Clyburn Predicts Last-Minute Debt-Limit Deal to Cut Up to $6 Trillion

Representative James Clyburn, the assistant Democratic leader in the U.S. House, said the “odds are very, very good” that negotiators will agree on a $3 trillion to $6 trillion package of spending cuts and tax increases in time to raise the U.S. debt limit before an Aug. 2 deadline.

Any agreement with Republicans “absolutely” must include provisions to raise more revenue, even if it also cuts corporate tax rates, said the South Carolina lawmaker, who holds the third-ranking position in the House Democratic leadership and is part of a bipartisan negotiating group of Senate and House members led by Vice President Joe Biden.

“We cannot get an agreement without revenues” being raised, and absent that “I don’t think we can get to what our goals are,” Clyburn said on Bloomberg Television’s “Political Capital with Al Hunt,” airing this weekend.

Democrats will resist any Republican plan to reduce Medicare benefits for future recipients, he said.

“We are not going to reduce benefits at all” because Medicare is “a very important part of the safety net” in American society, Clyburn said.

His comments underscore the difficulty negotiators face in reaching an agreement, as Republicans insist on no tax increases and demand significant cuts in spending, including a readjustment of entitlement programs such as Medicare and Social Security.

Republican leaders also insist that a package of spending cuts without any net increase in federal tax revenue must be part of an agreement to raise the U.S. debt ceiling.

Cuts Plus Taxes

Democratic leaders say that spending cuts alone will not suffice, Medicare has to be protected from any benefit-limiting changes, and new tax revenue must be part of any plan to rein in the federal budget deficit.

“I do believe that sometime between now and the first of August everybody will come to the realization that this cannot be done without revenue raisers,” he said.

Clyburn said Democrats are willing to find more savings from health-care providers and to achieve more efficient care in the health-care overhaul enacted last year.

“There are big bucks to be gathered there,” he said.

Clyburn said he is willing to lower the corporate tax rate from 35 percent to 26 percent, yet he and fellow party leaders insist that the elimination of tax exemptions accompanying any cut in rates must result in a net gain in government revenue.

“If you go down to 26 percent” and “close up the loopholes, then I think we can have positive revenues coming from it,” he said.

No Tax Increases

House Speaker John Boehner of Ohio and other Republican leaders in Congress have said they won’t increase taxes because doing so would hurt job creation. Republicans have ruled out eliminating tax breaks except as part of a broad tax-code overhaul that doesn’t raise additional revenue.

Still, Clyburn said that to achieve the kinds of budget savings both sides want, “sometime between now and the 1st of August, everybody will come to the realization that this cannot be done without revenue-raisers.”

Clyburn said he also favors ending the 2001 and 2003 tax cuts for households with incomes of at least $1 million.

“Most millionaires that I’ve talked to expect that,” he said. “They’re all for that.”

Late last year, President Barack Obama and Congress, then controlled by Democrats, agreed with Republicans to extend all of the Bush-era tax cuts through 2012.

Bush Tax Cuts

Their expiration next year will force Congress to revisit the issue. Clyburn said he hopes that negotiators can deal with the Bush tax cuts as part of the deficit-cutting package.

Wall Street investors have expressed hope that Congress will reach agreement by mid-July on raising the debt limit, currently at $14.3 trillion, so credit markets won’t be shaken by uncertainty about a possible U.S. default.

Clyburn said investors may have to wait until early August.

“We’ve been given until Aug. 2 to get this done without any harm being done to the country” and “Congress usually takes all the time it has,” he said.

The Republican plan to privatize Medicare for new recipients starting in 2022 wasn’t “the only thing” that enabled a Democrat, Kathy Hochul, to win a May 24 special election for a vacant House seat in western New York, he said.

‘Tax Breaks to Millionaires’

Democrats were talking about Republican proposals for “reducing Medicare while continuing to give these big tax breaks to millionaires, to oil companies, subsidies they don’t need, and people saw the correlation between that,” Clyburn said.

“Those two things working together produced that victory” in a staunchly Republican district, he said.

Clyburn said he doubted that Obama would be swayed by widespread Democratic support for a resolution intended to force him to speed up troop withdrawals from Afghanistan. The amendment to a defense measure failed, with 204 in favor and 215 opposed.

“He’ll probably stick to the proposals that he laid out,” Clyburn said. “That’s his prerogative. And it’s also mine to say, ‘Let’s speed it up a little bit.’”

To contact the reporter on this story: James Rowley in Washington at jarowley@bloomberg.net

To contact the editor responsible for this story: Mark Silva in Washington at Msilva34@bloomberg.net.

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