Taxes — Who to Believe?

Can they still raise taxes? Well, depends on who you believe

(CNN) — As the details of the debt ceiling deal start to emerge, it’s not surprising that there’s a disagreement between the White House and Republicans on whether the deficit reduction committee can or will tackle tax reform.

However, the politics of these positions are fairly clear: Republicans want to reassure members that taxes aren’t really on the table, and Democrats want to reassure members that they are.

Here’s what’s behind the spin:

Both sides agree …

The joint committee can take up tax reform if it chooses to. The dispute is whether the deal is structured in a way that motivates the committee to do it. Keep in mind the committee’s product — if it passes Congress — would take effect in January 2013, just when the Bush tax cuts expire.

The Republicans’ position …

Republican leadership aides say the committee is unlikely to tackle tax reform because the group’s goal is deficit reduction.

• They say the Congressional Budget Office — the official scorekeepers of any budget plan — will rate the committee’s deficit reduction package based on 2013 spending levels, when Bush-era tax cuts have already expired. That means they’ll be working off a baseline with higher revenue — as much as $3.5 trillion more revenue over 10 years.

• If the president wants to reinstate tax cuts for, say, the middle class, that would count as revenue lost. A committee focused on deficit reduction doesn’t want to be in the business of losing revenue.

• So the committee would then need to find a way to offset that lost revenue — closing loopholes wouldn’t be enough. It would have to move to cuts.

• Republicans say Democrats on the committee are unlikely to want to institute even more cuts in spending.

Therefore, Congress will have to deal with the expiration of the Bush tax cuts at some time, but there’s no motivation to do it in the context of a deficit reduction committee.

The administration’s pushback …

The White House says that the committee will be motivated to take up tax reform precisely because the Bush tax cuts will soon expire. One senior White House official says the schedule is motivating.

• First, the suggestion that it is impossible for the joint committee to raise tax revenue, they say, is simply false.

• If the joint committee decides as part of a balanced deal to eliminate tax subsidies for oil and gas companies or corporate jets, or if it decides to limit the value of itemized deductions for high-income earners, then these measures would raise revenue — completely independent of any baseline assumptions. They can be part of a balanced agreement, and the president will be encouraging the committee to consider them.

• Second, nothing in the legislation, they say, specifies that the committee must operate under any specific baseline — either the one that assumes the Bush tax cuts have expired, or the one that has them in place.

• Under the terms of the statute, the joint committee could decide to use whatever baseline it wants. If the committee wants to operate under a baseline that assumed the expiration of the Bush tax cuts for high-income taxpayers, it is free to do so. Likewise, if committee members want to operate under a current policy baseline that includes the Bush tax cuts — which is what House Speaker John Boehner was relying on when he said he had agreed to $800 billion in revenue from tax reform — they are free to do so as well.

• The legislation does not preclude revenue-raising tax reform. In fact, the president will be making the case that tax reform should be part of a balanced deal coming out of the joint committee.

Could the CBO use that baseline? It really doesn’t matter. The committee could still raise revenue if it wanted to. For instance, tax reform that included closing loopholes — tax breaks for jet plane owners, oil and gas subsidies — would show up as reductions from the baseline, despite GOP claims that it would not.

The bottom line …

Depending on who you believe, revenue increases — whether they take the form of closing loopholes, ending subsidies or letting the Bush tax cuts expire — may still be on the table in the next round. One way or the other, it will probably be up to the joint committee.

The question will be whether each side has the political will to push its position to the edge six months from now.

43% Believe the Tea Party Has Made Things Worse

Poll: Most Democrats See Tea Party as ‘Economic Terrorists’

29 percent of Americans say the Tea Party threatens the economy

By PAUL BEDARD
Posted: August 8, 2011

With the Democrats and media rapping the Tea Party as economic terrorists during the debt ceiling debate and subsequent S&P downgrade of American debt, a new poll finds that a majority of Democrats agree that the conservative fringe is to blame for the nation’s economic woes, according to a new Rasmussen Reports poll. But just as significantly, when all likely voters are lumped in, including key independents, only 29 percent call the Tea Party “economic terrorists.”

