Bush tax cuts a key roadblock as long-term budget talks begin

Joe Biden emerges from
Thursday's meeting (Jason Reed/Reuters)
 

Earlier today, Joe Biden kicked off talks between Democrats and Republicans from both the House and Senate on long-term budget issues. Republicans see these talks as negotiations over the debt limit, while Democrats see them as part of a larger discussion on fiscal policy taking place in parallel to raising the debt ceiling. The Republican view is probably a bit closer to the truth, but even though everybody sounded cheery after the meeting, realistically nothing more than a generic and toothless framework for deficit reduction goals will come out of the discussions.

The biggest reason the talks won't accomplish much: Republicans have completely ruled out any discussion of repealing the Bush tax cuts. They are insisting that spending cuts be the only thing on the table. Democrats, who actually have experience balancing budgets, are open to spending restraint, but also believe revenues need to be part of any balanced solution. But as long as Republicans let Grover Norquist rule their world, they won't agree to increase revenues, and that means nothing is going to get done.

Another stumbling block is the Republican insistence on reducing on spending levels instead of reducing debt as a share of the economy. Republicans are focused on putting in place some sort of spending cap that would trigger automatic cuts if spending goes above a certain level while Democrats are rallying around the White House proposal, which would trigger cuts in both spending and tax expenditures if the debt isn't decreasing as a share of GDP. Those ideas sound similar, but they are very different: the White House proposal is directly focused on reducing the debt burden. The Republican proposal is about reducing spending, regardless of what happens to the debt. (If you cut taxes while cutting spending, you'll increase the debt.)

It's possible negotiators will be able to come up with something that they call an agreement, but I don't see they can do much more than agree to disagree unless one side capitulates on revenues, particularly ending the Bush tax cuts on the wealthy. Democrats have already caved on the issue once, but I don't see them doing so again, not less than six months after their first cave. Similarly, I don't see Republicans giving up on taxes before the election.

That means Republicans need to start thinking about how they are going to walk off the ledge when it comes to linking raising the debt limit with getting their way on long-term fiscal policy. They have been acting like they have enormous leverage, but they don't, because it's obvious they are bluffing. Even the GOP won't ultimately block an increase in debt limit.

Source: http://feeds.dailykos.com/~r/dailykos/index/~3/NWp1EtjyAZ0/-Bush-tax-cuts-a-key-roadblock-as-long-term-budget-talks-begin

Bill Clinton Hillary Clinton