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Missing in this year’s debt-ceiling talks: Democratic demands for new taxes

Unlike fiscal standoffs in 2011 and 2012, Democrats have not publicly pressed for higher taxes on the wealthy even though it is a winning issue

Senate Majority Leader Charles E. Schumer (D-N.Y.) and House Minority Leader Hakeem Jeffries (D-N.Y.) speak with the news media after a meeting with President Biden in the Oval Office on May 16. (Demetrius Freeman/The Washington Post)
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In late May 2011, Vice President Biden exited a meeting on Capitol Hill to declare that he had delivered a “clear” edict in those negotiations over raising the nation’s federal debt limit.

“Revenues are going to have to be in the deal, and everybody knows that,” Biden told reporters, using Democratic parlance for raising taxes on the rich.

Twelve years later, during another debt standoff with a new House GOP majority, President Biden and his allies have not made higher taxes on the rich and powerful a centerpiece of the talks.

Instead, following Republican admonitions that raising taxes is a nonstarter, Democrats have focused their line of attack against House Speaker Kevin McCarthy (R-Calif.) and have made dire predictions of defaulting on the federal debt.

When opening the Senate floor on Thursday, Senate Majority Leader Charles E. Schumer (D-N.Y.) accused Republicans of “hostage taking” and warned “the consequences would be horrific” without a deal by early June.

On Wednesday morning, a day after Biden’s meeting with the top four congressional leaders, House Minority Leader Hakeem Jeffries (D-N.Y.) sent a letter to Democratic colleagues that outlined the demands he set forth in the Oval Office: “Addressing the debt ceiling must be accomplished without gamesmanship, brinkmanship and the extreme imposition of painful spending cuts.”

Neither Democratic leader mentioned the possibility of raising taxes as a way to counter Republican demands for spending cuts. Nor did either offer any other substantive liberal policy alternatives as a rejoinder to the conservative proposals pushed by McCarthy to stiffen work requirements for some federal entitlement programs and to ease regulations on energy production.

See how the national debt grew to $31 trillion

All that is making rank-and-file Democrats increasingly question the negotiating strategy of their party’s leadership. For months, Biden and top congressional leaders mocked Republicans with the “show us your plan” message that seemed anchored in the belief that, with just a four-vote majority, any McCarthy proposal would fail to clear the House.

After McCarthy narrowly got his very conservative proposal through the House in late April, Biden’s party simply declared there would be no negotiations over the full faith and credit of the U.S. debt.

That posture crumbled once Treasury Secretary Janet L. Yellen, backed up by other independent analyses, said the U.S. would run out of money to pay the nation’s obligations by June 1 or a few days later. The potential crisis was at hand and posturing was no longer an option. Now, Biden’s team is in a full-blown negotiation.

Republicans have their wish list, most of which will be rejected or whittled down, but the Democratic counteroffer has been made quietly behind closed doors with no public campaign.

“Had Republicans’ demand for spending reductions been immediately countered with a White House demand for revenue increases, a legitimate deficit reduction negotiation could have ensued. But now the White House is negotiating against itself, and in the words of Benjamin Franklin, necessity never made a good bargain,” Rep. Dean Phillips (D-Minn.) said Thursday.

Some Senate Democrats privately praised a Twitter thread from Rep. Alexandria Ocasio-Cortez (D-N.Y.) for handicapping that a final bipartisan deal would only get about 150 Republican votes in the House. These Democrats do not expect to negotiate a “clean” debt ceiling vote, as she suggested, but saw her words as a sign that maybe their party should have used this leverage. After all, McCarthy will need Democratic votes to pass any final deal if his most conservative colleagues oppose the final compromise.

This muted approach to tax policy comes after Democrats moved from their fearful days of being labeled “tax-and-spend liberals,” back in the 1980s and 1990s, to going on offense by promising to raise rates on the wealthy.

It’s been a politically winning message since Democrats honed it during the 2011 and 2012 fiscal fights between President Barack Obama and House Speaker John A. Boehner (R-Ohio).

Obama — sometimes with Biden acting as his negotiating proxy — pushed to raise taxes on those making more than $250,000 and to eliminate loopholes that big corporations used to avoid paying their full share. It became a central theme of his successful 2012 reelection campaign.

