Democrats Disagree With Republicans on Taxes to Cut Deficit

By Catherine Dodge - Nov 19, 2011 9:58 PM GMT+0700

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Nov. 18 (Bloomberg) -- U.S. Representative Dennis Kucinich, an Ohio Democrat, talks about the U.S. economy and prospects for agreement by the deficit-reduction supercommittee by its Nov. 23 deadline. Kucinich, speaking on Bloomberg Television's "InBusiness With Margaret Brennan," also comments on the bankruptcy of MF Global Holdings Ltd. (Source: Bloomberg)

A House Democratic leader said a U.S. deficit-cutting agreement can’t include the extension of Bush-era tax cuts, while an influential Republican said his House colleagues won’t back a deal calling for new tax revenue.

The disagreement underscores the crux of the problem facing a congressional panel seeking to meet a Nov. 23 deadline to trim at least $1.2 trillion from the deficit over the next decade.

Representative Jim Jordan, head of the Republican Study Committee, which pushes for deeper spending cuts, said any deficit-cutting proposal that includes a tax increase is unlikely to clear a majority of the House’s Republicans.

Representative James Clyburn, a Democratic member of the supercommittee, said if Republicans demand an extension of the tax cuts won by President George W. Bush in 2001 and 2003 the chances of an agreement are dim.

“It would be difficult” to win passage of a supercommittee plan that includes more taxes, said Jordan, of Ohio, on Bloomberg Television’s “Political Capital with Al Hunt,” airing this weekend.

“If it’s a net tax increase, this is the most fundamental principle within the Republican Party,” Jordan said. “This is a sacred trust I think we as Republicans have with voters.”

As members of the bipartisan supercommittee negotiate over possible spending cuts and revenue increases, for which some Republicans have voiced support, Jordan said it’s “anyone’s guess” whether the group will agree on a proposal.

‘Big’ Deal Unlikely

“The word is today that they may not get to some kind of agreement,” Jordan said in the interview, taped yesterday. “What I’m most concerned about, though, is we should not have any type of tax increase in this proposal. The last thing we need for our economy is to increase the tax burden on job- creators.”

Clyburn, in a separate “Political Capital” interview airing on the same program, said a large deal approaching $4 trillion isn’t likely. He said he sees a chance of a smaller package as long as Republicans agree to revenue increases.

“I’ve kind of given up on big and bold, but I’m never going to give up on balance,” said Clyburn, of South Carolina.

If Republicans insist on extending Bush tax cuts for the wealthy “then we probably won’t get a deal,” he said.

Clyburn, the third-ranking House Democrat, said he hopes President Barack Obama won’t relent as he did last year and allow the tax cuts of his predecessor to continue again.

“I have no idea whether he will or not,” Clyburn said. “I hold out hope that the president will hold fast.”

Obama, winding up his nine-day trip to Pacific Rim nations, hasn’t been in contact with congressional leaders on the supercommittee talks, according to spokesman Jay Carney. Carney said the president has been in “regular contact with his staff in Washington, including those who are monitoring” the deficit-reduction talks.

Republicans on the supercommittee have offered to increase tax revenue by $300 billion, which was seen by some lawmakers as a breakthrough given the party’s resistance to higher taxes.

Trigger Looms

Democrats are pushing for a larger increase in tax revenue, while Republicans want the plan to tackle long-term growth in spending on Medicare and other federal entitlement programs, creating an 11th-hour deadlock in talks.

Failure by Congress to enact a plan by year’s end that would cut at least $1.2 trillion over the next decade would force that amount in automatic spending cuts beginning in 2013.

Jordan said he’s not persuaded by several previous bipartisan proposals for deficit reduction, including one by the chairmen of Obama’s Simpson-Bowles fiscal commission and one by a group of six senators, which called for a mix of revenue increases and spending cuts.

“The taxes always get raised, and the spending cuts never happen,” he said. “Americans aren’t going to go for this. They say, ‘We are tired of these games, we don’t trust them to come through with the spending cuts.’”

Bush Tax Cuts

Republicans would be open to a proposal by Obama to expand a payroll tax break set to expire at the end of the year to foster job growth, Jordan said.

“If that’s part of a tax package that doesn’t increase the overall burden, I think you could get Republicans to look at it,” he said.

Jordan said he’s confident Republicans will prevail in efforts to extend the tax cuts enacted under President George W. Bush, which are set to expire at the end of 2012.

“We kept them in place just a year ago when Democrats controlled all of government and we got the president to go along,” he said.

Obama relented and allowed the Bush tax cuts to continue last year, Jordan noted, and if Republicans gain full control of the government next year they will support an extension.

The 2012 elections will likely result in Republicans keeping the House majority won last year and winning control of the Senate, he said. He also hopes to see a Republican in the White House, defeating Obama’s bid for re-election.

“And then I’m confident we can extend the Bush tax cuts,” he said. “Some of those have been in place for 11 years. That is tax policy.”

To contact the reporter on this story: Catherine Dodge in Washington at cdodge1@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net