Congress arrived at another fiscal impasse today: Both Republican participants in deficit negotiations led by Vice President Joe Biden chose to drop out of the talks, citing differences on the issue of tax increases.
House Majority Leader Eric Cantor’s (R., Va.) announcement this morning that he would not be attending the group’s meeting scheduled for that afternoon came as a surprise to many observers, as he had previously said that the talks were yielding “some progress.” Cantor told the Wall Street Journal, however, that Wednesday’s meeting was far more contentious than past sessions, and that talks had repeatedly stalled over the tax issue. “At each meeting, it has become a little more difficult to ignore that divide,’’ he said.
Despite his decision to exit the talks, Cantor said he remained optimistic that a meaningful deal was possible. He called on President Obama to assume a bigger role in the talks in an effort to break the deadlock. “I believe it is time for the president to speak clearly and resolve the tax issue,” he said. “Once that is resolved, we have a blueprint to move forward to trillions of spending cuts and binding mechanisms to change the way things are done around here.”
House Speaker John Boehner (R., Ohio) told reporters he sympathized with Cantor’s decision. “I know the frustration that he feels when Democrat members continue to want to bring tax hikes into this conversation and insist that we’ve got to raise taxes on the American people,” he said at weekly press briefing. “A tax hike cannot pass the U.S. House of Representatives. It’s not just a bad idea; it doesn’t have the votes, and it can’t happen. . . . The American people don’t want us to raise taxes.”
The speaker stopped short of endorsing Cantor’s move, citing the urgency of reaching an agreement to alleviate uncertainty in the marketplace. But that will only happen once Democrats accept the reality of the situation. “I understand why [Cantor] did what he did, but I think those talks could continue if [Democrats] are willing to take the tax hikes off the table,” Boehner said. “We don’t have any more time to lose.”
He also urged President Obama to get more involved in the talks, especially if negotiators are to reach a deal by early next month, as the White House has requested. “If we’re going to meet that timeline, the president is going to have to engage,” he said. “I would expect to hear from him.”
Shortly after Boehner’s press conference, Sen. Jon Kyl (R., Ariz.), who had been representing Senate Republicans in the Biden talks, announced that he would be dropping out as well. Speaking on the Senate floor this morning, Senate Minority Leader Mitch McConnell (R., Ky.) reiterated his party’s position that tax hikes are “a poison pill” to any potential deal to reduce the deficit. “We know that a tax hike would never make it through Congress,” he said. “Not because of Republican opposition — but because of Republican and Democratic opposition. We’ve already had the votes to prove it.”
McConnell was referring to the “tax deal” orchestrated during the lame-duck session in December to extend the Bush tax rates across the board through 2013, a measure that passed with significant bipartisan support in both chambers. President Obama even hailed its passage as a boon for the national economy. McConnell questioned the motivations of Democrats who continue to insist on raising taxes. “There’s one of two things going on here,” he said. “Either someone on the other side has forgotten that there’s strong, bipartisan opposition in Congress to raising taxes, or someone involved is acting in bad faith.”
Democratic leaders, meanwhile, first learned of the defections just as they were leaving a meeting with President Obama at the White House. Rep. Chris Van Hollen (D., Md.), ranking member on the House Budget Committee and participant in the Biden talks, told reporters he was “disappointed” in Cantor’s decision, but acknowledged “strong disagreement” between the two sides in the negotiations. He suggested that Republicans opposed to any kind of revenue increase whatsoever — through eliminating tax loopholes and subsidies, for example — were simply not serious about reducing the deficit.
He even called out Grover Norquist, president of Americans for Tax Reform and author of the “Taxpayer Protection Pledge,” an agreement to oppose all tax increases that nearly every Republicans lawmaker has signed. “Until our Republican colleagues are more concerned about the need to reduce the deficit than they’re worried about what Grover Norquist will say, we’re going to have a really difficult time reducing the deficit,” Van Hollen said, citing last week’s Senate vote to eliminate ethanol tax credits as a “positive sign.”
Van Hollen strongly suggested that the only disagreement on taxes was over the elimination of loopholes and subsidies, though a Senior GOP aide with knowledge of the talks tells National Review Online that’s not the case. “We would disagree with that notion,” the aide says. “Mr. Van Hollen’s perception of tax increase is at odds with the American people’s definition of one.”
In fact, even Republicans haven’t exactly been able to agree on what constitutes a “tax increase,” as evidenced by the vicious, ongoing feud between Norquist and Sen. Tom Coburn (R., Okla.) over whether getting rid of a tax credit without cutting taxes elsewhere to offset the resulting revenue is the same as raising taxes. Republican leaders have largely shied away from the debate, and Speaker Boehner was characteristically vague when asked at today’s press conference. “We’ve been opposed to increasing taxes,” he said. Republicans’ willingness to accept the elimination of some tax expenditures, like Democrats’ willingness to accept entitlement reform, is seen as a potentially critical element when it comes to reaching a compromise.
Even Norquist felt compelled to weigh in on the day’s developments. “Finally, Democrats are getting honest about their plan for the country’s financial future, which is to hide behind tax hikes rather than fix the spending problem they created,”he said in a statement. “Lawmakers who want to hike taxes, rather than save the country from bankruptcy, have been excused from the table. It’s time for grown-ups to sit down and start addressing the country’s spending problem head on.”
Cantor’s decision is certainly a turning point in the negotiations, as positions have noticeably hardened in the last several days, especially on the Democratic side. To the Democrats, spending cuts are unthinkable. “We cannot cut our way out of debt,” House Minority Leader Nancy Pelosi (Calif.) said today. And just yesterday, Democratic leaders were arguing for more spending to fund a “stimulus” measure to boost the economy.
Van Hollen, following his meeting with the president, described the White House position as follows: 1) Make sure the economy is “fully charged” and 2) reduce the deficit. That should pretty well sum up where things stand at the moment. The divide on taxes is not surprising, but Republicans must be fairly shocked to find themselves arguing against additional spending measures, given the political climate. Boehner was not impressed. “On the same day the CBO called our debt crisis ‘daunting,’ Democrats leaders came out and asked for new spending,” he said. “As you’ll recall, we tried this. It was called the stimulus plan. And it didn’t work.”
— Andrew Stiles is a 2011 Franklin fellow.