“While 53 percent of Democrats view Tea Party members as terrorists, 57 percent of voters not affiliated with either major party disagree, as do 74 percent of Republicans,” says the poll.

The Tea Party ducks the terrorist label, but the poll isn’t great news because 43 percent believe that party made things worse in the nation during the budget debates.

Highlights of the new poll:

— 55 percent of likely voters say members of the Tea Party are not economic terrorists; 29 percent do and 16 percent are undecided.

— 53 percent of Democrats view Tea Party members as terrorists, 57 percent of voters not affiliated with either major party disagree, as do 74 percent of Republicans.

— 53 percent of Republicans believe the Tea Party has made things better, while 73 percent of Democrats feel it has made things worse. Unaffiliated voters are evenly divided with 37 percent saying the Tea Party made things better and 37 percent worse.

— 34 percent of all voters in separate polling favored tax hikes as part of the deal to raise the debt ceiling; 55 percent opposed including tax increases of any kind in the deal.

— Among those who consider themselves part of the Tea Party movement, 92 percent feel they are not economic terrorists, and 76 percent think they’ve made things better for the country in terms of the budget debate. Those who are not members of the movement are narrowly divided over the terrorist question, and 58 percent of this group think the Tea Party has made things worse for the country.

The Starting Lineup

What the Super Committee Will Look Like

August 1st, 2011
by Boo ManThe Booman Tribune

Assuming this debt ceiling bill actually passes, the next freak-out is going to be over the composition of the 12-member SuperCommittee that will be making recommendations for an additional $1.5 trillion in budget cuts over the next decade. Now, the obvious choices on the Democratic side are the chairmen and ranking members of the Budget Committees, the House Ways & Means Committee and the Senate Finance Committee, plus someone from the leadership of both houses. That’s basically what went down with the Bowles-Simpson commission, although it had 18 members instead of twelve. In any case, here’s a likely lineup for the Super Committee:

Democrats
Rep. Sandy Levin (D-MI)- ranking member of Way & Means
Rep. Chris Van Hollen (D-MD)- ranking member of the Budget Committee
Rep. Jim Clyburn (D-SC)- Minority Whip [or Rep. Xavier Becerra (D-CA)- Vice-Chair of the House Democratic Caucus]
Sen. Max Baucus (D-MT)- Chairman of the Finance Committee
Sen. Kent Conrad (D-ND)- Chairman of the Budget Committee
Sen. Dick Durbin (D-IL)- Majority Leader Whip of the Senate

Republicans
Rep. Dave Camp (R-MI)- chairman of Ways & Means
Rep. Paul Ryan (R-WI)- chairman of the Budget Committee
Rep. Eric Cantor (R-VA)- Majority Leader of the House
Sen. Jeff Sessions (R-AL)- ranking member of the Budget Committee
Sen. Orrin Hatch (R-UT)- ranking member of the Finance Committee
Sen. Jon Kyl (R-AZ)- Minority Whip

That’s not a very encouraging line-up, is it? That’s why we should start asking for someone from the Progressive Caucus to sit on this committee.

U.S. Just Barely Avoids Default

Obama to sign US debt ceiling bill into law

President Obama to authorise measure to avert US debt default and cut spending after weeks of political wrangling.
Last Modified: 02 Aug 2011 17:38, Al Jazeera
The eleventh hour deal came after weeks of political wrangling between Republicans and Democrats [GALLO/GETTY]

The US Senate has approved a bill that raises the country’s borrowing limit and averts a possible default, after the lower house of congress approved it on Monday following weeks of political wrangling.

The upper house of congress passed the measure by 74 votes to 26. It required 60 votes to pass.

Barack Obama, the US president, is set to sign the bill into law following Tuesday’s vote.

