Partisan Divides Harden on Possible Debt Accord as Options Are Rejected
Partisan Divides Harden on Debt Accord
Andrew Harrer/Bloomberg
Republicans said they wouldn’t agree to any measure that raised taxes or contemplated automatic tax increases to rein in future deficits. Democrats continued to insist that Social Security cuts be omitted from the discussions.
Republicans said they wouldn’t agree to any measure that raised taxes or contemplated automatic tax increases to rein in future deficits. Democrats continued to insist that Social Security cuts be omitted from the discussions. Photographer: Andrew Harrer/Bloomberg
May 11 (Bloomberg) -- U.S. Senator Michael Bennet, a Colorado Democrat, talks about negotiations over the federal budget and the importance of the bipartisan "Gang of Six." Bennet speaks with Peter Cook on Bloomberg Television's "In the Loop." (Source: Bloomberg)
Democratic Senator Michael Bennet
Andrew Harrer/Bloomberg
Democratic Senator Michael Bennet.
Democratic Senator Michael Bennet. Photographer: Andrew Harrer/Bloomberg
Lawmakers in both parties said their options were narrowing for reaching an accord on reducing long- term deficits as congressional leaders rejected key elements of a possible bipartisan deal to raise the U.S. debt limit.
Republicans said they wouldn’t agree to any measure that raised taxes or contemplated automatic tax increases to rein in future deficits. Democrats continued to insist that Social Security cuts be omitted from the discussions.
At the same time, the two camps sketched out disastrous consequences from failing to get an agreement in the coming months to reduce the federal debt, which lawmakers in both parties and President Barack Obama have said will be necessary to win support to raise the government’s legal borrowing limit.
Senator Lindsey Graham, a South Carolina Republican, summarized the frustration among some lawmakers over various programs and proposals being taken off the table as negotiations intensify over government spending.
“If you can’t do Medicare, you can’t do Social Security, you can’t do Medicaid, you can’t raise taxes, you can’t lower taxes, we’re just going to sit here and talk to each other,” he said.
The government is scheduled to hit its $14.3 trillion debt ceiling next week and will run out of options for avoiding default by early August, according to projections by Treasury Secretary Timothy Geithner. So far, there is little sign of any consensus being reached that would lead to lifting the debt lid.
No Tax Increase
“Taxes will not be on the table in the discussions” among Senate and House leaders to pave the way for a vote in Congress to raise the limit, said Senate Republican leader Mitch McConnell of Kentucky, scarcely an hour before the negotiating group, led by Vice President Joe Biden, held its second gathering yesterday at Blair House, across from the White House.
McConnell, who called the nation’s debt “a looming crisis,” also said he doubted that separate negotiations by a bipartisan group of six senators could yield a deal. “With all due respect to the Gang of Six,” McConnell said, “the discussions that can lead to a result between now and August are the talks” among Biden and congressional leaders.
Senate Majority Leader Harry Reid, a Nevada Democrat, said minutes later that changes to Social Security shouldn’t be part of any debt-reduction deal. He also said Republicans would have to accept tax increases as part of any compromise.
“We should not be drawing lines in the sand,” Reid said, even as he made his comment about Social Security. The “fair” way to reach agreement, he added, is to “cut spending -- we know we have to do that -- but also to make the tax code a little more fair.”
‘Real Progress’
Biden said after yesterday’s meeting that the group was “making real progress,” and that “I remain optimistic” about prospects for an agreement. He added that “optimism is an occupational requirement” for his job.
Senator Max Baucus, a Montana Democrat who is chairman of the Senate Finance Committee and is participating in the talks, said the group is making strides and has discussed specific programs.
“The ball’s advanced a couple of steps further,” he said. “I’ve got quite a strong sense that this is going to work out.”
Democratic Representative Chris Van Hollen of Maryland echoed those comments, saying the lawmakers had “identified some areas of common ground.” Still, he said, the group had yet to address some of the toughest issues, such as entitlement programs, in a specific way.
“The major areas of disagreement have not yet engaged in a detailed level,” he said.
Not Doing Puzzles
The group’s Republican members, Senator Jon Kyl of Arizona and Representative Eric Cantor of Virginia, didn’t comment upon leaving the meeting. Kyl later said on Capitol Hill that the group is doing substantive work. “We’re not just sitting there doing crossword puzzles,” he told reporters.
