President Barack Obama threw the talks on the debt ceiling crisis into turmoil on Monday afternoon by proposing a $600 billion tax hike before even meeting with Republican Senate Leader Mitch McConnell.
Just as Democrats and Republicans seemed to be inching toward an agreement that would stave off the prospect of a default on the nation’s debts, Obama introduced a measure that is sure to have the GOP howling in opposition.
The new wrench in the works drew scorn from conservatives.
"The Democrats’ insistence on touting their desire to 'end tax breaks to oil and gas companies' is becoming quite tiresome," wrote Andrew Stiles at the National Review's website. "It’s basically their only specific new tax proposal, but would amount to saving of just $21 billion over a decade. That’s a long way to $600 billion."
Other conservatives ridiculed the idea that the White House could be taking such a proposal seriously.
"The White House has proposed raising about $600 billion in new tax revenue, including ending subsidies to oil and gas companies, an idea that failed in the Senate," wrote Bryan Preston at the conservative PJ Tattler blog on Pajamas Media.
"It failed in a Democrat-controlled Senate, and with good reason: It’s a terrible idea. I was at first tempted to post a hoary old Admiral Ackbar – “It’s a trap!” graphic on this story, but it doesn’t really merit that," Preston continued. "Calling it a trap at least implies that the GOP might fall for it. Honestly, I don’t see that happening. So if it’s not a trap, what is this? For one thing, it’s the Democrats’ answer to everything. For another, it’s class warfare, which is also the Democrats’ answer to everything."
The move came as Republicans signaled that they were finally prepared to talk about cuts to military spending, one of the major roadblocks to agreement.
“When we say everything is on the table, that’s what we mean,” House Majority Whip Kevin McCarthy said before Obama’s announcement.
White House Press Secretary Jay Carney announced the tax proposals after Obama met Senate Majority Leader Harry Reid on Monday morning. He is due to meet McConnell later in the day in a bid to find “common ground.” It is the first time the president has personally gotten involved in the debt ceiling talks.
Carney said the president is still hopeful that the two sides can come to an agreement but said Republicans have to realize that some taxes must go up. "It's the only way to get it done," Carney said.
Among Obama’s proposals are an end to tax breaks for big companies and the richest and taxing equity and hedge fund managers on income tax rates rather than capital gains tax rates.
Other changes include changing depreciation rules on corporate jets, limiting itemized deductions for the wealthy and repealing a tax benefit that companies use for inventory accounting.
Earlier the Republicans were making it clear that such tax increases are the only point on which there can be no negotiation, so Obama’s move seems almost assured to stall the talks once more. McConnell said, "It is my hope that the president will take those off the table today so that we can have a serious discussion about our country's economic future."
The president has just five weeks to bring the two sides to an agreement that will allow the country to raise the $14.3 trillion ceiling before August 2 or risk defaulting on its debts. Last week, bipartisan talks led by Vice President Joe Biden fell apart when the GOP representatives walked out.
House Speaker John Boehner insisted the increase in the limit must be offset with spending cuts without any tax hikes.
"These are the realities of the situation," he said. "If the president and his allies want the debt limit increased, it is only going to happen via a measure that meets these tests."
And McConnell added, “Throwing more tax revenue into the mix is not going to produce a desirable result, and it won't pass. Putting aside that Republicans don't like to raise taxes, Democrats don't either."
For the Democrats, Carney said, "We won't support an approach that gives millionaires and billionaires $200,000 tax cuts annually while 33 seniors pay for that with $6,000 per person increase in their Medicare costs.”
Biden had been leading the talks that had involved Rep. Eric Cantor and Sen. Jon Kyl on the GOP side and Sens. Max Baucus and Daniel Inouye and Reps. James Clyburn and Chris Van Holland for the Democrats. But they came to a screeching halt when Cantor walked out on Thursday and Kyl followed.
Carney said the involvement of the president, and the leaders of the two parties in both the Senate and the House had always been inevitable. "It is not as though this negotiating group could simply declare into law what they agreed on,” he said. “The process was always going to have to proceed out of the negotiating room and move forward with the engagement of the speaker, Senate leaders, the House minority leader, the president, et cetera."
Before the president’s statement, both sides seemed to be softening. Republicans had started to talk of military cuts in recent days, especially as troops prepare to leave both Afghanistan and Iraq.
Previously defense spending had been seen as non-negotiable within the GOP. But news stories that have revealed the military is spending $20 billion a year in air conditioning costs alone have suggested there is room for cuts at the Pentagon.
Freshman GOP Rep. Adam Kinzinger of Illinois, an active-duty Air National Guardsman who flew missions in Iraq, acknowledged in The Washington Post that defense spending is “a pillar of Republican strength.” But he added, “Look, I know there are sacred cows, but we cannot afford them anymore,”
And another Republican, Rep. Robert Hurt of Virginia, added, “I would never support anything that would reduce the safety of the troops on the ground. But bureaucracy is bureaucracy, and there are ways to get at it, even in the Pentagon.”
The Democrats moved too. Before he left the talks, Cantor had even praised them for finding $2 trillion in cuts over 10 years.
Now the prospect of any agreement leaves Boehner with the most to lose. Many pundits believe Cantor’s decision to quit the talks was a politically motivated bid to score points with tea party members and other conservatives in the GOP.
“The speaker is now politically exposed to fire from every direction as he goes into the final phase of negotiations with President Obama and the Democrats,” Fox News analyst Juan Williams wrote in The Hill.
Williams had harsh words for Cantor, saying he “threw Boehner under the bus,” by leaving the talks and telling The Wall Street Journal before informing leaders of his own party. “Now there is a new and profoundly rude way to announce a political divorce,” wrote Williams.
“The bottom line is that Cantor’s decision to abdicate any pretense of being a political leader set a trap for Boehner.”
The political implications are also huge for Obama, who won’t want to go into next year’s election as the president who allowed the country to default.
A Gallup poll last week showed his approval rating has slumped to 45 percent, trailing his disapproval rating of 48 percent. A poll from The Hill earlier this month showed 48 percent of likely voters believe he has hurt the economy, and only 41 percent think he’s helped it.
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