
“Defense spending is damaging spending. Many of us believe it does more harm than good to our people and to our reputation in the world,” said Rep. Barney Frank (D-Mass.). “If we can get $100 billion from reducing unneeded military spending, that’s better than $100 billion in taxation.”
Getting to an agreement to cut defense spending may not be easy, however. Many Republicans are still hawkish and want to fully support U.S. troops abroad. Rank-and-file lawmakers said they specifically oppose any across-the-board reductions to the Pentagon budget, preferring that incoming Defense Secretary Leon Panetta present Congress with a detailed plan of programs to be slashed.
Outgoing Defense Secretary Robert M. Gates has advocated for some cuts, especially related to costly new military hardware, but has warned of the consequences of deep or across-the-board reductions that could jeopardize U.S. military strength in the future.
“Our caucus would come in and say, ‘This is a reasonable place for defense,’ as long it wasn’t arbitrary and capricious. If the secretary reworked the numbers, our guys would go, okay,” said a senior GOP aide, who said the White House has so far refused to offer a detailed annual spending plan for the Pentagon. Without official guidance, the aide said, “it’s kind of like: Pick the defense number. And we can’t do that.”
Senate Minority Leader Mitch McConnell (R-Ky.), a critical player in the talks, has taken the same position as Cantor — that congressional appropriators should decide where to cut spending. McConnell, a senior member of the Appropriations Committee who touted his ability to deliver defense dollars to his state in his 2008 reelection campaign, is part of a powerful Republican old guard that has fought for years to expand military spending, as much to benefit constituents as for reasons of political principle.
Today, however, the old GOP hawks are finding that their tea-party-influenced troops are more interested in saving money than protecting turf at the Pentagon. Rep. Tim Scott (R-S.C.), a leader among the 87 House Republican freshmen, said the military budget is widely viewed as loaded with pork that has little bearing on the day-to-day battles in Afghanistan and other hot spots.
“If there are sacred cows, we ought to find them and get rid of them,” said Scott, who represents a district where more than a third of voters hail from military families.
“I would never support anything that would reduce the safety of the troops on the ground,” said Rep. Robert Hurt (R-Va.), a freshman whose district runs south from Charlottesville. “But bureaucracy is bureaucracy, and there are ways to get at it, even in the Pentagon.”
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