Some Republicans said it was counterproductive to reject debt-reduction options at this point.
“Some of us are saying, even though we have our own preferences, we need to keep everything on the table,” said Senator Rob Portman of Ohio. “At this stage, we shouldn’t be talking about limiting the debate; we should be talking about a genuine discussion over the entire gamut of issues.”
Raising tax revenue and curbing the growth of entitlement programs such as Social Security and Medicare are at the core of talks that the Gang of Six have been conducting for four months. Led by Democratic Senator Mark Warner of Virginia and Republican Senator Saxby Chambliss of Georgia, the group has been trying to reach a compromise based on last year’s proposal by the leaders of Obama’s bipartisan debt commission. Warner has said that the group is weighing a plan to cut $3 in federal spending for every $1 of new revenue.
‘Do It Now’
“We’re going to be in tough shape if the Gang of Six can’t produce something, because there really is not a Plan B,” Senator Michael Bennet, a Colorado Democrat, said at a breakfast yesterday in the Bloomberg News Washington bureau. “We need to surface the work product from these guys, and then we need to have a debate about it. And we need to do it now.”
While Bennet gave the Gang of Six “better-than-even” odds of reaching a deal, other lawmakers said the group might miss its opportunity to produce a bipartisan plan.
“They’re at real risk of having history pass them by if they don’t get a real proposal on the table shortly,” said Democratic Senator Chris Coons of Delaware, a member of the Senate Budget Committee.
‘Strong Likelihood’
Coons said he saw a “strong likelihood” that Democrats, who control the Senate, would present their own budget blueprint that would receive no Republican support, rather than “a budget that has a real chance of moving forward, where we all come to the middle, and we give some and they give some.”
Democratic Senator Kent Conrad of North Dakota, the Senate Budget Committee chairman, yesterday showed colleagues a fiscal blueprint that would shave $4 trillion over 10 years from the debt -- half through tax increases and half through spending cuts, Reid said.
Republicans, who hold the majority in the House, have stressed that they would reject any plan that includes raising taxes. House Speaker John Boehner of Ohio reiterated that position in a May 9 speech to the Economic Club of New York, saying that all means for reducing the government’s debt -- except a tax increase -- should be considered.
Market Yields
Amid debate about the deficit in Washington, bond market yields in the U.S. are lower now than when the government was running a budget surplus a decade ago. The yield on the benchmark 10-year note is below the average of 5.48 percent in 1998 through 2001, the last time the U.S. had a budget surplus, according to Bloomberg Bond Trader prices.
Ten-year yields rose two basis points, or 0.02 percentage point, to 3.23 percent as of 10:48 a.m. in London, pushing yields toward the week’s high after four consecutive weekly declines. U.S. stock futures climbed, indicating that the benchmark Standard & Poor’s 500 Index will rise for a fourth straight day.
Talks by the Gang of Six have been hung up over politically difficult questions about how to handle changes to entitlement programs, as well as the details of any tax overhaul.
‘Still At It’
Warner and Chambliss said in brief interviews yesterday that their group is making “progress,” while declining to reveal any details or say when they might present their plan.
“We’re still at it,” Warner said.
In his speech, Boehner outlined the parameters for the Republican position on any agreement to raise the debt limit. He called for an accord that reduces spending by “trillions” in exchange for any borrowing increase and said the cuts must exceed the debt-limit boost. He argued that it would be more irresponsible for Congress to fail to slash spending than it would be to allow the nation to default on its obligations.
Representative Steny Hoyer of Maryland, the House’s second- ranking Democrat, said that Boehner, by ruling out any tax increases, was abandoning what many consider a crucial element of any debt-reduction plan.
Obama’s debt commission and others “have made it clear that without using revenues, you cannot get there in a reasonable way, and certainly politically, you probably couldn’t get there either,” Hoyer told reporters.
Still, Hoyer said he wasn’t “overly pessimistic” about the prospect for an agreement to emerge from the Biden meetings.
Bennet dismissed as “utterly predictable” the conditions some Democrats and Republicans are placing on a debt-reduction agreement. “The question is going to be, ‘Can we construct a center here that can hold?’” he said. “The alternative is really terrifying.”
To contact the reporters on this story: Julie Hirschfeld Davis in Washington at jdavis159@bloomberg.net; Lisa Lerer in Washington at llerer@bloomberg.net
To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net
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