U.S. House Speaker John Boehner and Minority Leader Nancy Pelosi are signaling flexibility on taxes and entitlement cuts, two issues that have deadlocked the congressional supercommittee seeking at least $1.2 trillion in deficit savings by Nov. 23.
While Boehner derided a Democratic proposal to raise taxes by $1.3 trillion, the Ohio Republican didn’t rule out closing tax loopholes to raise revenue in exchange for a Democratic willingness to cut Social Security, Medicare and Medicaid spending. Pelosi, a California Democrat, called for “balance” between taxes and spending cuts while not rejecting a proposal for measuring inflation that would mean smaller cost-of-living increases for Social Security recipients.
Both leaders yesterday urged the supercommittee to agree on a plan before its Nov. 23 deadline for proposing legislation to trim at least $1.2 trillion from the deficit over the next decade. Failure to implement those cuts would trigger automatic spending cuts starting in 2013.
“It’s going to be very difficult to get to an outcome, but I am committed to getting to an outcome,” Boehner told reporters in Washington. “I am not surprised we are having some difficulty because this isn’t easy. It’s time for everybody to get serious about this.”
Standard and Poor’s downgraded U.S. debt to AA+ from AAA on Aug. 5, although the markets have shrugged off concerns about the U.S.’s creditworthiness.
The government’s borrowing costs have fallen to record lows as Treasuries rallied. The yield on the benchmark 10-year Treasury note fell from 2.56 percent on Aug. 5 to below 1.72 percent on Sept. 22. The yield on the 10-year note was at 2.4 percent yesterday in New York.
At an Impasse
The congressional supercommittee is at an impasse over the insistence by Democrats on tax increases and Republicans’ refusal to consider them. Democrats have proposed almost $3 trillion in budget savings, with about half consisting of tax increases, according to a congressional aide.
Republicans proposed a $2.2 trillion plan, according to a Senate aide familiar with the proposal. It includes $600 million in new revenue, mostly by assuming economic growth, the aide said.
Boehner said the proposed Medicaid cuts in the Democratic plan won’t begin to put a dent in the amount the government spends on the program. “There is a lot more room there to help find common ground,” he said.
Pelosi said she is eager for the bipartisan supercommittee to reach a deal promptly so Congress can “send a message of confidence to the country and to the world. We stand ready to reach an agreement.”
Republicans and Democrats should “exploit the fast-track opportunity that is there” to enact whatever deal the panel proposes without amendments, Pelosi said. The law creating the committee also guarantees votes in the House and Senate, where the threat of a filibuster would be banned.
“It’s a missed opportunity; it is even worse than that if we do not do this,” Pelosi said. “It behooves all of us to be as open as possible” to new ideas.
Asked whether she could accept a change in the formula for calculating Social Security cost-of-living adjustments in a deal for higher taxes, Pelosi said, “let’s just see a package. Let’s not, again, exclude anything.”
Still, she said, “It’s not fair to say to a senior you are going to pay more for Social Security and we are not going to touch a hair on the head of the wealthiest people in our country.”
Democrats, led by President Barack Obama, have proposed raising taxes on the wealthiest Americans to help raise revenue.
Under a revised formula for calculating Social Security inflation adjustments, seniors would get smaller increases in benefits, which would provide some with less money to pay their Medicare premiums.
On July 6, as Obama was trying to negotiate a deficit- reduction plan with House Republicans, Pelosi voiced concern about using a different inflation gauge than the Consumer Price Index to calculate Social Security adjustments.
“There’s concern in my caucus about what would happen with the CPI,” Pelosi said at the time. “Some think it is a benefit cut; others do not.”
Boehner has linked closing tax loopholes to reducing overall marginal tax rates as part of an overhaul.
In a Sept. 16 speech to the Washington Economic Club, he said the deficit committee “can develop principles for broad- based tax reform” that would be enacted later.
“Tax reform should include closing loopholes, not for purposes of bringing more money to the government,” he said.
Boehner yesterday reiterated that a tax overhaul should be left to the legislative committees that have jurisdiction over revenue.
“I’ve never believed the supercommittee could rewrite the tax code,” he told reporters. “That is an appropriate role of the committee process in the House and the Senate and I would expect it would stay that way.”
In his aborted talks with Obama to reach a deficit- reduction deal, Boehner showed a willingness to trade revenue increases for entitlement cuts.
“I’d be willing to do revenues, but only if the president were willing to really look at fundamental reform of our entitlement programs,” Boehner said at an Oct. 6 forum sponsored by the Atlantic Monthly and the Aspen Institute.
Boehner said the partisan division over entitlement cuts and taxes hasn’t changed. “All year my conversation with the president, my conversation with Senate leaders this summer, conversations now“ have “revolved around the same type of structure,” he said.
Asked yesterday whether his fellow Republicans would accept closing tax loopholes to raise revenue, Texas Representative Kevin Brady said it would depend on the specific proposal.
Any plan to close tax loopholes for energy producers such as oil companies is “off the table” because “they are job creators,” said Brady, a member of the House’s tax-writing Ways and Means Committee.
Boehner said across-the-board spending cuts that would be triggered in 2013 if Congress failed to pass a deficit plan aren’t acceptable. Nor is repealing the trigger for the spending cuts if the supercommittee can’t reach an agreement, he said.
“Our goal is to meet the targets as set forth in the Deficit Control Act,” he said.
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