U.S. Senator Dick Durbin of Illinois said bipartisan negotiations are under way in his chamber to avoid mandatory federal spending cuts by using recommendations of a presidential debt-reduction commission as a framework.
“The Group of Eight, four Democrat, four Republican senators that I’ve been part of for two years or more, still continues to meet and talk about what we can put on the table,” Durbin, the Senate’s second-ranking Democrat, said in an interview with Bloomberg Television’s Peter Cook on the new program Capitol Gains.
If Congress fails to act by the end of the year, tax rates for income, capital gains, dividends and estates would increase for all taxpayers. The top income tax rate would rise to 39.6 percent from 35 percent, and the top rate on capital gains would jump to 23.8 percent from 15 percent.
The tax increase is part of a so-called $607 billion fiscal cliff of automatic spending cuts and revenue changes in 2013 that the nonpartisan Congressional Budget Office says would probably cause a recession if left intact.
Durbin, co-chairman of President Barack Obama’s re-election campaign, said a starting point for an accord is the December 2010 plan proposed by a commission led by former Senator Alan Simpson, a Wyoming Republican, and Erskine Bowles, a Democrat who served as chief of staff to then-President Bill Clinton.
It recommended a mix of spending cuts, entitlement program adjustments and tax changes to cut the deficit $3.9 trillion over 10 years beyond increased revenue triggered by the assumed expiration of tax cuts for top earners enacted when George W. Bush was president.
The 18-member Simpson-Bowles commission was created by Obama. He refused to back its recommendations when they were released, and the commission failed to provide enough support to have the panel’s report considered by Congress.
Still, interest has persisted among some lawmakers in the commission’s recommendations, Durbin said.
“When we call a meeting of senators who believe the Simpson-Bowles commission model is the right starting point and 46 senators show up, equal numbers from both parties, that tells me that we have a good starting point over in the Senate,” Durbin said.
He urged businesses that are having trouble planning because of fiscal uncertainty to urge members of Congress to reach a bipartisan agreement on a 10-year deficit reduction package before the new Congress is sworn in January. That approach would postpone a more complicated tax overhaul until early next year, Durbin said.
He said the Obama administration won’t announce its own plan until after the Nov. 6 presidential election, assuming Obama wins.
“I don’t think anything serious is going to happen publicly before the election,” said Durbin, 67. “But the day after, if the president’s re-elected, I think the wheels are going to start turning.”
Durbin also expressed support for Federal Reserve Chairman Ben Bernanke and said he opposes restrictions on the Fed.
“Encouraging this economy by keeping interest rates low, trying to buy up some of the mortgage debt that’s out there, is a way to try to give more buoyancy and more lift to this economy,” Durbin said. “We quit too soon when it came to stimulus. I voted for the stimulus, glad I did. I think we should be doing more to encourage this economy to get back on its feet. But Bernanke’s doing his part.”
Asked whether the U.S. should withhold aid to Egypt in the wake of protesters scaling U.S. Embassy walls on Sept. 11, Durbin said, “I wouldn’t give up so quickly on Egypt. I think we need to hold them to standards and values. But if we can establish a good, positive working relationship with them and other Arab nations, it’s in the best interests of the United States.”