House Dems want to talk more debt limit than debt and equity

As it stands, the role the tax code would play in any deficit agreement continues to be a major roadblock in the discussions. GOP lawmakers have stressed over and over that they oppose the inclusion of any tax increases in any deal, while Democrats have said that the wealthiest Americans should contribute more revenues to help roll back deficits. 

House Speaker John Boehner (R-Ohio), who had expressed interest in brokering a grand debt deal with Obama, told his conference Tuesday that he never agreed to raise taxes and that talks on a broad agreement had broken down over tax reform disagreements.

Also on Wednesday, Ben Bernanke, the Federal Reserve chairman, reiterated that a failure to increase the debt limit would have serious economic consequences, a point also stressed by other policymakers. But some conservatives have declared that the government could avoid default by prioritizing certain obligations. 

At the Wednesday tax hearing – the first joint hearing on that issue for Finance and Ways and Means in some seven decades – Levin also accused McConnell of playing politics and poisoning the well for tax reform, after the minority leader said Tuesday that he did not believe a real deficit fix was possible as long as Obama was in the Oval Office.

“It flies in the face of the basic facts: President Obama inherited a debt that had risen under President Bush from $5.7 trillion to $10 trillion,” the Michigan Democrat said.

Other House Democrats, including Rep. Charles Rangel of New York, pressed hearing witnesses over whether the debt ceiling should be linked to a deficit-reduction plan. And still others – including Reps. Mike Thompson and Xavier Becerra, both of California – asked about the economic impacts of not raising the debt ceiling, as well as whether revenues should be part of any deficit deal. 

Thompson told panelists that farm interests had told him “that it’s going to be devastating for agriculture, and that it’ll take years – decades – to recover from the loss of not doing the debt ceiling.”

For their part, Republicans at the hearing stressed once more that they believe Americans want Congress to tackle federal spending and that it was important to get the country’s fiscal books in order.  

“I truly think that if we don’t take this issue serious, and we don’t look long-term and have a serious how to rebalance and get our country back on track, I think the private sector and the financial markets will say, ‘Hey, Washington still doesn’t get it,’” freshman Rep. Rick Berg (R-N.D.) said.

But GOP lawmakers may not have necessarily gotten the answers they wanted when asking whether any deficit pact should include new revenues. 

Under questioning from Rep. Vern Buchanan (R-Fla.), Pamela Olson, a former assistant Treasury secretary under George W. Bush, indicated that lawmakers needed to be careful when thinking about tax hikes.

But Mihir Desai of the Harvard Business School told Buchanan that to get the country’s structural issues under control, “you’re going to have to raise taxes on someone at some point.” 

And Simon Johnson of the Massachusetts Institute of Technology, in response to a question from Becerra, said “I would definitely include revenues in the discussion.”