The supercommittee failed because Democrats insisted on $1 trillion in new taxes

By Jon Kyl, Rob Portman, Pat Toomey, Jeb Hensarling, Fred Upton and Dave Camp, Published: November 25

We do not choose to add more to the blame game for failure of the Joint Select Committee on Deficit Reduction , but one Democratic talking point needs debunking: that the talks failed because of Republicans’ attachment to the Bush tax cuts.The untold story of the negotiations is the significance of the Republican offer of fundamental tax reform. It is critical to understand the interplay between the proposal(dubbed the “Toomey plan”) and existing tax law.

First, a bit of history. The 2001 and 2003 changes to the tax code reduced marginal rates for all taxpayers as well as the rates for capital gains, dividends and the death tax. For technical reasons, all of these provisions expire at the end of next year — meaning that if Congress does not act, Americans will face the largest tax increase in our history.

This prospect has put a wet blanket over job creation and economic recovery. It would be the wrong medicine for our ailing economy. As President Obama has famously said, “You don’t raise taxes in a recession.” Partially to avoid this result, but also to try to meet the Democrats partway — given their absolute insistence on big, new tax increases — Republicans offered a proposal that would have both reformed the current code and produced significant new tax revenue.  Read More >>>

 

Supercommittee Likely to Give Up

 

Compromise is not one of the supercommittee’s superpowers. Tasked with cutting the federal deficit by at least $1.2 trillion by this Wednesday’s deadline, the panel of 12 lawmakers is expected to admit defeat as soon as Monday in a joint statement from the co-chairs. The bipartisan group hasn’t been able to agree on anything, and aides tell CNN that the legislators are now focusing on exactly how to announce their failure. Sen. Pat Toomey, one of six Republican Congress members on the committee, admitted that a deal will be “very difficult.” The unfinished business will trigger automatic budget cuts and will likely set up a year-end battle, as Congress is expected to fight over whether to cut emergency jobless benefits and extend an expiring payroll tax break.

Read it at Washington PostNovember 20, 2011 9:30 PM

As Deadline Nears, Deficit Panel Is Still at Deep Impasse

WASHINGTON — Just 72 hours before a deadline to present Congress with a plan to cut $1.2 trillion from the nation’s deficit, members of a joint Congressional committee remained at a deep impasse on Friday after Democrats rejected a new Republican proposal devised with the help of Speaker John A. Boehner.

Pessimism mounted among members of the committee about their ability to strike a deal by Monday and avert a high-profile failure that would demonstrate anew the inability of the two parties on Capitol Hill to reach consensus about how to attack the nation’s mounting public debt. The partisan divide was also showcased Friday by a vote in the House to reject a Republican-backed constitutional amendment requiring a balanced federal budget.

Despite time running out on the committee created by the summer agreement to raise the federal debt limit, negotiations were in disarray, with Republicans and Democrats even disputing what precisely divided them. One panel member said that he still had slim hope for a deal but that it would take an extraordinary development to end the stalemate and avoid a series of automatic cuts in 2013 that would reduce federal services and make substantial reductions in Pentagon spending.

Seeking to reach at least a partial accord, Republicans made their six Democratic counterparts on the committee an offer that would get to roughly half of its goal — a retreat for an earlier plan with cuts in spending and revenue increases — but Democrats rejected it out of hand as inadequate. Democrats said the proposal was unbalanced because it was overly dependent on spending cuts with only a small amount of new revenue.

“If they maintain this,” said Representative James E. Clyburn of South Carolina, a Democratic member of the committee, in an interview, “then this is not going to happen.” Mr. Boehner, stepping in to the talks as the deadline neared, helped devise the Republican proposal, which offered less in new revenues than a previous Republican plan. But Republicans said the proposal also would not touch MedicareMedicaid or Social Security, so they said they were surprised it was spurned. Mr. Boehner left town on Friday pessimistic that a deal could be made by the Monday evening deadline, his aides said.

“This was a balanced, bipartisan plan,” said Kevin Smith, a spokesman for Mr. Boehner. “The fact that it was rejected makes it clear that Washington Democrats won’t cut a dime in government spending without job-killing tax hikes.”

Senator John Kerry, Democrat of Massachusetts and a member of the committee, said in an interview that he still had hope, but that “we’re really having a hard time bringing our colleagues to what is fair, what is balanced.”

Aides to lawmakers in both parties, speaking anonymously because they did not want to be seen as sabotaging the negotiations, were even more negative. “I do not feel any last-minute sense of urgency,” one said.