The earlier passage of the bill by the Republican-controlled House came a day before the deadline to lift the debt ceiling, with agreement between Republicans and Democrats over the $2.1 trillion deficit-cutting plan reached over the weekend.

In remarks delivered immediately following the passage of the bill in the senate, Obama said that “both parties need to take responsibility for improving this economy”, and emphasised the need for congress to work towards passing stalled trade bills that created more jobs. He also said that he wanted to see unemployment benefits extended.

He said that lawmakers need to continue to work towards finding a balanced approach to reducing the deficit, including some adjustments to healthcare benefit plans for the elderly and reforming the tax code so that the wealthy pay more.

“We can’t balance the budget on the backs of the very people who have borne the biggest brunt of this recession,” Obama said.

The White House has indicated that Obama will sign the bill as soon as it lands on his desk.

No immediate tax increases

The vote in the Senate had been virtually guaranteed to pass the bill, with Harry Reid, the Democratic majority leader, and Mitch McConnell, the Republican minority leader, both backing it.

It passed with support from 45 Democrats, 28 Republicans and an independent. Nineteen Republicans, six Democrats and an independent voted no.

The bill, which contains no immediate tax increases, raises the borrowing limit into 2013, calls for spending cuts spread over 10 years and creates a congressional committee to recommend a deficit-reduction package by late November.

It does not spell out where the spending cuts should be made and instead puts off decisions about which programmes will bear the brunt.

World markets were initially down, despite the news, with the US Dow Jones Industrials bearish for the eight straight day on the back of spreading debt troubles in Europe and a decline in US consumer spending.

Al Jazeera’s Patty Culhane, reporting from Washington DC, said that there was a lot of public anger over the way that the US congress went about dealing with this crisis.

“If you ask the American public across the board they blame anybody who currently holds elected office in Washington … what is possibly going to impact the president here is what he’s done to his base,” she said.

“You’ll hear from lawmakers here on Capitol Hill, especially the more on the far left [that] they feel as if the president simply walked up to the negotiating table and got nothing in return from the Republicans. They feel that he basically threw the Democrats here on Capitol Hill under the bus, is an expression I’ve heard a couple of times.”

Credit rating fears

On Tuesday, Timothy Geithner, the US treasury secretary, said that it was unclear if the passage of the debt ceiling deal would ensure that the country did not lose its prized AAA rating from international credit ratings agencies.

The Fitch ratings agency retained its AAA rating for the US immediately following the passage of the bill, but more prominent firms Moody’s and Standard & Poor’s were yet to report.

The deal falls short of the $4 trillion in fiscal consolidation that rating agencies had indicated would be sufficient to retain the current rating.

U.S. Debt Crisis As Seen By the Rest of the World

World reacts to U.S. debt crisis

An editorial and op-ed round-up from the world’s English language newspapers.

Compiled by John Cookon, CNN

SAUDI ARABIA—“[I]nternational markets are becoming increasingly nervous about the fate of the dollar, the world’s only reserve currency and in times past a haven for anxious investors,” says an editorial in the Jeddah-based Arab News.

“Saudi Arabia is paid in dollars for its oil. Our currency is tied to the dollar. The Kingdom has approximately 2 trillion invested abroad, the greater part of it in the United States. The value of those investments, the value of our oil earnings and the value of our currency are all under threat as politicians in Washington grandstand for their constituents and argue bitterly from two utterly polarized positions.”

AUSTRALIA—““Had Australia – or any other country – tried to build up debt on the U.S. scale, their currencies would immediately have been punished and their folly quickly exposed, ” says an editorial in the Sidney Morning Herald.

“That has not happened to Washington. The arrival of what might, following Paul Keating, be called the United States’ banana republic moment has been long delayed, and the delay will make the shock of it worse.”

CANADA—“For the U.S. to begin defaulting on its obligations would be catastrophic, not just for Americans, but for all those who depend on U.S. stability and leadership,” says an editorial in the Toronto-based Globe and Mail.

