July 7 (Bloomberg) -- White House adviser David Plouffe pushed for “positive” revenue increases in a deal to cut the U.S. deficit while Republicans continued to resist any net growth in taxes as talks resume today on raising the government’s debt ceiling.
The Obama administration and congressional leaders are seeking an accord to lower the deficit during the next 10 to 12 years to pave the way for a vote to increase the $14.3 trillion debt limit, and the tax issue looms as the major obstacle to a deal.
“Our sense has been to make the numbers work, you’re going to have to have a revenue-positive situation,” Plouffe said yesterday at a Bloomberg breakfast in Washington. “Obviously, the bigger the deal, the bigger the hole is to fill.”
The White House, in meetings led by Vice President Joe Biden, had been willing to discuss cutting the deficit through changing the way the government measures inflation, according to people in both parties familiar with the administration’s position who weren’t authorized to speak publicly. This would amount to a cut in the annual cost-of-living adjustments for entitlements like Social Security.
Two Democratic officials with knowledge of the negotiations, who briefed reporters yesterday, said Social Security was among the entitlement programs that may be discussed to get to a larger deficit-reduction package.
‘On the Table’
Illinois Senator Richard Durbin, the chamber’s No. 2 Democrat, said Social Security should be on the table in negotiations aimed at reducing U.S. debt, provided that savings are used to strengthen the retirement system.
“I’ll put Social Security on the table as long as several things are clear: Number one, any savings in Social Security goes to make Social Security stronger, longer,” Durbin said in an interview on Bloomberg Television. “Secondly, we’ve got to make sure the benefits structure that people really count on, those in lower and middle-income categories, are going to be protected and enhanced.”
Durbin said he supported a push toward assembling a large package of cuts worth as much as $4 trillion over more than a decade.
“Our economy, if it’s going to recover, needs a signal that we understand the deficit challenge and can deal with it,” he said. “I was afraid we were going to get stuck with a mini-deal, and then a mini-mini deal.”
Both parties understand the “skeletal outline” needed for a compromise, which can be reached if leaders have the “political will” to act, Durbin said.
House Majority Leader Eric Cantor of Virginia signaled some flexibility before today’s White House talks, which include Obama and top lawmakers from both parties, saying Republicans may be amenable to closing some tax loopholes Democrats have targeted if such moves are “coupled with offsetting tax cuts somewhere else.”
Cantor and other Republicans, including House Speaker John Boehner of Ohio and Senate Minority Leader Mitch McConnell of Kentucky, say a plan that includes more tax revenue won’t pass the Republican-run House or the Democrat-controlled Senate, where Republicans have enough votes to stall action.
Plouffe, making the White House case, said more revenue is essential to achieve meaningful deficit reduction and provide some balance to expected spending cuts for defense, domestic and entitlement programs -- including Medicare and Medicaid.
He said that if Republicans “want deficit reduction, it’s got to be balanced; therefore it’s got to have revenue.”
Leaving Comfort Zone
“Folks in the Democratic Party are going to have to, I think, get out of their comfort zone,” Plouffe said, because “you’re not going to have a credible deficit-reduction package that doesn’t have some entitlement reform in savings.”
Cantor suggested possible Republican acceptance of President Barack Obama’s proposals to end tax-break loopholes, such as depreciation on corporate jets.
“If the president wants to talk loopholes, we will be glad to talk loopholes,” Cantor told reporters in Washington. Still, he questioned the call by Obama, Plouffe and other Democrats for a deficit-reduction package that includes additional tax collections.
“Why would you want to raise taxes in a sputtering economy?” Cantor asked. “So any discussion about loopholes must be accompanied by offsetting tax cuts,” he said.
Obama, during a “Twitter Town Hall” at the White House yesterday, said Republicans shouldn’t use the debt-ceiling bargaining “as a gun against the heads of the American people to extract tax breaks for corporate jet owners or oil and gas companies that are making billions of dollars.”
Responding to questions over the Twitter Inc. interactive service, the president said he was “happy to have those debates” on tax breaks because “the American people are on my side on this.”
Obama and lawmakers are working to complete a deficit-cutting deal by July 22 to give Congress enough time to write and circulate the agreement before Aug. 2 -- the Treasury Department’s projected date for expiration of its borrowing authority.
Two Democratic officials familiar with the talks said that at today’s session, which convenes at 11 a.m. Washington time, Obama will argue that it may be easier to get a bipartisan deal on a larger package of $2.5 trillion to $4 trillion over a decade than a smaller or shorter-term compromise that some lawmakers have said is becoming the more likely scenario.
A larger long-term accord would provide lawmakers in both parties the political cover to say that while they oppose some aspects of it, the opportunity to take significant steps to revamp the government’s finances was too good to pass up, said one of the two officials, who spoke on condition of anonymity ahead of the meeting.
Plouffe, at the breakfast session, said leaders in both parties want a long-term deal, and he dismissed sharp rhetoric from both sides at media events as external “theatrics.”
Some Republicans, such as Senator John Cornyn of Texas, have suggested that a short-term package is more likely, given the complexities of a larger agreement.
A smaller package would likely force Congress to vote again on the debt ceiling before the 2012 elections, an outcome Obama has said he wants to avoid.
Plouffe, Obama’s 2008 campaign manager, said the president is pushing hard for a long-term plan because it would help the economy and give investors greater confidence in the country’s fiscal future.
It is also an accomplishment Obama could take into his 2012 re-election campaign.
Talking About Timing
In addition to the haggling over spending cuts and taxes, Plouffe said negotiators are focusing on the timing of implementing the parts of a final agreement to avoid upsetting the fragile and slow economic recovery. He didn’t rule out the possibility that a final package would push new revenue, raised by closing tax loopholes or other measures, into later years while providing short-term stimulus measures, such as a temporary payroll tax cut.
“You’ve got to look at it as a holistic thing here,” Plouffe said. “How do you hit your number so that you are hitting an appropriate deficit-reduction target? You can’t look at it as just one thing. It’s all of a piece.”
Cantor expressed optimism that the basis for a deal would be a “blueprint” for saving more than $2 trillion that was produced in the Biden-led bipartisan debt-limit talks.
Those talks broke down last month after Cantor and the other Republican participant, Senator Jon Kyl of Arizona, withdrew because of the impasse over tax increases.
The framework that is ‘still in the works’’ and “that we can deliver on” includes more than $400 billion in cuts to mandatory health-care spending, Cantor said.
Since the Biden-led talks ended, Obama and Boehner “have been in discussion over some period of time now,” Cantor said.
Senator John McCain of Arizona, the 2008 Republican presidential nominee, yesterday urged members of his party to drop their insistence on including a balanced budget amendment to the U.S. Constitution in any debt deal. They should also agree to end scores of tax breaks for industries, including oil and gas and manufacturing, as part of an overall agreement to lower the corporate tax rate, he said on the Senate floor.
“Reality today dictates that we don’t have the votes in this body” for a balanced budget amendment, McCain said. Although that may change in the future, he said, “for our purposes today, in order to avoid what would be disastrous consequences for our markets, our economy as a whole, and our standing in the world, I encourage my colleagues to lay aside, at least temporarily, their insistence that amending the Constitution be a condition of their support for a solution to this terrible problem.”
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