More On Legal & Compliancefrom The Advisor's Professional Library
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In a move that surprised some fellow Democrats, published reports say President Obama will offer in Thursday discussions with members of Congress the possibility of substantial reductions in funding for Medicare, Medicaid and Social Security as a means of slashing the U.S. deficit far beyond the $2 trillion in cuts discussed in earlier negotiations. In exchange Obama wants Republicans to agree to raise taxes, the reports say, perhaps letting breaks for the country’s wealthiest expire at the end of next year.
Senator Harry Reid (D-Nev.) said in a statement Thursday that the Senate will consider legislation today that includes asking “millionaires and billionaires to contribute to this country’s effort to reduce our deficit.”
The Washington Post reported Wednesday that Obama is looking at as much as a $4 trillion reduction over the next 10 years, through a combination of tax increases, loophole closures and cuts in public entitlement programs previously considered untouchable. According to the report, some of Obama’s fellow Democrats are alarmed by the proposal, while others see it as a demonstration of the president’s willingness to compromise.
According to a New York Times report, apparently the proposal arose out of a secret meeting Obama had with Speaker John Boehner, R-Ala., over the weekend—a meeting that on Wednesday the White House was still refusing to acknowledge, and that caught Democrats by surprise.
While the Post cited a Democrat familiar with the proposal saying, “Obviously, there will be some Democrats who don’t believe we need to do entitlement reform. But there seems to be some hunger to do something of some significance,” it also quoted another Democratic official as saying, “The fiscal good has to outweigh the pain.” Senator Sheldon Whitehouse, a Rhode Island
Democrat, was quoted in the Times report saying, “Depending on what they decide to recommend, they may not have Democrats. I think it is a risky thing for the White House to basically take the bet that we can be presented with something at the last minute and we will go for it.”
And while Boehner may have signaled a willingness to compromise—he is reported to have initiated the secret meeting—others in his party continue their adamant stance not to raise taxes. Also, despite the meeting, Boehner spokesman Michael Steel, asked to comment, said only that “there are no tax increases on the table.” Boehner himself may be delivering mixed messages to the president, since the speaker’s aides also said no tax increases were on the table and that he had not agreed to allow any tax cuts to expire.
House Majority Leader Eric Cantor, R-Va., did seem open to the possibility of closing loopholes, but not to an increase in tax rates or collections. “If the president wants to talk loopholes, we’ll be glad to talk loopholes,” he told reporters in the Post. “We’ve said all along that preferences in the code aren’t something that helps economic growth overall. But listen, we’re not for any proposal that increases taxes, and any type of discussion should be coupled with offsetting tax cuts somewhere else.”
Sen. Charles E. Schumer, D-N.Y., said that Cantor’s willingness to consider closing loopholes without raising taxes elsewhere was meaningless. “It is like taking one step forward and then two steps back,” he said. “The point isn’t to get rid of these loopholes simply to pay for new tax breaks elsewhere. It’s to do it in a way that contributes to the reduction of the debt.”
Senate Minority Leader Mitch McConnell, R-Ky., however, insisted that changes to the tax code should only be made in a broader income tax reduction and not as part of debt negotiations. “To sort of cherry-pick items in the context of this current negotiation with the White House strikes me as pretty challenging,” he said in the report, saying once more that any tax increases would cause job losses. “We want to tackle deficit reduction in a way that doesn’t exacerbate unemployment.” The tie between tax increases and job losses is tenuous at best, according to historical statistics.