With just two weeks before a Nov. 23 deadline, Congress’s “super committee” broke new ground this week, as Republicans – for the first time in 10 months – offered a plan that includes tax hikes.
It’s not the last word. Aides say that Democrats rejected the measure, which proposes cutting tax breaks in exchange for extending the Bush-era tax cuts, saying it was too tilted toward the rich.
But the GOP move to put tax hikes on the table could mark a turning point in the push for a deal – that is, if Democrats come up with a plausible counteroffer.
“The fact that some Republicans have stepped forward to talk about revenue I think is an invitation for Democrats to step forward and talk about entitlement reform as well as spending cuts – and therein lies the core of an agreement,” said Senate deputy majority leader Richard Durbin (D) of Illinois, at a briefing with reporters Wednesday.
The super committee is responsible for coming up with a deal by Nov. 23 that would cut at least $1.2 trillion in deficits over 10 years. The plan has to be approved by a majority of the panel itself.
Frustrated by weeks of impasse, 45 senators and, more recently, 100-and counting House members bucked party lines to call on the Joint Select Committee on Deficit Reduction to “go big” and put all elements on the table.
For Democrats, that means significant cuts to entitlement programs, such as Medicare and Medicaid, as well as Social Security. For Republicans, it means considering tax hikes – in violation of a “Taxpayer Protection Pledge” that most have taken that commits them to opposing all tax increases. That includes cutting tax breaks, unless they are entirely offset by lower tax rates.
The plan proposed by Sen. Patrick Toomey (R) of Pennsylvania on Tuesday would have cut some tax breaks – such as capping itemized deductions for mortgage interest or ending tax breaks for corporate jets – in exchange for lowering the top tax rate from 35 percent to 28 percent and cutting entitlements spending.
The plan is a technical violation of the Taxpayer Protection Pledge, but Senator Toomey, a former president of the antitax Club for Growth, has strong standing among conservatives.
In all, the plan could net some $500 billion in deficit reduction, Toomey told The Wall Street Journal. (Republicans claim that lowering the tax rates will produce even more revenue for government by spurring economic growth, but current rules of congressional accounting require static scoring.)
Still, the negotiators remain far apart, especially on taxes. Since the deliberations of the 12-member panel are closed and leaks relatively rare, accounts of offers and counteroffers are not always consistent. Here’s what has been confirmed by aides on both sides of the aisle:
Democrats first proposed $1.3 trillion in tax hikes as part of a package to lower deficits by $3 trillion over 10 years. Democrats say that a new, second offer is on the table, which proposes about $1 trillion in tax hikes to drop deficits $2.3 trillion. GOP aides say the offer is not new, and besides, “job-killing” tax hikes are still too high.
“Right now, we are waiting for a response to what the second-ranking Democratic leader in the Senate called a ‘breakthrough’ – and we’ve seen nothing,” said Michael Steel, a spokesman for Speaker John Boehner, in an e-mail Wednesday night.
The week began with a sharp warning from Sen. Charles Schumer (D) of New York, who said he expected the super committee to fail because Republicans “have said no net revenues.”
“The American people are beginning to sniff this. They’re beginning to sniff that the other side has dug in and is not compromising,” Senator Schumer told MSNBC.
Senate Republican leader Mitch McConnell shot back that it’s Democrats and the White House that are pulling for failure, so that Republicans can be blamed for the outcome.
But at the same time, that bipartisan coalition of senators and House members has mobilized as a counterweight to partisan firefights. Their aim is to give cover and assurance to the 12-member super committee that there is a critical mass in Congress willing to back a bold deal. Their mantra: Failure is not an option.
“The most important thing I can do right now is find colleagues who are willing to compromise,” says Sen. Claire McCaskill (D) of Missouri. “There is a huge group of us in the House and Senate who are willing to compromise on all three parts of the equation – spending cuts, entitlement reform, and revenue.”
In recent weeks, leaders of the bipartisan group have also been reaching out to business leaders to lobby the super committee on the need to get an agreement. “The business sector has not been overly engaged in fiscal policy recently, and it’s clearly in their best interest to see a sustainable fiscal plan in place so they can invest,” says Maya MacGuineas, president of the Committee for a Responsible Federal Budget, who has been working with the bipartisan group.
“After a tumultuous summer, they realize that markets are going to make their jobs incredibly difficult until this is resolved,” she adds.
The super committee has unprecedented powers to set a 10-year fiscal course for the nation and bring to the floor, without amendment or possibility of a filibuster, a deficit reduction plan. Congress has given itself until Dec. 23 to vote the final agreement up or down. If an agreement is not passed by that date, some $1.2 trillion in automatic spending cuts are due to take hold beginning in 2013.
Some antitax groups fear that some deals have already been cut within the 12-member panel that will prove difficult to challenge in the future. Last week, Americans for Prosperity, Americans for Tax Reform, Citizens Against Government Waste, the Heartland Institute, the National Taxpayers Union, and Taxpayers for Common Sense wrote to the super committee to caution against writing a farm bill in secret.
“The super committee appears to be using the deficit reduction process to lock in major agricultural subsidies for the next 5 or 10 years,” says Steve Ellis, a spokesman for Taxpayers for Common Sense. “It completely turns what was the goal of deficit reduction on its head.”
At the same time, lawmakers on the left of the political spectrum fear that Democrats have already given away too much in negotiations over entitlement reform. Sen. Bernard Sanders (I) of Vermont is calling for Democrats on the super committee to vet proposals with their caucus before presenting them to the full panel.
“I was very upset to have read in the papers a [Democratic] proposal to cut deficits by adjusting the formula for cost of living [COLA],” he says.
“People are very concerned about cuts in Social Security, Medicare, and Medicaid,” he adds. “People actually laugh when I tell them that in Washington, there are people that think that the COLA formula is too generous.”