One is at the Capitol, where most Republicans and Democrats are sticking to their guns: Democrats insisting they won’t agree to any significant cuts in Medicare benefits, and Republicans declaring no form of revenue increase is acceptable. GOP spines are stiffened by the Tea Party and its sympathizers in Congress, who argue that any tax changes, even to create greater fairness, are an open invitation to more government spending. The two sides spend most of their time talking past each other, often questioning each other’s motives.
But at the nearby Liaison Capitol Hill Hotel this week, aptly named since it was one of the only places in town where Republicans and Democrats were having a serious face-to-face discussions, a bipartisan consensus emerged that only a combination of spending cuts and revenue increases will put a dent in the nation’s $ 14.3 trillion accumulated debt.
The namesakes of the Simpson-Bowles Deficit Reduction Commission, which issued a blueprint for tackling the problem last December, spoke out Tuesday even more vigorously. Former Republican Senator Alan Simpson and former White House Chief of Staff Democrat Erskine Bowles argued that sacrifice will be required by all segments of society in order to reduce –much less eliminate — the debt overhang. Their audience consisted of some elected office holders and a larger number of former office holders and debt-reduction advocates.
This focus on the longer-term debt crisis has been building for months, and is getting renewed attention with the looming deadline to raise the legal limit on how much money the United States government can borrow now before Congress. Vice President Joe Biden is personally guiding private talks between members of Congress from both parties, trying to win over Republicans who say they won’t support a higher debt limit unless federal spending is cut by an equal amount.
There have been mixed reports on how much success the group is having.
Meanwhile, Federal Reserve Board chairman Ben Bernanke warned at a meeting hosted Tuesday by the non-partisan Committee for a Responsible Federal Budget that failing to raise the debt ceiling before the deadline could cause “severe disruptions” in global financial markets, and make the debt problem even worse. He also said Republicans should not be tying the debt limit to a vote on cutting spending.
But for Republican congressional leaders like Senator Mitch McConnell of Kentucky, “the key to success…is for everyone involved to view the debt limit vote as an opportunity…to reduce Washington spending.” This puts McConnell squarely in the camp of the most conservative voices in his party, who say that money saved by closing tax loopholes for the well-to-do, ending tax subsidies for farmers who convert corn into fuel ethanol, or any move that allows more tax revenue to arrive at the U.S. Treasury is a tax increase.
Having said that, McConnell voted for a bill introduced by Oklahoma Republican Senator Tom Coburn this week to cancel billions of dollars in annual tax credits for ethanol producers. But he said he viewed it as part of an effort to reform the federal tax code, not to reduce the deficit. Perhaps that is a distinction without a difference, but McConnell was joined by 33 other Senate Republicans, most of whom have signed an anti-tax pledge. Their willingness to entertain a change in the tax code that would result in higher taxes for the farmers and businesses who have received the ethanol tax credit, even though it ultimately went down in defeat, is a crack in the solid wall of GOP opposition to tax changes.
But unless that crack spreads and more Republicans sign on to the sort of compromises that would lead to meaningful debt reduction measures, the two conversations — one among mostly out-of-office advocates, the other among office-holders who have the power of the vote — the prospects for resolving the nation’s long-term debt, the mind-blowing figure that scares all who look at it, are dim.