WASHINGTON (Reuters) – U.S. House Republicans and Democrats showed no sign of surrendering their partisan positions after a briefing on the nation’s $31 trillion debt on Wednesday, the day before President Joe Biden is due to unveil his 2024 spending plan.
Biden said his proposal will cut the nation’s deficit by nearly $3 trillion over 10 years, though it relies on tax increases to do so while Republicans are pushing for sharp cuts to domestic spending.
The closed-door meeting for House of Representatives members was meant to establish a common set of facts for the debate from the director of the nonpartisan Congressional Budget Office, Phillip Swagel, who has warned that the federal debt will surpass the size of the U.S. economy within the next decade if no steps are taken.
“It’s important for members of both parties to get the information and be able to process it together,” said Republican Representative Mike Lawler. “We’re not always going to agree, obviously. But frankly, I think that’s part of the problem in Washington. There’s not enough opportunity to do these things together.”
Republicans hold a majority in the House, while Biden’s fellow Democrats control the Senate.
The CBO presentation laid out 17 options for reducing the deficit, several of which contained either new or higher taxes. Those with the biggest deficit-reducing potential were new consumption and payroll taxes, and new limits on tax deductions, each of which could cut the deficit by as much as $2.3 trillion-$3 trillion over a decade.
Spending cuts would have significantly less impact, the CBO said, according to a copy of its presentation posted online.
The White House said Biden’s budget plan is expected to extend the life of the Medicare healthcare plan for Americans age 65 and older, by raising the Medicare tax on those earning over $400,000. The budget plan would also raise taxes on billionaires.
The Republican-led House Budget Committee is expected to follow up in coming weeks. It has been looking at $150 billion in cuts to nondefense discretionary programs for 2024 that would reset spending to fiscal 2022 levels and save $1.5 trillion over a decade by holding spending increases to an annual 1%.
“It’s my hope that Republicans will release their budget sooner rather than later, so we can have a thoughtful discussion about alternatives,” the top House Democrat, Hakeem Jeffries, said as he emerged from the meeting.
The emergence of the two budgets is seen as the starting gun for negotiations between Republican House Speaker Kevin McCarthy and Biden over spending for fiscal 2024, which begins on Oct. 1.
But after hearing the CBO presentation, McCarthy ruled out new taxes as a way to address the U.S. fiscal position.
“I do not believe that raising taxes is the answer,” McCarthy told reporters.
“We could find common ground. It won’t be new taxes,” he said. “Raising taxes in a low-growth economy like this will only hurt us more and put us into recession.”
The stakes of talks between Biden and McCarthy are elevated this year as the federal government is expected to hit the $31.4 trillion debt ceiling by summer. Failure to act by then could trigger a potentially disastrous default.
McCarthy wants Biden to agree to spending cuts before his narrow Republican House majority would agree to raise the debt ceiling. Biden insists that Republicans must agree to a “clean” debt ceiling increase without a preliminary deal on spending.
TRADING BLAME
Each party blames the other for the country’s fiscal position. Republicans say spending under Biden has added to the national debt, while Democrats point to tax cuts for businesses and wealthy individuals that were passed under former President Donald Trump and cost the budget $2 trillion in revenue.
Biden and McCarthy last met over a month ago at the White House, and the speaker said he hoped Wednesday’s meeting with Democrats would spur the president to move forward on talks.
Neither Biden’s proposal nor the one that House Budget Committee Chair Jodey Arrington is preparing would result in a balanced budget.
In a blog post this week, Swagel said Congress could “nearly stabilize” the growth of federal debt by reducing deficits by an average of $500 billion a year for a decade-long savings of $5 trillion, a sum that dwarfs the combined 10-year savings proposed by Biden and Arrington.
Overall, CBO projects that annual deficits will average $2 trillion between 2024 and 2033, approaching pandemic-era records by the end of the decade.
“Republicans and Democrats alike know that we have to do something about the deficit,” said Democratic Representative Veronica Escobar. “The difference in approach is the issue here.”
Source: Economy - investing.com
