The Senate’s No. 2 Democrat said lawmakers should avert a fiscal crisis at year-end and allow Congress to “buy” a six-month delay in scheduled tax increases and spending cuts by finding other ways to reduce the deficit.
Assistant Senate Majority Leader Dick Durbin, an Illinois Democrat, offered the strategy, which he dubbed “the Dick Durbin Plan” at a breakfast today co-sponsored by Bloomberg LP, owner of Bloomberg News, and the Peter G. Peterson Foundation held at the Democratic National Convention in Charlotte, North Carolina.
“We put a six-month timetable together to reach this goal,” Durbin said, later adding, “The notion is that we have to come up with the savings to show we’re serious.”
The deficit-reduction agreement reached last year by President Barack Obama and congressional Republicans helped create a $607 billion “fiscal cliff” of spending cuts and tax increases starting in January unless Congress acts to stop it. The Congressional Budget Office forecast that if Congress does nothing, the fiscal changes would trigger another recession.
Durbin suggested the “payment” for an extension in an interim agreement be deficit savings amounting to the pro-rated equivalent of the fiscal cliff. Many of the changes occur gradually, such as higher taxes paid through increased paycheck withholding and automatic spending cuts over the course of the year.
The parties have been deadlocked over how to approach the expiring provisions. Democrats want to let the tax cuts end for top earners. Republicans who control the U.S. House say the tax cuts for people of all income levels should be extended and that they won’t budge from this stance.
“We can create a force that will bring the House around,” Durbin said.
Lawmakers of both parties say they don’t expect to reach a resolution before the Nov. 6 election, and the policy outcome, Durbin said, will depend largely on who wins the presidency and controls Congress. If Republican Mitt Romney wins, he said, the entire process will need to be restarted while Romney gets his economic team in place.
With less than two months between the election and the deadline, Durbin said it would be difficult for congressional committees to hammer out complex tax legislation and changes in entitlement programs that probably would be part of a broad bargain between the two parties.
During the first half of 2013, Durbin said, Congress and the president should reach an agreement that would reduce projected deficits by $4 trillion over the next decade, using a ratio that includes $2 of spending cuts for every $1 of tax increases.
The tax overhaul President Ronald Reagan and then-House Ways and Means Chairman Dan Rostenkowski, an Illinois Democrat, achieved after the 1984 election followed lengthy negotiations, Durbin said.
“There’s a limited window in that lame duck to get anything achieved,” he said, using the term for the session of Congress held after the election before new members take office at the beginning of the year.
“This is a big lift,” he said. The demand to pay for an extension with deficit savings “puts pressure on everybody.”