House Minority Leader Nancy Pelosi said any deal to cut the deficit and boost the federal debt ceiling has to include reductions in “tax subsidies” for U.S. companies.
Democratic President Barack Obama and Republican House Speaker John Boehner will need the support of Democrats to get an agreement through the House, Pelosi said Sunday in an interview on CNN’s “State of the Union.” Such an agreement would have to include both spending cuts and an end to tax breaks for some industries such as oil, she said.
“You can’t cut your way out of the deficit,” California Democrat Pelosi said. “You have to have revenue on the table.”
Obama stepped into the negotiations to cut at least $1 trillion from the long-term deficit and raise the nation’s $14.3 trillion debt ceiling before Aug. 2, after discussions led by Vice President Joe Biden broke down last week when House Majority Leader Eric Cantor, a Virginia Republican, walked out on June 23 saying he wouldn’t discuss increases in revenue.
“The obstacle has come because Leader Cantor walked away from the table because he doesn’t want to deal with the special interest tax subsidies,” Pelosi said.
Obama summoned Senate Majority Leader Harry Reid, a Nevada Democrat, and Minority Leader Mitch McConnell, a Kentucky Republican, for separate meetings at the White House tomorrow aimed at breaking the impasse.
“Throwing more tax revenue into the mix won’t get us the desired results,” McConnell today said on ABC’s “This Week.” “And, it won’t pass.”
McConnell, who declined to completely rule out ending some tax breaks to raise revenue, said Republicans are focused on cutting spending.
“We need to cut spending now, we need to cap spending in the future, and we need to save our entitlement programs,” he said.
Treasury Secretary Timothy F. Geithner has said the statutory debt ceiling must be raised by Aug. 2 or the U.S. risks being unable to pay its debts.
Moody’s Investors Service said this month it will put the U.S. government’s Aaa credit rating under review for a downgrade unless there’s progress on increasing the limit by mid-July. Standard & Poor’s put the U.S. on notice in April that it risks losing its top credit rating unless policy makers agree on a plan by 2013 to reduce budget deficits and the national debt.
“Both Democrats and Republicans would like to come together and finish this negotiation and finish it soon,” McConnell said. “It need not go to the 11th hour.”
Cantor quit the Biden-led talks after seven weeks and Arizona Senator John Kyl, the second-ranking Republican, followed within hours.
At that time, the negotiators had agreed to $1.4 trillion to $2 trillion in spending cuts, McConnell said.
The Republicans bowed out with only two meetings to go in the round of dealmaking, said South Carolina Representative James Clyburn, one of the Democrats involved in the talks. Clyburn said on “This Week” that the group was discussing ways to raise revenue that the Republicans wouldn’t accept because they saw them as tax increases.
“How do you call loopholes to oil companies that are making all these billions in profits tax hikes?” Clyburn said. “That is no tax hike. We call a tax hike when you raise rates.”
Republicans are pressing to cut spending on entitlement programs such as Medicare and Medicaid. Democrats proposed phasing out tax breaks for those earning more than $500,000 a year, Maryland Representative Chris Van Hollen, a Democrat participating in the talks, said on a conference call June 24.
Speaking at a political fundraiser June 23 in New York, Obama said he’s “prepared to bring down our deficit by trillions of dollars,” and that spending cuts must be “balanced” with tax increases on the wealthy.
U.S. debt may exceed the size of the nation’s economy by 2021, according to the nonpartisan Congressional Budget Office.
The handoff of negotiations to the president will force Obama to be specific about what kinds of tax increases he supports to help close the budget deficit, something Democrats have avoided amid tension in their party over raising tax rates versus closing tax loopholes for corporations.
It also increases pressure on Boehner, who would have to find enough Republican votes to pass a deal that might draw opposition within his caucus.
© Copyright 2023 Bloomberg News. All rights reserved.