Next Budget Showdown Could Lead to More Cuts

By George E. Curry
NNPA Editor-in-Chief

WASHINGTON (NNPA) – After blinking during in a New Year’s Day showdown with President Obama that could have triggered across-the-board spending cuts and significant tax increases, Republicans are poised to seek deep cuts in spending that would violate the “balanced” approach to the deficit that the president has advocated.

In an interview Sunday on ABC’s “This Week,” Senate Minority Leader Mitch McConnell (R-Kentucky) said Republicans will not consider additional tax increases to help pay down the nation’s debt.

“The tax issue is finished, over, completed,” he said. “That’s behind us. Now the question is what are we going to do about the biggest problem confronting our country and our future? And that’s our spending addiction. It’s time to confront it. The president surely knows that.”

President Obama has rejected the GOP demand for specific cuts in exchange for raising the nation’s debt limit to pay its outstanding bills.

“One thing I will not compromise over is whether or not Congress should pay the tab for a bill they’ve already racked up,” Obama said in his weekly address on Saturday.

That position is being opposed by Republicans.

“I want to raise the debt ceiling, but I will not do it without a plan to get out of debt,” Senator Lindsey Graham [R-S.C.] said Sunday on CNN’s “State of the Union. “If you raise the debt ceiling by a dollar, you should cut spending by a dollar. That is the way to go forward.”

House Minority Leader Nancy Pelosi (D-Calif.), appearing Sunday on CBS, said “I don’t think these two things should be related. Right now, we have to pay the bills that have been incurred,” she said. “And if you want to say cut spending for what we do next, fine, but don’t tie it to the debt ceiling.”

As the Los Angeles Times noted, the fiscal cliff debate underscored the geographic divide within the Republican Party, as the position taken by McConnell and Graham illustrates.

The newspaper reported, “Almost 90% of Southern Republicans voted against the ‘fiscal-cliff’ compromise. At the same time, a majority of Republican representatives from outside the South supported the deal, which was approved in large part because of overwhelming Democratic support.”

Some experts say cuts in spending have already outpaced any expected rise in revenue.

“President Obama has said that future deficit reduction should come through a balanced mix of revenue increases and spending cuts; as a first step, he required that ATRA’s [the American Taxpayers Relief Act] two-month delay in scheduled across-the-board budget cuts (‘sequestration’) be offset with an even split of revenues and spending reductions. By contrast, some Republicans leaders have indicated that they will push to achieve the additional deficit reduction entirely through spending cuts, with no further revenue increases at all,” wrote Robert Greenstein, founder and president of the Center on Budget and Policy Priorities, a nonpartisan organization that examines how fiscal policy and public programs that affect low- and moderate-income people.

He explained, “The President’s approach is the sound and equitable one. If this Republican view holds, then when all of the deficit reduction efforts are tallied together, spending cuts will outpace revenue increases by nearly 5 to 1 — hardly a balanced approach.”

After Congress hastily approved a plan to avert the fiscal cliff that raised taxes on individuals earning more than $400,000 a year and families earning in excess of $450,000 annually, many angry House Republicans – who did not want to see any tax increases – are threatening to vote against raising the debt limit in two months if Obama doesn’t go along with their cuts-only proposal.

As Greenstein noted, cuts have already been imposed on domestic spending and any additional reductions would mean that the budget is being balanced primarily through spending cuts rather than a balanced approach.

“Several pieces of legislation, culminating in the 2011 Budget Control Act, reduced spending on discretionary programs — for both non-defense and defense programs — by $1.5 trillion over the 2013-2022 period,” he stated. “All of these savings are on the spending side.”

Consequently, even if future measures require an even split between slashing spending and raising additional revenue, the burden would fall disproportionately on cuts.

Greenstein noted, “If future deficit reduction comes through an even split of revenues and spending cuts, total spending cuts will still outpace revenue increases by nearly 2 to 1. (These ratio estimates do not include the effects of interest savings; if those savings are included, the share of savings that come from spending cuts rises further.)”

The Joint Committee on Taxation (JCT) estimates show that ATRA makes all but $624 billion of those $3.4 trillion in tax cuts permanent. It thus makes permanent 82 percent of the Bush tax cuts, while letting 18 percent expire.

The Joint Committee on Taxation (JCT) and Congressional Budget Office estimate that making permanent all of the Bush tax cuts would have cost $3.4 trillion over 2013-2022

According to a White House fact sheet, “By raising income tax rates on the wealthiest and keeping taxes low for the middle class, the agreement will ensure we have the most progressive income tax code in decades.”

However, found: “All the president’s talk about preserving middle-class tax cuts in the just-passed bill to avert the so-called fiscal cliff may give one the impression that, except for the wealthy, people will be paying the same amount in taxes this year as last. But that’s not correct. Left out of Obama’s analysis is that a temporary two-year reduction in Social Security payroll taxes was allowed to expire. As a result, most people will actually pay more in taxes this year.”

According to the nonpartisan Tax Policy Center, households with income between $40,000 and $50,000 will pay an additional $574 in payroll taxes this year as a result of the payroll tax returning to 6.2 percent from 4.2 percent. Households with earnings between $75,000 and $100,000 will pay an additional $1,194. Overall, 77 percent of Americans will be paying more in taxes in 2013 than they did in 2012.

Senate Majority Whip Dick Durbin (D-Illinois) said Democrats and Republicans should join hands to reform the tax code.

“There are still deductions, credits, special treatments under the Tax Code that should be looked at very carefully,” he said Sunday on CNN’s “State of the Union.” He explained, “We forego about $1.2 trillion a year in the Tax Code, money which otherwise would go to the government. Trust me, there are plenty of things within that tax code, these loopholes where people can park their money offshore and not pay taxes, are things that need to be closed.”


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