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US Debt Negotiations Still Stuck On Taxes

by Mike Godfrey,, Washington

13 July 2011

Despite recent intense negotiations between President Barack Obama and the top leaders of both political parties an agreement on a package of measures to allow an increase to the United States debt ceiling has not been reached.

While the President and the Democrat party continue to insist that the abolition of selected tax breaks should form part of such an agreement, Republican party leaders reject such an idea categorically, calling for additional reductions in government spending.

Political negotiations have been continuing sporadically since the Treasury confirmed in May that the US public debt limit had been reached and that its borrowing authority would have to be extended by August 2, or the US government would have to shut down. However, matters had reached a deadlock recently, and the two political leaders, the President and the Republican House Speaker John Boehner, have now become directly involved.

Both sides, however, are still playing hardball. For example, at his press conference following negotiations over the past weekend, President Obama reiterated that “there is strong resistance on the Republican side to do anything on revenues. But if each side takes a maximalist position, if each side wants 100% of what its ideological predispositions are, then we can’t get anything done.”

While he professed that he was willing to contemplate some meaningful changes to Medicare, Social Security, and Medicaid, they would need to “preserve the integrity of the programmes and keep our sacred trust with our seniors”.

From his viewpoint, Boehner disclosed that "the President and I agree that the current levels of spending are unsustainable. The President and I do not agree on his view that government needs more revenues through higher taxes on job creators”.

He added that “most Americans would say that a ‘balanced’ approach is a simple one: the administration gets its debt limit increase, and the American people get their spending cuts and their reforms. And adding tax increases to the equation doesn’t ‘balance’ anything. The American people understand that tax hikes destroy jobs.”

He said that he had told the President that “if more revenues were what they had to have then we ought to be looking at comprehensive tax reform instead. That’s because comprehensive tax reform means broadening the base and lowering the rates. And as (Florida Republican Senator) Marco Rubio put it last week, we don't need more taxes, we need more taxpayers. And I think broadening the base and lowering the rates will generate economic growth – that means more revenue without tax hikes.”

TAGS: tax | economics | fiscal policy | United States | tax breaks | tax reform

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