Democrats did not get tax hikes in the 2011 debt ceiling resolution, but Republicans caved almost 18 months later and allowed higher rates on those making more than $400,000, among other tax hikes.

To be sure, Biden this time did propose a budget outline in early March that would reduce deficits by $3 trillion, largely through raising taxes on those making more than $400,000 and eliminating corporate loopholes. He has highlighted these proposals at events such as his May 10 trip to the Hudson Valley, but the focus of those remarks came on how the House plan would lead to deep spending cuts on local programs.

During a phone call earlier this month, White House aides floated about a dozen different ideas to raise tax revenue, including ending many tax loopholes. The Republicans rejected every single one of them.

“We’ve brought them up in the negotiations,” Schumer told reporters Thursday.

But critics like Phillips noted that they only learned about those tax proposals from the work of Jeff Stein, The Washington Post’s White House economics reporter, who broke the news on Monday.

The people were on background and Democratic leaders have done little since then to amplify the argument that Republicans are defending specialty tax breaks for the wealthy.

GOP rejected White House effort to close tax loopholes in debt ceiling talks

Democrats say that in the first round of negotiations, with a broader collection of staff, they hammered away every day with tax increase proposals and offered policy plans like paid family medical leave. Republicans rejected them, and after that, the Democrats did little to publicly air the GOP’s intransigence.

This shyness comes even though Democrats continue to believe the tax issue breaks their way with voters, more so than ever before.

When the Republicans took full charge of Washington in 2017, they slashed taxes by nearly $2 trillion — for which they received no political gain. Democrats highlighted how the tax cuts significantly contributed to the national debt and did not target the middle class, helping them flip the House in the 2018 midterms.

“If you look at the massive cuts under the Trump administration, those were actually a detriment for the Republicans because they gave all the tax breaks to the very wealthy and powerful corporations, and middle-class folks were left out,” Sen. Gary Peters (D-Mich.) said Thursday.

Back in July 2012, the Pew Research Center found that 44 percent of Americans said Obama’s plan to raise taxes would help the economy, 22 percent said it would hurt, while the rest said it would make no difference. Among Republicans, a combined 51 percent said raising taxes would help or make no difference to the economy.

Last month, ahead of tax day, Pew found that 61 percent of Americans were bothered “a lot” that some corporations do not pay their “fair share” in taxes, with another 22 percent somewhat bothered. Even Republicans view the issue as a problem: 46 percent were bothered “a lot” by corporations avoiding taxes.

As chairman of the Democratic Senatorial Campaign Committee, Peters is encouraging candidates in 2024 to highlight tax fairness as a key issue.

“It’s a powerful issue. There’s no question about it,” he said.

In 2011, Biden and Democrats made sure tax hikes were in the public domain during debt talks. They even got Boehner to consider nearly $1 trillion in new revenue before the deal fell apart. It set the stage for their campaigns in 2012 and the year-end “fiscal cliff” talks that ended with Democratic wins on taxes.

Democrats may make a more forceful pitch to raise taxes on the rich in a later debate, or during campaigns in the fall of 2024. For now, they have left the issue on the sidelines of this debt debate.

There’s not much choice, Sen. Richard Blumenthal (D-Conn.) said. The debt talks have “taken so much time” that the “X date” is fast approaching, he said. The Democrats’ best hope now is to avert disaster and then try for policy wins in the annual funding bills for the federal government.

“I’m concerned about avoiding default. I’m deeply concerned that we are close to a precipice that will be catastrophic for our country,” Blumenthal said Thursday. “And I support the president and our leadership in trying to avoid that kind of calamity.”

What to know about the U.S. debt ceiling

The latest: The House and Senate passed a debt ceiling deal as lawmakers rush to avert a disastrous government default on June 5, sending the bill to President Biden to sign into law. See how each member of the House and Senate voted. If the debt ceiling isn’t raised by the deadline, here’s what a government default means and the payments at risk.

Understanding the debt ceiling fight: Biden and the House Republican leadership have been on a collision course over the national debt limit. In this comic, see how hitting the debt ceiling could unleash chaos. Here’s when the debt ceiling battle could end.

What is at stake? Invoking the 14th Amendment to dodge the debt limit is risky, White House officials say, although Biden has floated it as an option. If the debt limit is breached, Biden warned that it could send the U.S. economy into a free fall. Amid consumer anxiety over the uncertainty, financial experts warn against making fear-based decisions.