Congressional Republicans are upset that the $2 trillion in deficit reduction would come from tax increases, which would primarily affect the rich and corporations.
President Joe Biden is reportedly set to release a budget proposal on Thursday that would reduce the annual budget deficit by $2 trillion over a decade without raising taxes for anyone earning less than $400,000 a year. But congressional Republicans who have been demanding deficit reduction in exchange for averting a catastrophic default on the national debt are already attacking his plan.
With the government already close to the $31.5 trillion cap on how much it can borrow, Congress needs to raise the debt limit in the upcoming weeks, or the Treasury Department will be unable to pay its bills on the programs already funded and interest on the existing debt.
Biden, who ran on a promise to raise taxes on wealthy Americans and large businesses — but not on anyone making under $400,000 — said on Feb. 28: "I want to make it clear. I'm gonna raise some taxes," including for "billionaires out there."
He has called for a new tax for households worth more than $100 million, a Medicare tax rate increase on annual income over $400,000, and a 4% excise tax on corporate stock buybacks, of which the current rate is 1%.
House Republican Conference chair Elise Stefanik tweeted Monday, "Over the next decade, the interest on our national debt will be $10.5 trillion – while Democrats push for higher taxes and less opportunity for our future generations."
According to the Washington Post, House Ways and Means Committee Chair Jason Smith, a Republican from Missouri, said on Tuesday: "We do have a fiscal crisis that we need to address. What's the solution to it? It's definitely not to increase taxes and spend more money … but that's what [Biden's] budget will do."
Idaho Sen. Jim Risch tweeted Monday: "President Biden will release his budget this week, and to no surprise, Idahoans can expect tax hikes and out-of-control spending proposals that will cause our deficit to soar. This is not what America needs right now. It’s time we balance the budget."
The Senate Republican caucus circulated on social media a comment on Tuesday by Montana Sen. Steve Daines at a committee hearing: "...the President said he is going to raise taxes. That is a recipe for disaster. It’s going to crush productivity, discourage investment, and stifle growth even further."
Smith, Daines and Risch are among the 42 Republicans in the Senate and 189 in the House who have signed Grover Norquist's oath never to raise taxes for any reason.
Like the majority of members of his caucus, House Speaker Kevin McCarthy has also signed the pledge. In a Feb. 6 address, he demanded deficit reduction without tax increases or cuts to two prominent safety net programs before he would allow any increase in the debt limit.
"Cuts to Medicare and Social Security are off the table. Defaulting on our debt is not an option," the California Republican said. "But neither is a future of higher taxes, higher interest rates, and an economy that doesn't work for working Americans."
The Washington Post reported Monday that McCarthy's chief of staff, Dan Meyer, has privately said the speaker is in a nearly impossible situation as he tries to eliminate the budget deficit without a tax increase or cuts to Medicare and Social Security. It reported that an unnamed colleague of Meyer's had said: "He knows it's tough and that it's going to be tough. The situation he's in is horrendous."
House Republicans have yet to release any specific demands in exchange for a debt limit increase.
The New York Times reported that Moody's Analytics chief economist Mark Zandi was set to tell the Senate Banking Committee Subcommittee on Economic Policy on Tuesday that a debt default could cost the United States economy between a million and 7 million jobs and would likely spur a recession.
Zandi told the Times: "The only real option is for lawmakers to come to terms and increase the debt limit in a timely way. Any other scenario results in significant economic damage."
Experts told the American Independent Foundation last month that even if a deal is ultimately reached, House Republicans holding the debt limit hostage could significantly harm the economy and actually make the deficit even larger. A similar fight in 2011 spooked credit rating agencies and markets, leading to a downgraded credit rating and higher borrowing costs for the U.S. government.
The Times published an analysis of Congressional Budget Office reports on Monday that found Republicans and Democrats in Congress had voted in comparable numbers for bills that resulted in growth of the national debt since 2017.
Stefanik blamed Democratic lawmakers on Monday, though, tweeting, "Two years of reckless spending under one-party Democrat rule has caused our national debt to skyrocket."
Published with permission of The American Independent Foundation.