“The power the U.S. exercises on the world stage comes largely from its economic strength. Default would demonstrate the U.S.’s inability to meet its commitments. In addition to the economic consequences, that could lead to a loss of its moral authority in international affairs – and that would be a very bad thing.”

UNITED ARAB EMIRATES—“While the U.S. is used to the spectacle of noisy squabbles in Congress, the current game of chicken at the heart of the world’s leading economy is unsettling to say the least,” writes Alan Philips in the Abu Dhabi-based National.

“In past years, the raising of the U.S. debt ceiling has been treated as a technical issue to be nodded through by Congress. But this year the ideological battles lines are drawn between those who demand cuts, and those who see borrowing yet more money as the only way. But there is another point of view which is gaining attention. This view holds that there is nothing exceptional going on here. Rather, the progress of liberal democracies from affluence to the brink of bankruptcy – and beyond – is normal, and indeed inevitable.”

CHINA—“When countries across the world hold breath watching the debt negotiations between the Democrats and Republicans in Washington, they are once again ‘kidnapped’ by U.S. domestic politics,” writes Deng Yushan in China’s government-run Xinhua.

“Given the United States’ status as the world’s largest economy and the issuer of the dominant international reserve currency, such political brinkmanship in Washington is dangerously irresponsible, for it risks, among other consequences, strangling the still fragile economic recovery of not only the United States but also the world as a whole.

Debt “Deal” Reached

US debt limit: Congress to vote on last-minute deal

BBC News

The US Congress is preparing to vote on a deal struck between the White House and party leaders that would end weeks of uncertainty and avoid a default.

Sunday’s deal would raise the debt ceiling by up to $2.4tn from the current $14.3tn and would cut the US budget deficit by a similar amount.

A bipartisan commission will also be set up to seek further reforms.

The deal needs to pass both houses of Congress to become law, but elements of both parties are expected to oppose it.

Republican and Democratic leaders in the House of Representatives and the Senate are to spend Monday meeting their own party members and attempting to convince them of the merits of the bipartisan deal.

The markets responded to the breakthrough with relief. The Dow Jones index in New York gained nearly 1% soon after opening, following gains in Tokyo and London.

However, the BBC’s Jane O’Brien says the package is still likely to be a tough sell, with some Republicans and Democrats in the House remaining opposed to different aspects.

Newly elected Republicans have consistently refused to compromise in the debate over the debt ceiling, with many insisting on deep and immediate spending cuts and a constitutional amendment to force the US to balance its budget.

Many Democrats, meanwhile, strongly oppose the prospect of cuts to social programmes, benefits and health care for the elderly or lower-paid.

‘We’ve changed the debate’The most intense debate on the deal is likely to come in the House of Representatives, where the divisions are most pronounced.

In the Senate, where a vote is expected around 14:00 local time (18:00 GMT), analysts say there is more of consensus.

Democratic Majority Leader Harry Reid and Republican Senate leader Mitch McConnell were two of those pushing the plan and they are thought likely to be able to corral their troops to approve the deal.

In the House, Democratic leader Nancy Pelosi is expected to ensure enough Democrats vote for the bill to help smooth its passage, analysts say.

Announcing the deal on Sunday night, President Obama himself conceded that the deal was not the one he would have preferred, but noted that the compromise plan would make a “serious downpayment” on the US deficit.

“I want to announce that the leaders of both parties in both chambers have reached an agreement that will reduce the deficit and avoid default, a default that would have had a devastating effect on our economy,” Mr Obama said.

Republican House leader John Boehner – who had negotiated at length with Mr Obama in an eventually fruitless effort to seal a comprehensive deficit-reduction deal – hailed the deal despite its imperfections.

“This isn’t the greatest deal in the world. But it shows how much we’ve changed the terms of the debate in this town,” he said.

The proposed deal calls for:

• At least $2.4tn deficit reduction over 10 years

• New bipartisan congressional committee to recommend a deficit-reduction proposal by November

• A two-stage increase in the debt ceiling.

