House Speaker John A. Boehner (R-Ohio) took a similar stand late Tuesday after voters returned a Republican majority in the House. By renewing the GOP majority, he said during an event in Washington, “the American people have . . . made clear that there is no mandate for raising tax rates.”
Still, faced with a determined Democratic president, many Republicans on Capitol Hill and elsewhere say the GOP will have few options but to compromise.
“I love what John Boehner is saying, but I have a hard time believing Republicans won’t cave,” said GOP tax lobbyist Kenneth J. Kies. To resist Obama, “you have to be prepared to shoot the hostages. You have to be prepared to let it all expire. And it takes a lot of courage to do that.”
For weeks, Republican tax aides have been mulling ideas for a potential deal that would keep the top tax rate at 35 percent, as Republicans prefer, while enacting new provisions to extract about $55 billion next year from households earning more than $250,000 a year, meeting Obama’s goal to raise taxes on top earners.
But any such deal, they say, would hinge on Obama’s willingness to rein in the cost of federal entitlement programs, including Social Security and Medicare, the biggest drivers of future borrowing. Obama’s most recent budget request proposed only modest trims to federal health-care programs, totaling about $360 billion, and no changes to Social Security.
Obama went further in 2011 budget negotiations with Boehner, offering to raise the eligibility age for Medicare from 65 to 67 and to apply a less-generous measure of inflation to Social Security benefits. It is not clear that Republicans — who have been demanding a fundamental restructuring of Medicare — would view Obama’s 2011 offer as sufficient inducement to raise taxes.
Meanwhile, many liberal Democrats are vehemently opposed to any reductions in retirement benefits, though others acknowledge that a trade will have to be made.
The question, said former White House economist Jared Bernstein, is what Democrats would be willing to give Republicans in return for prying them away from the influence of anti-tax activist Grover Norquist, who has maintained firm discipline among GOP lawmakers.
“I’m sure they’re going to ask for something big,” said Bernstein, now a senior fellow at the Center on Budget and Policy Priorities. “I think Republicans would value something on Social Security as a real trophy.”
Without a deal in December, policymakers would quickly face another economy-rattling deadline: The need to raise the federal debt limit, set at $16.4 trillion. Many Republicans insist that they will regain leverage in January and February as the Treasury Department runs out of options for managing the nation’s finances without additional borrowing authority.
But after the debt-limit battle of 2011, approval ratings for the GOP Congress went into free fall and many Republicans are not eager to repeat the experience.
“I get a sense there’s still a fairly strong interest in Congress among the conservatives to use the debt ceiling as some kind of leverage,” said Heritage Foundation senior fellow Patrick Louis Knudsen, who was a top aide on the House Budget Committee to Republican vice-presidential candidate Paul Ryan (Wis.). “But they are a bit chastened about how that worked — or didn’t work out — last year.”