The group has until Monday to submit a plan to the Congressional Budget Office for evaluation before presenting it to the full Congress on Wednesday, leaving time for reaching the sort of last-minute breakthrough that often occurs on Capitol Hill when lawmakers face a deadline. But members said the divisions were so deep, and good will so lacking, that their expectations were eroding.

The divide was further illustrated by the House’s rejection of a constitutional amendment that would generally require the federal government to balance its budget. The House voted 261 to 165 in favor of the proposal, but that was 23 votes short of the two-thirds majority needed to advance a constitutional amendment. The vast majority of Republicans supported the measure. Democrats, even some who voted in favor of a similar measure in 1995, pushed it to failure.

The dynamic Friday mirrored that of other high-stakes fiscal fights in the 112th Congress, like the brawl last summer over legislation to lift the debt ceiling and avoid default and a fight over a spending measure that was also resolved within hours of a government shutdown. But without an immediate threat of fiscal calamity, as was the case in both those instances, the cuts to federal spending triggered by a committee failure would not take place until 2013, leaving Congress an opportunity to find other escape hatches.

Republicans and Democrats provided radically different descriptions of the Republicans’ latest offer, intended to reduce budget deficits by $643 billion over 10 years. Republicans said their proposal called for $229 billion in new revenue and fees, including taxes on owners of corporate jets, and $316 billion in cuts in spending, including $100 billion from the Defense Department. Republicans said these cuts would reduce the need for federal borrowing and thus reduce interest payments on the federal debt by $100 billion over 10 years.

Democrats said the amount of tax revenue in the Republicans’ plan — $3 billion from owners of corporate jets — was laughable.

Central to the impasse is a fundamental disagreement over how much revenue would be raised toward the $1.2 trillion, and what the role of the Bush-era tax cuts, which are set to expire at the end of next year, would play. Republicans want to maintain the cuts; Democrats want them eliminated for the nation’s highest earners.

Most members of the committee intend to stay in town over the weekend and continue talking. Half the members are scheduled to appear on the Sunday morning television talk shows, where they will almost certainly have to discuss whether their efforts are doomed. Members of the panel are trying to figure out how to manage the denouement of the panel’s narrative, which began with their first meeting 10 weeks ago.

One option is for the panel to meet and vote next week on deficit reduction plans devised by the two parties. However, Congressional leaders are cool to that idea, saying it makes no sense to have the public embarrassment of a meeting that would showcase a failure to solve some of the nation’s biggest problems.

A version of this article appeared in print on November 19, 2011, on page A1 of the New York edition with the headline: Deadline Near, Deal On Deficit Remains Elusive.

Kudlow: A Super Tax Hike Spells Disaster

By Lawrence Kudlow November 17, 2011 7:30 am

It would be a great tragedy if a super tax hike came out of a supercommittee compromise deal. It would do great harm to the economy — just as much harm as President Obama’s various tax-hike threats. And on the Republican side, a super tax hike would irreparably split the GOP.

OK. Here’s the good news. In a CNBC interview this week, I asked supercommittee co-chair Jeb Hensarling about an idea from the Democrats to raise taxes by $600 billion to $800 billion. About $300 billion of that might be upfront, with $500 billion later from some tax-reform overhaul. This would be an unmitigated economic disaster.

But Hensarling was blunt: “Not going to happen, Larry.” He said no such deal has been presented to him. And if it were, he and other Republicans on the supercommittee would not support it.

Hensarling then added, “We put $250 billion of what is known as static revenue on the table, but only if we can bring down rates. We believe we can bring the top individual rate down to 28, 29, maybe at most 30 percent, and bring the corporate rate down to the median of the EU, 25 percent.” For emphasis, he said, “We have gone as far as we feel we can go.”

The Texan was referring to the Sen. Pat Toomey plan, which would lower the personal tax rate to 28 percent and head down from there, while at the same time putting limits on personal deductions (such as mortgage interest) for upper-income taxpayers. In other words, flatten the rates and broaden the base.

Net revenues would go up in this scheme for two reasons: First, the reduction in personal tax breaks; second, the economic-growth impact would be positive. This calls on the research of Harvard professor Martin Feldstein, who urged Congress to trade off lower rates with fewer deductions since the incentive effect of taking home more after-tax income would benefit the economy.

Trouble is, Democrats don’t buy into it — at least not yet. Senate supercommittee members Patty Murray and John Kerry have opposed real tax reform. And it has been reported that House supercommittee member Xavier Becerra opposes it (although Chris van Hollen might be looking at it).

But the whole trouble with the machinations of the two sides in this deficit-cutting episode is that the closer you get to the Nov. 23 deadline, the more compromises are made. Democrats are pulling hard for higher tax rates, which would damage the economy, while Republicans are making no progress getting any meaningful health care entitlement reform.