The recommendations of the new, bipartisan committee tasked with identifying further savings would also be put to a vote in Congress, Mr Obama said.

According to Mr Boehner, those savings would amount to at least $1.5tn, bringing the total spending cuts under the plan to about $2.4tn.

In recent days Republicans, who control the House of Representatives, and Democrats, who control the Senate, have rejected plans drawn up by the rival party in a mounting political battle.

Shares upThe US faces a Tuesday deadline to raise its $14.3tn (£8.7tn) debt limit or risk the first full-scale default in its history, a possibility that has spread mounting unease through international markets.

Democrats and Republicans in Washington have been deadlocked over finding a way to cut spending and raise the debt limit as the Tuesday deadline approached.

The US limits by law the total amount of debt its government can issue, and the Obama administration has been under mounting pressure over how it would continue to pay bills and costs like salaries if the limit was reached.

News of the proposed deal was welcomed by financial markets around the world.

“We welcome the US debt deal and hopefully this will stabilise markets,” Japan’s Chief Cabinet Secretary Yukio Edano said.

Ca$hing in on Debt Negotiations

Politicians cash in on the debt debate

By Manu Raju, Anna Palmer | Politico – 8 hrs ago PoliticoSen. Scott Brown, R-Mass., waits for a hearing of the Senate Federal Financial Management, Government Information, Federal Services and International Security subcommittee hearing at historic Faneuil Hall in Boston, Monday, June 20, 2011. (AP Photo/Stephan Savoia)
Democrats and Republicans may not be able to get together on a deal to raise the debt ceiling, but there’s one thing lawmakers in both parties seem able to agree on: They need cash.

As Washington and Wall Street scramble to avoid default, a credit downgrade and economic chaos, lawmakers and interest groups — everyone from fiscal conservatives like Rand Paul to House Democrats like Martin Heinrich and party committees — have tried to capitalize on the debt crisis to fill their campaign coffers and help their like-minded allies.

The fundraising pitches also point to the larger problem infecting Washington — the tone of the messages are sharply partisan, and campaign donors often don’t want their lawmakers to compromise, a dynamic that plays into the stalemate facing Congress as it tries to avoid an economy-shaking default next week.

“No phony deals,” wrote Paul, a tea party favorite.

“Deals are being cut or discussed nearly every day in Washington. Deals that will bring us more debt and economic destruction. Deals that abdicate congressional authority over spending and debt,” the Kentucky Republican wrote in a missive on behalf of the Campaign for Liberty.

Sen. Jim DeMint sent an email to supporters through the Senate Conservatives Fund earlier this month attacking a fallback plan proposed by Senate Minority Leader Mitch McConnell. At the bottom of the message, DeMint asked for support to help his group elect more conservatives to the Senate.

The South Carolina Republican told POLITICO he’s “never seen a larger coalition of outside groups involved like this.”

“It goes beyond what they call tea parties,” DeMint said. “They’ve got mainstream think tanks, conservative groups all over the country, that will look at this proposal that are very concerned. They realize that this is a high-stakes showdown.”

DeMint said he’s not “trying to raise money off the debt limit,” but is seeking to tell his supporters exactly who is holding up the enactment of a constitutional amendment to balance the budget.

There are some signs that the past two months have been good for business of the four congressional campaign committees — each of them raised more money in June than they did the month before, according to Federal Election Commission records.

The Senate Democrats’ campaign committee raised $4.8 million in June, compared with $4.1 million in May; Senate Republicans pulled in $3.7 million last month, $600,000 more than in May. The House Democratic campaign committee pulled in about $6.2 million in June, crushing May’s $3.8 million take — while House Republicans raked in $6.7 million last month, more than $2 million higher than May. Even DeMint’s political action committee raised $150,000 more in June than it did a month before.

Senate and House Democrats are also trying to capitalize on the pitched battle, whether it’s a candidate in New Mexico, Heinrich or the Democratic Senatorial Campaign Committee, which sent out fundraising solicitations the past two days, including one that was released Wednesday calling for $70,000 by the end of the week for an “emergency media campaign.”

