In a marked shift, Republicans are now willing to close some tax loopholes as part of a final deal to raise the nation’s legal borrowing limit, House Majority Leader Eric Cantor (R-Va.) said Wednesday.
But Cantor said that raising taxes was still off limits in negotiations to raise the $14.3 trillion debt ceiling by the Aug. 2 deadline.
“If the president wants to talk loopholes, we’ll be glad to talk loopholes,” Cantor said at his weekly roundtable with reporters. “We’ve said all along that preferences in the code aren’t something that helps economic growth overall. But listen, we’re not for any proposal that increases taxes, and any type of discussion should be coupled with offsetting tax cuts somewhere else.”
Republicans have rebuffed Democrats’ calls for any comprehensive deficit-reduction package to close tax loopholes such as those for corporate jet owners and oil and gas companies. Such measures, GOP leaders have said, should be considered only as part of a comprehensive tax-reform effort.
That position seemed to hold firm for Senate Republican leaders on Wednesday as they balked at Cantor’s new openness to closing the loopholes.
Senate Minority Leader Mitch McConnell (R-Ky.) reiterated that the closing of loopholes should be a separate debate in talks about tax reform.
“I’m open to tax reform,” McConnell said. “We need to do it broadly. To sort of cherry-pick items in the context of this current negotiation with the White House strikes me as pretty challenging.”
McConnell said that ending tax preferences is a “big, complicated subject” and that targeting certain industries could hurt the economy. “We want to tackle deficit reduction in a way that doesn’t exacerbate unemployment,” he said.
Cantor’s apparent turnaround, however, is an indication that some Republicans are cracking open the door to addressing those loopholes if they’re accompanied by tax cuts elsewhere, such as an extension of the payroll tax holiday or changes to the alternative minimum tax.
But Senate Democrats said Wednesday that the door still isn’t open wide enough. They cast Cantor’s comments as evidence that they had put Republicans “on their heels” over taxes. But they criticized him for insisting that the closing of any loopholes be balanced by more tax cuts.
“If Republicans are going say we can only close these loopholes in a revenue-neutral way, it is like taking one step forward and then two steps back,” Sen. Charles Schumer (D-N.Y.) said in a statement. “The point isn’t to get rid of these loopholes simply to pay for new tax breaks elsewhere, it’s to do it in a way that contributes to the reduction of the debt.”
The Senate GOP’s reaction to Cantor’s new openness on the tax issue could suggest an emerging split in strategy between the House GOP majority and their Senate counterparts, who are eyeing the 2012 election in hopes of winning back the chamber from Democrats.
Sen. Jon Kyl (R-Ariz.) noted that President Obama has said he wants to insert the tax discussion into debt talks as a way to increase revenue, and he stuck to the position that Republicans reject ending subsidies and loopholes to raise new dollars.
“Trying to do that in this context then raises the question: Are you trying to raise revenues, or are you trying to get a more coherent tax code?” Kyl said. “If you’re trying to do the latter, it’s probably not best done in this context, and you’re probably not going to be able to do the number or the magnitude of things that are really necessary to really make a difference in the tax code. If you’re trying to do it to raise revenue, then obviously, that’s something that’s not going to pass.”
Cantor also said Wednesday that he would endorse a pledge gaining traction among some conservatives to oppose any increase in the debt ceiling without the substantial spending cuts and passage of a balanced-budget amendment.
“I don’t want to sign a pledge that conditions my vote on what the Democrats may or may not do,” Cantor said.
Cantor’s remarks come a day after Obama invited congressional leaders to meet at the White House on Thursday to try to break the impasse over raising the nation’s debt ceiling. And earlier at the Capitol on Wednesday, Democrats and Republicans continued to spar over one of the most contentious issues in the talks: whether to raise taxes.
“The Republican Party has been taken over by ideologues either devoted to or terrified by Grover Norquist and his no-tax pledge,” Senate Majority Leader Harry M. Reid (D-Nev.) said Wednesday morning in remarks on the Senate floor, referring to the president of the anti-tax advocacy group Americans for Tax Reform. “These Republicans refuse to believe the countless respected voices that have said over and over how serious a crisis we face if we fail to avoid default.”
House Minority Whip Steny H. Hoyer (D- Md.) echoed Reid, seizing on previous criticism of Norquist by former senator George Voinovich (R-Ohio) to make the case that Republicans must be willing to put tax increases on the table.
“Senator Voinovich said that the pledge that so many Republicans, almost every Republican, have taken expressing fealty to Mr. Norquist’s premise was inconsistent with their oath to the Constitution to preserve and protect the welfare and the security of the United States of America,” Hoyer told reporters at his weekly roundtable. “I believe that Senator Voinovich was correct.”
Republican leaders fired back with the argument that the insistence by the White House and congressional Democrats that tax increases be part of a “balanced” deal contradicts Obama’s agreement late last year to extend the Bush-era tax cuts.
“Just this last December the president acknowledged that preventing a tax hike meant more resources were available for job creators to add employees,” McConnell said on the Senate floor. “Does the president now think the economy is doing so well, that unemployment is so low and economic growth so rapid that we can take billions of dollars away from these very same job creators?”
McConnell said that Democrats and the White House were the ones who were “ludicrous” for proposing hundreds of billions of dollars in revenue increases “at a time when 14 million Americans are looking for work and job creators are struggling.”
“We don’t think it’s absolutist to oppose more stimulus spending,” he said. “We don’t think it’s maximalist to oppose hundreds of billions of dollars in tax hikes in the middle of a jobs crisis. We’d have a better term for it: common sense.”
