Dem seeks 50-50 split: Taxes and cuts

Democrats’ Senate Budget chairman will present a spending plan to his party leaders Wednesday that seeks to cut the federal deficit through an equal split of tax hikes and spending cuts.

Senate Budget Committee Chairman Kent Conrad (N.D.) will brief Democratic leaders on a budget that significantly raises government tax revenues in order to reduce the deficit, according to Senate sources. 

{mosads}The plan will balance the burden of reducing the deficit roughly 50-50 between increasing tax revenues and cutting government spending, sources said.

Conrad’s office declined to confirm any details of the plan until Senate Majority Leader Harry Reid (D-Nev.) and other leaders have heard the chairman’s presentation. The rest of the Senate Democratic Caucus will receive a briefing after Conrad meets with leadership.

Conrad told reporters Tuesday that his new budget plan is similar to the proposal he pushed in May, but with “significant changes.”

That plan called for a 50-50 breakdown of spending cuts and increased government revenues. 

He conceded that some colleagues could object at the last minute when they see his latest details on paper. 

“I’ve been around long enough to know it’s when you reduce it to writing that sometimes differences emerge,” Conrad said. 

“I feel very good about it. It’s, to me, a very responsible, rational package,” he added. 

Conrad said last week that his budget plan would cut the deficit by more than $4 trillion over 10 years. Given a one-to-one ratio of new tax revenues to spending cuts, tax increases and the elimination of special tax breaks would total more than $2 trillion. 

The high ratio of increased revenues to spending cuts will put centrists who face reelection next year, including Sens. Claire McCaskill (D-Mo.), Ben Nelson (D-Neb.) and Jon Tester (D-Mont.), in tough positions. 

McCaskill has said she would prefer a higher ratio of spending cuts to revenue increases. 

Republicans will pounce on the budget for raising taxes, and it could be difficult for Democratic leaders to keep the 53 members of their caucus unified to pass it through the upper chamber. But Democratic leadership aides believe there is growing momentum within the Senate Republican conference for closing special tax breaks, such as the tax subsidy for ethanol. 

Over the weekend, Republican Sens. John McCain (Ariz.) and John Cornyn (Texas) signaled they could support the elimination of some special tax breaks. 

Cornyn said “we could bring down rates, eliminate the tax, a lot of tax expenditures or loopholes and actually make our nation more competitive internationally.”

McCain said he was willing to consider “revenue raisers.”

A 50-50 split is a departure from the ratio of higher tax revenues and spending cuts recommended by President Obama and his fiscal commission, chaired by former Sen. Alan Simpson (R-Wyo.) and former Clinton White House Chief of Staff Erskine Bowles. 

At a speech at George Washington University in April, Obama recommended a three-to-one ratio of spending cuts to tax increases, according to a fact sheet released by the White House.

The Simpson-Bowles commission recommended a ratio of spending cuts to increased government revenues of roughly 2.2 to 1 to reduce the deficit. 

One Democratic source said the ratio of spending cuts to tax revenue tilts more in the direction of spending cuts if certain recommended defense program cuts are counted.

Another Senate Democratic source said the budget will include a substantial allocation for transportation funding, which could fund programs such as the infrastructure bank and Build America Bonds. 

“It’s significantly to the left of us,” said an aide to a centrist on the committee, who downplayed Conrad’s budget plan as a framework. 

Since early May, Democratic leaders have said they would advance a budget plan calling for increases in government revenues to pay down a hefty portion of the federal deficit. 

Democratic leadership aides argued their party needed to set down a bold marker on tax revenues to set up negotiations with Senate and House Republicans. 

The Senate Democratic budget plan, however, became entangled for weeks by an internecine Democratic dispute within the Budget Committee. 

Sen. Bernie Sanders of Vermont, an Independent who caucuses with Democrats, pushed a surtax on millionaires and insisted on an even breakdown between spending cuts and higher tax revenues, but Sen. Bill Nelson (D-Fla.), a centrist facing a tough reelection next year, resisted that approach. 

The dispute stalled action because Conrad couldn’t pass a budget through his committee if even one Democrat voted against it, given staunch Republican opposition. 

In a letter to Obama made public Tuesday, Sanders reiterated his call for a long-term deficit-reduction package to include an even balance of new government revenues and spending cuts. 

{mosads}“The wealthiest Americans and the most profitable corporations in this country must pay their fair share,” Sanders wrote. “At least 50 percent of any deficit reduction package must come from revenue raised by ending tax breaks for the wealthy and eliminating tax loopholes that benefit large, profitable corporations and Wall Street financial institutions.”

Sanders said a package must also include significant cuts to Pentagon spending. 

As of mid-day Tuesday, 102,564 people from 50 states and the District of Columbia had signed the letter to Obama. 

Sanders praised Conrad’s budget blueprint but declined to comment on any of its details, since Conrad wants to keep them secret until he’s met with leaders. 

“I am very comfortable with his budget,” Sanders said of Conrad’s plan. 

Conrad was supposed to brief his leadership on Tuesday evening, but the session was postponed because the chairman ran into travel delays returning to Washington.