published Wednesday, May 11th, 2011

Parties laying down blunt budget markers for debt crisis

By JIM KUHNHENN

Associated Press

WASHINGTON — Get rid of tax subsidies for oil and gas companies, the Senate’s top Democrat urged on Tuesday, staking out a deficit-cutting stance bluntly at odds with House Speaker John Boehner’s insistence on no tax increases as the parties exchanged opening debt-crisis salvos.

“It’s a no brainer,” Senate Majority Leader Harry Reid said in support of his plan to go after thriving oil and gas companies. The idea is “batty,” retorted Boehner’s spokesman.

Boehner is calling for trillions of dollars in spending cuts, and the Democrats, too, acknowledge that spiraling annual deficits require spending restraint. But the differences over possible tax increases, even if they would spare regular wage-earners, underscore the chasm between the two parties.

Congressional negotiators and Vice President Joe Biden struggled for common ground on tackling long-term deficits Tuesday while party leaders fired over their heads with proposals that are probably politically unattainable.

The conflicting approaches put added pressure on the bipartisan budget negotiators who met with Biden for the second time in a week. At the same time, the administration is seeking an increase in the government’s borrowing authority, and Republicans see that debt ceiling vote as critical leverage.

One of the Republicans’ top negotiators with Biden, House Majority Leader Eric Cantor of Virginia, signaled flexibility Tuesday. Cantor said the talks were designed to find where the White House, Democrats and Republican were “in terms of commonality right now” and indicated that an agreement on spending cuts in broad terms could be enough to win support for increasing the debt ceiling.

Still, he said, “there’s got to be assurances that the commitments are real” to cut spending.

Laying down his party’s clearest marker yet, Boehner on Monday insisted that any legislation to raise the government’s debt limit should be accompanied by spending cuts larger than any proposed increase in the debt ceiling. The administration has not yet proposed a figure.

Treasury Secretary Timothy Geithner has said the government must increase its debt ceiling by Aug. 2.

Democrats such as Rep. Steny Hoyer of Maryland, the party’s House whip, portrayed Boehner as a captive of the Republicans’ conservative base. And several Senate Democrats introduced legislation to strip highly profitable oil companies of tax breaks that give them $2 billion a year and use the money to make at least a small dent in the federal deficit. That idea is unlikely to go anywhere, since Republicans and oil state Democrats would be likely to filibuster it to death.

Boehner’s office cast the end of such tax breaks as equivalent to a tax increase that would be felt at the gasoline pump.

“Making that a precondition for budget talks is . well, batty,” Boehner spokesman Brendan Buck said.

The White House tried not to get drawn into the contretemps. “Maximalist positions do not produce compromise,” White House spokesman Jay Carney told reporters.

“We understand that there are starting positions,” he said. “We also understand that compromise involves acknowledging that you have to move off of your starting position.”

Carney was armed with past quotes from Boehner in which the speaker declared that not raising the debt ceiling, thus prompting the U.S. to default on its debts, could mean disaster for the world’s economy.

The last increase in the debt ceiling was in February of last year, from $12.4 trillion to $14.3 trillion. Under Boehner’s proposal, that would mean that a similar increase this year would have to include about $2 trillion or more in spending cuts, an unprecedented reduction in spending.

Such cuts would require lawmakers to deal with spending in the government’s biggest benefit programs, such as a Medicare and Medicaid. But Cantor and other top Republicans appeared to concede last week that overhauling those programs would be virtually impossible before the 2012 presidential and congressional elections.

A Republican budget plan passed by the House last month would change Medicare, the health care program for older adults, from direct government payments for medical bills to a voucher-like system. The change would affect future beneficiaries who are now 54 years old or younger.

Without Medicare or Medicaid on the negotiating table, the list of budget items facing trims is far more limited. The House Republican budget lists about $715 billion in non-Medicare and non-Medicaid cuts. They include spending reductions in farm subsidies, food stamps and changes in mortgage finance programs.

Democrats and the White House also want to consider increased revenues from taxes as part of the deficit reduction mix. But Boehner said that was one item that Republicans would not allow.

As the items on the negotiating table dwindled, Senate Finance Committee Chairman Max Baucus, also on the bargaining group negotiating with Biden, said Tuesday that he doesn’t think Congress will address Social Security as part of an effort to reduce government borrowing.

The Montana Democrat said that Social Security has not added to the budget deficit, so it should not be included in a deficit reduction package. The massive retirement and disability program is projected to run out of money by 2037. At that point, payroll taxes would cover about 78 percent of benefits.

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Associated Press writers Andrew Taylor, Jim Abrams and Stephen Ohlemacher contributed to this report.

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