Republicans exit budget talks, point to Democrats’ demands for tax increases along with cuts

6/23/2011

WASHINGTON — Republicans pulled out of debt-reduction talks led by Vice President Joe Biden with a flourish on Thursday, blaming Democrats for demanding tax increases as part of a deal rather than accepting more than $1 trillion in cuts to Medicare and other government programs.

“Let me be clear: Tax hikes are off the table,” said House Speaker John Boehner, R-Ohio.

Boehner spoke shortly after the House GOP second-in-command, Majority Leader Eric Cantor, announced he would not attend a planned negotiating session and said it is “time for President Obama to speak clearly and resolve the tax issue.”

White House spokesman Jay Carney quickly obliged, while announcing that the talks were “in abeyance.” He said Obama supports a “balanced approach” to debt reduction.

“I would point that the president supports a balanced approach,” Carney said. “He does not support an approach that provides for a $200,000 tax cut for millionaires and billionaires paid for by a $6,000 a year hike in expenses and costs for seniors.”

Numerous officials have said in recent days that Obama and Boehner would soon take a more public role in the negotiations, as time grows short for confronting politically vexing questions over taxes and Medicare and other benefit programs.

As a result, it appeared that the day’s events marked an eruption of political maneuvering rather than a blow-up that would jeopardize the success of negotiations.

“The goal of these talks was to report our findings back to our respective leaders,” Biden said in a statement. “The next phase is in the hands of those leaders, who need to determine the scope of an agreement that can tackle the problem and attract bipartisan support. For now the talks are in abeyance as we await that guidance.”

In general, the negotiations are aimed at producing legislation to cut future deficits while simultaneously lifting the $14.3 trillion limit on Treasury borrowing.

Treasury Secretary Tim Geithner has said that without an increase in the debt limit by Aug. 2, the United States faces a first-ever default, with potentially catastrophic consequences for the economy.

Carney told reporters that Boehner had met unannounced with Obama at the White House Wednesday evening. The meeting was at the president’s initiative, and the first known encounter between the two men since their widely publicized round of golf last weekend.

Nor was it likely Democrats were taken by surprise by the day’s events, since Cantor informed Biden of his plans before making any public announcement.

Adding to the intrigue, one GOP leadership aide said Cantor did not inform Boehner of his plan to withdraw from the talks until shortly before he did so. Nor was Cantor aware of Boehner’s trip to the White House the evening before, this aide said.

For his part, Cantor said the secretive Biden-led talks had “established a blueprint” for agreement on significant cuts in spending, but had reached an impasse because of the Democratic demand for taxes.

Sen. Jon Kyl of Arizona, the other Republican participant, also said he would not attend the scheduled session, and Senate Republican leader Mitch McConnell spoke in unusually biting terms of Democratic demands for new government spending as part of a debt-reduction deal.

“What planet are they on?” McConnell wondered aloud.

While accepting a need to raise the debt limit, Boehner has said that deficit cuts must exceed the size of any increase in borrowing authority — a position that neither Obama nor any other Democrat has challenged.

The president and Biden were meeting with House Democratic leaders at the White House when Cantor made his announcement.

One of the Democratic negotiators, Rep. Chris Van Hollen of Maryland, said at a news conference that Republicans “are playing with fire and really putting the very fragile economy at greater threat by playing the games that we’ve been seeing.”

In several weeks of talks, Biden and congressional negotiators had largely completed a review of the federal budget, focusing at first on areas where the two sides were amenable to cuts.

They quickly identified higher pension contributions for federal employees as one area of savings, and cuts in farm programs and student loan subsidies as others. Additional items include a federal auction of parts of the spectrum and the sale of surplus federal property. Discretionary programs, which bore the brunt of an earlier agreement to cut spending by $38 billion, would be ticketed for additional cuts.

Other steps had been discussed to rein in future government spending automatically if deficit targets were not reached.

But in recent days, officials said, the two sides were increasingly at an impasse, with Democrats demanding higher taxes to accompany spending cuts, while Republicans ruled out tax hikes and pushed for deeper cuts in benefit programs.

The conflicts long predate the current negotiations.

Republicans long ago branded themselves as the party of lower taxes, while Democrats, looking to the 2012 elections, are already campaigning hard against a new Republican plan to turn Medicare into a system of private insurance coverage beginning with anyone currently under 55 years of age.

Privately, Republicans bristle at the suggestion that taxes be traded off for Medicare. They argue that official reports make it clear that without significant changes, the Medicare program is financially unsustainable.

Yet polls show that while there is general support for spending cuts, there is opposition to benefit cuts in Medicare.

The imperative to cut spending has gained impetus since Republicans won control of the House last fall, benefiting hugely from tea party activists demanding a smaller and less intrusive government.

In addition, sputtering recovery from the worst recession in decades and stubbornly high unemployment have helped form a bipartisan agreement that long-avoided steps are needed to reduce federal red ink.

The Congressional Budget Office warned on Wednesday that unless steps are taken to rein in deficits, the country risks a “sudden fiscal crisis,” with investors losing faith in the U.S. government’s ability to manage its fiscal affairs.