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Budget Panel Members Clash on Raising Revenue in Talks

October 30, 2013

U.S. Senator Patty Murray

U.S. Senator Patty Murray, a Washington Democrat and co-chairman of the conference, said the panel should do “the absolute minimum” by replacing automatic spending cuts known as sequestration. Photographer: Alex Wong/Getty Images

Democrats and Republicans clashed over reducing the U.S. debt by raising revenue as the first meeting of a bipartisan budget panel today revived the same disputes that have scuttled previous congressional efforts.

Republican Representative Paul Ryan said using the talks as way to raise taxes will doom the process as Democratic Senator Patty Murray said replacing automatic spending cuts with a short-term budget must include ending some tax breaks. Any agreement that trims Social Security and Medicare benefits must be tied to added revenue, she said.

“Republicans are also going to have to work with us to scour the bloated tax code -- and close some wasteful tax loopholes and special-interest subsidies,” Murray of Washington, co-chairman of the panel, said at the committee’s first meeting with 29 House and Senate members.

Ryan, chairman of the House Budget Committee, said changing the tax code should be handled by other committees. “If we look at this conference as an argument about taxes we’re not going to get anywhere,” he said as the panel seeks to reconcile differences between Republican and Democratic budget blueprints.

Murray and Ryan are lowering expectations for a major deal to reduce the nation’s $17 trillion debt. Both have instead focused on replacing the automatic spending cuts passed in 2011 that are reducing funds for education, transportation and medical research.

‘Achievable Goal’

“Let’s focus on an achievable goal,” Ryan said. “Let’s make a down payment on the debt and let’s get this economy growing.”

The committee will meet again on Nov. 13, Ryan said today, giving the panel four weeks to bridge differences before a self-imposed Dec. 13 deadline.

The two parties aren’t close. Republicans want to replace the across-the-board cuts with savings from entitlement programs including Social Security and Medicare. Democrats say they are open to ideas as long as they’re coupled with revenue increases. Ryan has ruled out revenue increases.

Some Republicans stood behind Ryan’s stand on taxes.

“President Obama got his tax increase” as part of a 2011 deal that increased the top income-tax rate, said Senator Charles Grassley, an Iowa Republican. “If we’re going to reform entitlement programs to ensure their vitality for future generations we should do just that,” he said, warning he will not vote for such a “balanced plan.”

Price, Cole

Other Republicans including Tom Price, the Republican vice chairman of the House Budget Committee, and Representative Tom Cole, an Oklahoma Republican and deputy whip, didn’t draw a line to keep revenue out of the discussion.

“I believe that it should be, but not in the way some of my friends on the other side of the aisle suggest,” Cole said. “More revenue doesn’t and shouldn’t mean higher taxes.”

The conference also should set a path “for comprehensive tax reform,” he said, drawing a distinction from Ryan’s opening comments about other committees handling tax revisions.

Republican Senators Rob Portman of Ohio and Mike Crapo of Idaho, veterans of past debt-reduction efforts, said the committee should aim to create benchmarks for rewriting the tax code. “One of the best things this committee could do is to establish some processes to help us move forward,” Crapo said.

‘Ripoffs,’ Loopholes

Democrats such as Senators Ron Wyden of Oregon and Bill Nelson of Florida were unanimous in their position on revenue.

The tax code has “plenty of ripoffs and loopholes” that Congress should close or eliminate “without jeopardizing the goal of comprehensive tax reform,” Wyden said.

Nelson said the difference between the House and Senate budget proposal is about the same as what isn’t collected by the U.S. Treasury.

“We need to close some of those loopholes that allow some of the more privileged and more profitable corporations a system that allows them to avoid paying taxes,” Nelson said. “The difference between the House and the Senate is about $90 billion,” about the amount Treasury forgoes each year from offshore tax havens.

The positions on taxes may limit the committee’s negotiations to redistributing the spending cuts to soften the blow to domestic and Pentagon programs. Even a mini-deal may be a stretch if the sides remain deadlocked over revenue, meaning the federal government in January will face a second round of deeper spending cuts, primarily hitting the military.

Automatic Cuts

Sequestration led to $80 billion in automatic cuts in March to programs that Democrats consider priorities, including Head Start for poor children and scientific and medical research.

An additional $19 billion cut in Pentagon spending is set for January, raising concern among Senate Republicans such as John McCain of Arizona and Lindsey Graham of South Carolina.

“There is clear consensus that this is a terrible way to cut spending,” Murray said today. “The question is no longer whether sequestration should be replaced, but how.”

At least five similar bipartisan attempts to draft a broad debt-reduction bill have failed in the past few years. According to the nonpartisan Congressional Budget Office, federal debt held by the public is 73 percent of the economy’s annual output, higher than at any point in U.S. history except a brief period around World War II.

Sanders, Graham

If the sequestration cuts stay in place, such debt would decline slightly over the next several years before rising above its current level.

The gulf between the parties was highlighted by an exchange between Graham and Vermont independent Senator Bernie Sanders, the only self-described socialist in Congress.

“Who in this room is going to defend a situation where we lose $100 billion a year because multinational corporations are parking their profits in the Cayman Islands and Bermuda?,” Sanders said. “Does anybody in this room think that’s a particularly good idea?”

Graham, who has a record of working with Democrats, replied: “I like Senator Sanders, but I disagree with virtually everything he said. That brings us to what we’re trying to do, reconcile his world with mine. It’s like we’re on different political planets.”

To contact the reporter on this story: Heidi Przybyla in Washington at hprzybyla@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net


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