And the GOP is in danger of losing the narrative. Most of the noise is coming from Democratic proposals for higher taxes, while Republicans have not taken any entitlement-spending-cut scalps.

In all likelihood, Hensarling will succeed in his conference with the idea of making the Georget W. Bush tax rates permanent in return for about $300 billion of loophole-closers. The deeper-tax-rate-cut Toomey reform doesn’t seem to be gaining traction.

Trouble is, so-called tax reform would probably be handed over to the tax-writing committees in the Senate and House for a decision next year. At deal-time this year — if there is a deal — we won’t know what the tax-rate picture will actually look like. At least, that’s a risk. But it’s possible in a worst-case scenario that personal-deduction limits will be hammered out upfront, without any assurances of lower tax rates next year.

All this leads me back to this question: Where are the super spending cuts? Nowhere. So why not fall back on the across-the-board budget-cutting trigger known as sequestration? That’s the $1.2 trillion backup plan if a $1.5 trillion deal cannot be reached. (Hensarling called the $1.2 trillion backstop very important.)

Then at least some spending will be cut. And the trigger is probably better than a deal that uses Iraq and Afghanistan spending cuts that would happen anyway or fiddles around with the current-services baseline from which reductions are measured.

For defense hawks who object — since 50 percent of the trigger would come out of national security — any spending measures would have a shelf life of only one year: 2013. After that, new presidents and Congresses will do what they will.

In another interview, Rep. Ron Paul (now in a dead heat for first place in Iowa polling) told me the GOP should forget tax hikes and trigger $1.2 trillion in spending cuts. Out on the campaign trail, Newt Gingrich agrees.

But for investors and people in business, a super tax hike would be the worst possible outcome. So take the spending-cut sequestration now, and then fight the real battle in November 2012. That’s better than a supercommittee deal at any cost.

To find out more about Lawrence Kudlow and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate web page at www.creators.com.

COPYRIGHT 2011 CREATORS.COM

Supercommittee on the brink

By JAKE SHERMAN & MANU RAJU | 11/16/11 4:32 AM EST

It’s one week from a drop-dead moment for the supercommittee, and the powerful panel is at risk of failing, adding yet another black mark on what is already the most unpopular Congress in modern history.

There isn’t a shred of bill language circulating publicly and no scent of a bipartisan deal before a Nov. 23 deadline to show the public how a panel granted such sweeping authority is trying to solve America’s great fiscal crisis.

Even worse for Republicans, there seems to be a growing civil war on the right over the idea of tax revenues. Rank-and-file conservatives have always been suspicious of the supercommittee, and they’ve started to go public with their complaints, warning against the tax revenue proposals coming from their own party.

“I think that is a danger,” said Sen. Jeff Sessions (R-Ala.), the ranking Republican on the Budget Committee. “We’re in a national discussion about whether to deal with our deficit through tax increases or spending reductions, and I think the American people demonstrated in the last election they were prepared to take spending reductions. I don’t think we’ve done a very good job of expressing that, frankly.”

To be clear, a modest deal could still come together – this Congress has had a way of stumbling into 11th hour budget deals that nobody seems to like yet still barely pass both chambers.

“I hope they’re able to pull the rabbit out of the hat here at the end,” said Sen. John Cornyn (R-Texas).

But as of Tuesday night, the pessimism was palpable.

Supercommittee co-chairman Jeb Hensarling (R-Texas), speaking bluntly to a closed House Republican meeting Tuesday said any deal that the panel produces will either be an “abject [failure] or a ‘kiss your sister agreement.’”

Sensing that the end game is approaching, Speaker John Boehner and Senate Majority Leader Harry Reid met Tuesday to discuss the supercommittee’s outlook. While the leaders downplayed their talks, their direct involvement suggested they’re looking for an escape hatch before the Thanksgiving Eve deadline.

Adding to pressure to the supercommittee are liberals in Congress who fear Democrats may take a huge whack out of cherished entitlement programs — as well as a bipartisan group of lawmakers who will continue to demand Wednesday that the panel “go big” in its deficit goals and take money out of Medicare while raising tax revenues. Any bipartisan deal would split both parties.

Before Republicans make any deals with Democrats, however, they’ll need to make peace in their own party.

“I think what it’s really come down is this: this is such a huge problem and we’re so near crisis if not in the midst of crisis that if this doesn’t get fixed, everybody pays a huge price,” said Sen. Mike Johanns, the Nebraska Republican who has endorsed calls for higher revenue.     Read more:

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