The retorts came after Obama announced Tuesday that he and Vice President Biden will meet at the White House on Thursday with congressional leaders of both parties.
The huddle will mark the first formal involvement by the president in the debt-limit discussions, but Obama has been working behind the scenes. He and House Speaker John A. Boehner (R-Ohio) have held two private meetings on the debt limit. The two met in late June, the day before Cantor pulled out of the first phase of the debt talks. And Obama said Tuesday that he “made progress” in talks with congressional leaders over the Fourth of July weekend, meeting with Boehner on Sunday.
Still, Republicans reacted warily Tuesday to the change in the negotiating structure and to Obama’s suggestion that the parties produce the biggest debt-reduction package of the past two decades over the next two weeks. They said they would attend the Thursday summit but offered little hope for progress in the tax debate.
“We’re not dealing just with talking points about corporate jets or other ‘loopholes.’ The legislation the President has asked for — which would increase taxes on small businesses and destroy more American jobs — cannot pass the House, as I have stated repeatedly,” Boehner said in a statement. “I’m happy to discuss these issues at the White House, but such discussions will be fruitless until the President recognizes economic and legislative reality.”
Summoning congressional leaders to meet at the White House, Obama on Tuesday rejected calls for a short-term increase in the debt ceiling.
With an Aug. 2 deadline closing in for raising the nation’s borrowing limit before it defaults on its debt, Obama urged lawmakers in both parties to break the stalemate that halted talks nearly two weeks ago and seize what he called “a unique opportunity to do something big” to rebalance the nation’s finances.
“There may be some in Congress who want to do just enough to make sure that America avoids defaulting on our debt in the short term but then want to kick the can down the road when it comes to solving the larger problem of our deficit. I don’t share that view,” Obama said.
Cantor said Wednesday said that he agrees that a short-term deal on raising the debt limit is unacceptable.
“I think many of you reported way back that the president had said one time that he’s going to keep looking for something that he and Eric Cantor could agree on,” Cantor said. “I think this is that. I agree with him that we need to go and drive toward a deal which is not a deal which kicks the can down the road.”
Obama’s surprise announcement Tuesday was a signal that he was taking charge of a situation that was rapidly devolving into a perilous game of chicken over tax increases.
The president also struck a more conciliatory tone than he did in a news conference last week, when he ridiculed Republicans’ work ethic and accused them of seeking to prevent the super-rich from making sacrifices alongside those who stand to suffer from unprecedented cuts to federal programs.
“It’s my hope that everybody is going to leave their ultimatums at the door,” he said.
Polls show that Americans largely disapprove of Obama’s handling of the economy, and failing to reach a debt-reduction deal could make the president more vulnerable leading into the 2012 election.
The battle over the debt limit, which has dominated debate in Washington for much of the spring, is set to intensify to code-red levels. Treasury Secretary Timothy F. Geithner has said he will run out of money to pay the nation’s bills — forcing the first government default in U.S. history — unless Congress acts to increase the debt ceiling by Aug. 2. The Treasury needs a little more than $2 trillion in fresh borrowing authority to cover the government’s needs through the 2012 election.
Republicans, however, are refusing to raise the debt ceiling unless the increase is accompanied by spending cuts of an equal amount. In bipartisan talks led by Biden, negotiators had identified more than $1 trillion in savings before Republicans pulled the plug on June 23, declaring an impasse over the issue of taxes.
On Tuesday, a GOP aide familiar with the talks put the numbers even higher, saying the two sides had agreed on as much as $2.3 trillion in potential savings, including more than $300 billion in interest payments averted through lower borrowing. That would match the amount needed to cut a long-term deal.
But serious hurdles block the path forward. Republicans, for example, have refused to agree to Democratic demands for a “firewall” between defense and non-defense spending that would distribute the pain broadly across government, hitting the military as well as domestic agencies. And although Democrats have offered to reduce spending on government health programs as long as the reductions do not affect benefits, Republicans have been adamantly opposed even to eliminating tax breaks that are unpopular among Republicans.
Since the talks broke down, some lawmakers in both parties have expressed doubts about their ability to negotiate, draft and approve such a momentous package of spending cuts and revenue increases in the dwindling time that remains. That has fueled talk of a short-term extension of the debt limit that would permit the Treasury to cover the bills for a few more months while discussions continue.
On Sunday, Sen. John Cornyn (R-Tex.) issued the latest call for a “mini-deal.” Cornyn, who is in charge of 2012 Republican Senate campaign strategy, said, “We’ll take the savings we can get now, and we will re-litigate this as we get closer to the election.”
Many lawmakers are loathe to defer a decision on the debt until next year, however, because that would force them to take another unpopular vote to raise the debt limit within months of facing voters. Such a vote could prove devastating to as many as a dozen vulnerable Senate Democrats, and McConnell, who stands to gain control of the Senate in the 2012 elections, has been perhaps the most persistent advocate of a short-term deal.
House Republicans would also be vulnerable, and Boehner has said he wants a long-term deal.
Obama weighed in Tuesday, noting that a remarkable bipartisan consensus has emerged about the scope and severity of the nation’s debt problem. “Most of us already agree that to truly solve our deficit problem, we need to find trillions in savings over the next decade, and significantly more in the decades that follow,” he said. “And that’s the kind of substantial progress that we should be aiming for here.”
Staff writers Peter Wallsten, Rosalind S. Helderman and Paul Kane contributed to this report.