The Democratic Congressional Campaign Committee has sent out four of its own solicitations in recent weeks.

“The takeaway is this: Boehner and the GOP will walk away from any plan that doesn’t cripple President [Barack] Obama,” Jason Rosenbaum, director of the DSCC’s online communications wrote in a Tuesday solicitation.

GOP candidates, like Sen. Scott Brown in Massachusetts, Adam Hasner in Florida, Sarah Steelman in Missouri and John Sanchez in New Mexico, all have cited their positions in the debt debate — or their opponents’ stances — to curry campaign donations from supporters.

Shortly after Senate Democrats killed the conservative plan to raise the debt ceiling, known as Cut, Cap and Balance, the National Republican Senatorial Committee’s political director sent out a fundraising solicitation saying that Republicans needed only four seats to recapture the Senate in 2012 to get their way.

“Won’t you help?” The pitch stated. “Won’t you say YES right now to ensure that critical victory for our party, our country, our future in 2012?

Texas Sen. John Cornyn, the National Republican Senatorial Committee chairman, said there’s nothing unusual about the fundraising efforts.

“This is a fight about not only the future of the country but which political party represents the interests of the American people,” he said.

Still, most politicians are holding off on using the debt ceiling fight as a reason to ask for big donations at inside-the-Beltway fundraisers. Instead, Republicans and Democrats are using it as a way to draw a crowd. Senate Republicans are hosting nearly 20 fundraisers this week, according to an NRSC fundraising list. House Democrats also have a plethora of events, hosting 44 fundraisers this weeks.

“It’s a top-line issue of discussion at lunches and dinners,” one GOP corporate lobbyist said. “People want to know where certain members are and what’s going to happen.”

Special interest groups have also gotten in on the fundraising action amid the debt fight.

Conservative legend Morton Blackwell, who leads the weekly must-attend Wednesday meeting of conservatives, said “raising a ruckus in the media and fundraising on it are both essential.”

Blackwell, founder of the Leadership Institute, is affiliated with Coalitions for America which registered the Cut, Cap Balance Pledge Coalition. The coalition is soliciting supporters to contribute up to $10,000 on its online fundraising form.

FreedomWorks, the tea party organization based in Washington, is fighting the debt ceiling plan by House Speaker John Boehner, saying it’s too weak and doesn’t go far enough in cutting spending — and says it needs more cash to kill the plan.

“Because this fight is SO critical — as soon as you’ve called your congressman, I must ask for your financial support,” Matt Kibbe president and CEO of the group, wrote to his supporters this week. “If we receive an outpouring of donations … FreedomWorks will be able to sound the alarms and expand our mobilization efforts to ensure Congress doesn’t cave into the Boehner Plan.”

British Minister Takes on Right-Wing “Nutters”

United Kingdom Minister Says Congressional “nutters” risk global finance

July 24th, 2011

By Tim Castle

Right-wing “nutters” in the United States Congress holding up a deal to prevent a catastrophic debt default are a greater risk to the global financial system than problems in the euro zone, a British minister said Sunday.

Business Secretary Vince Cable said “irresponsible” people who had been gleefully anticipating the collapse of the euro currency had been confounded after European leaders agreed a second rescue package for debt-stricken Greece last week.

“The irony of the situation at the moment, with markets opening tomorrow morning, is that the biggest threat to the world financial system comes from a few right-wing nutters in the American congress rather than the euro zone,” he told BBC television.

Cable, a former economist known for speaking his mind, has previously denounced bankers as “spivs and gamblers.”

Last December he was removed from his role overseeing News Corp’s bid for all of British pay TV firm BSkyB after being recorded saying he had “declared war” on News Corp chief Rupert Murdoch.

The U.S. Congress is seeking to hammer out a deficit deal and assure investors before Asian markets open that America can avert a default and hold onto its prized credit rating.