Senate vote to repeal ethanol tax credit fails, but some in GOP break ranks

The parameters of the deal are very much in flux. But all sides signaled Tuesday that they are aiming for a package that would reduce future borrowing by at least $2 trillion. That would be paired with a debt-limit increase of roughly the same size — enough to pay the nation’s bills through the end of next year.

Treasury Secretary Timothy F. Geithner has said the government risks defaulting on its obligations after Aug. 2 unless Congress acts to lift the $14.3 trillion debt limit. Until Tuesday, it was unclear whether policymakers would settle for a shorter-term extension that would force Congress to take another vote on the hugely unpopular issue in the months leading up to the 2012 election.

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Explore the Senate vote to repeal ethanol subsidies
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Explore the Senate vote to repeal ethanol subsidies

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Motion graphic: A guide to understanding the federal debt
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Motion graphic: A guide to understanding the federal debt

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“You’d like to do it all at once,” said Sen. Jon Kyl (Ariz.), the No. 2 GOP leader, who represents Senate Republicans in the talks. “You’d hate to have to come back and do it in pieces.”

If a plan emerges by July 1, Biden said, Obama and congressional leaders will have ample time to hammer out final concerns and set a legislative path for what is likely to be a complicated and contentious measure, packed with unprecedented changes to long-protected programs such as farm subsidies and pensions for federal workers.

After initially focusing on areas of common ground, the two sides have now moved to tougher issues, such as how to enforce a multi-year agreement to cut spending. Republicans want spending caps that would trigger automatic cuts if they are breached; Democrats want deficit caps that could also trigger higher taxes. The group is also looking at steep reductions in agency spending for 2012 and 2013.

While Democrats have insisted on new revenue as part of the deal, Republicans have demanded cuts to the entitlement programs, especially Medicare, that are the biggest drivers of future spending. On Tuesday, Senate Democratic leaders reiterated their opposition to any reduction in Medicare benefits, though they left the door open to other changes, such as forcing drug companies to charge the program lower rates.

It was unclear Tuesday whether the ethanol vote has any direct implications for the Biden talks. Though he was among the 34 Republicans who voted to advance the measure, Senate Minority Leader Mitch McConnell (R-Ky.) told reporters that ending tax breaks is “the kind of thing you would typically do in a broad tax reform bill,” not in debt-reduction talks.

For his part, Norquist claimed victory, saying he had prevented Coburn from tricking his colleagues into voting for a tax increase. At a Capitol Hill meeting Tuesday morning with more than 100 GOP staffers, Norquist said he authorized senators to advance the Coburn measure so long as they also supported a bill by Sen. Jim DeMint (R-S.C.) to cut the estate tax.

This strategy, Norquist said, “robbed” Coburn of the opportunity to persuade his Senate colleagues to vote for higher taxes.

“We won, he lost; he can try again, but he’s not going to get his tax increase,” Norquist said. “Because the House won’t let him have his tax increase, even if he thinks he can get it through the Senate.”

Staff writer Felicia Sonmez contributed to this report.

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