Democrats were incensed late Thursday at news that President Obama and Speaker of the House John Boehner were working on a $3 trillion deficit reduction deal, which relied only on spending cuts, to increase the nation's debt limit.
Democrats have insisted that any deal must include a “balanced approach,” meaning that revenue increases, in addition to spending cuts, would have to be included. Republicans have insisted that only spending cuts be used to reduce the deficit. Thus far, no agreement has been reached on how to end the stalemate before the August 2 deadline to raise the nation's debt limit.
The current negotiations between Obama and Boehner may revolve around whether the expiration of Bush era tax cuts in 2013 would count as a tax increase. Legislators could reduce tax rates after the tax cuts expire. The new rates could still be higher than the Bush era tax cuts. This would mean that legislators have, technically, cut taxes, even though tax rates would rise from 2012 to 2013.
Grover Norquist, of Americans for Tax Reform, seemed to leave open this possibility Wednesday in an interview with The Washington Post editorial board. He has been an important figure in the debt ceiling debate. Americans for Tax Reform has asked members of Congress to sign a pledge that they would not raise taxes, and a majority of Republicans have done so. Norquist decides what constitutes a violation of the pledge.
In his Washington Post interview, Norquist was asked if letting the Bush tax cuts expire would be considered a violation of the pledge. “Not continuing a tax cut is not technically a tax increase,” said Norquist.
This would seem to open a door to a possible compromise. Democrats could get what they want – increased revenue, and Republicans could vote for it without, technically, voting for a tax increase.
Sen. Chuck Schumer (D-N.Y.) mentioned it on the Senate floor. “The House GOP is on an iceberg that is melting in to the ocean and even Grover Norquist is offering them a lifeboat. The question is, for their own good, for the country's good, will they take it?” said Schumer.
Norquist backed off his position, however, in a statement released Thursday.
“Any failure to extend or make permanent the tax cuts of 2001 and 2003, in whole or in part, would clearly increase taxes on the American people,” he stated. “It is a violation of the Taxpayer Protection Pledge to trade temporary tax reductions for permanent tax hikes.”
In a response to the statement, the Washington Post posted the audio from the interview on its website. Norquist can indeed be heard saying that letting the Bush tax cuts expire is not a violation of the pledge. The editorial board even pressed him on the issue because they were clearly surprised at his answer. He clarified that while he thinks that letting the Bush tax cuts expire would be a bad thing, it would not be a violation of the pledge.
The other side of the debate became just as intense over word of a bargain between Obama and Boehner as White House Budget Director Jack Lew met with Senate Democrats Thursday afternoon.
As soon as Lew entered the door, Senate Majority Leader Harry Reid said, “I’m the Senate majority leader; why don’t I know about this deal?” as reported by The Hill. Lew assured them that there was no deal reached. In the heated meeting between Lew and Senate Democrats, Lew was warned that Senate Democrats would not go along with any deal if they are left out of the loop.
In an interview with the Newshour, Senator Kent Conrad (D-N.D.), a member of the Gang of Six, said that any deal to raise the debt ceiling “is going to have be something very close, in terms of dealing with the debt, to what the group of six has come up with because it's the only bipartisan plan that has been developed that really gets the debt under control.”
In the same interview, Sen. Saxby Chambliss (R-Ga.), another member of the Gang of Six, was asked if House Republicans would accept any plan that increases revenue. Chambliss said that increasing tax rates are out of the question, “but, as far as increase in revenue, you bet, that's going to have to be part of any plan to solve the long-term debt.”
When asked if Tea Party members in the House are likely to go along with that, Chambliss responded, “If you couch it the way we have, if you put in real meaningful tax reform ... that lowers rates and energizes the economy and shows true economic growth in the long term, that's what we're all for. I can't imagine anybody being in opposition to that.”
Conrad also had some stern warnings for his fellow Democrats.
“The harsh reality is this, a failure to right size the entitlement programs means they are going to go broke. That's not our word, that's the word of the trustees of the programs themselves,” Conrad said. “Anybody that says you don't have to make any change is not telling the American people the truth. The truth is all of us are going to have to give some ground to solve this American problem and it's in America's interests that we do so.”
The Senate will hold a cloture vote Friday morning on the House passed Cut, Cap, and Balance bill. Cloture votes require the support of 60 senators to end debate on a bill. Without cloture, the bill cannot be voted on. The cloture vote is expected to fail.
The U.S. national debt is currently over $14.5 trillion with over $114.7 trillion in unfunded liabilities.