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In debt talks, Obama offers Social Security cuts
President Obama is pressing congressional leaders to consider a far-reaching debt-reduction plan that would force Democrats to accept major changes to Social Security and Medicare in exchange for Republican support for fresh tax revenue.
At a meeting with top House and Senate leaders set for Thursday morning, Obama plans to argue that a rare consensus has emerged about the size and scope of the nation’s budget problems and that policymakers should seize the moment to take dramatic action.
“If the president wants to talk loopholes, we’ll be glad to talk loopholes,” Cantor said at his weekly roundtable with reporters. “We’ve said all along that preferences in the code aren’t something that helps economic growth overall. But listen, we’re not for any proposal that increases taxes, and any type of discussion should be coupled with offsetting tax cuts somewhere else.”
Among the options for cutting taxes are a number of proposals that should appeal to Democrats, said Cantor spokesman Brad Dayspring. They include a White House proposal to temporarily reduce payroll taxes for employers, an idea aimed at propping up the sputtering economy. Democrats also routinely support an annual effort to restrain the alternative minimum tax, which would otherwise strike heavily at households in high-cost urban areas that tend to vote Democratic.
Even as Cantor cracked the door open, however, Senate Minority Leader Mitch McConnell (Ky.) slammed it shut, reiterating the long-standing Republican position that policymakers should consider eliminating tax breaks only as part of a comprehensive effort to rewrite the code and lower income tax rates.
“To sort of cherry-pick items in the context of this current negotiation with the White House strikes me as pretty challenging,” McConnell told reporters, adding that raising taxes on any sector of the economy could trigger job losses at time when the unemployment rate already hovers around 9 percent. “We want to tackle deficit reduction in a way that doesn’t exacerbate unemployment,” he said.
Democrats, in any case, dismissed Cantor’s offer, saying it makes no sense to cut taxes in a package whose primary goal is to reduce borrowing.
“It is like taking one step forward and then two steps back,” said Sen. Charles E. Schumer (N.Y.). “The point isn’t to get rid of these loopholes simply to pay for new tax breaks elsewhere. It’s to do it in a way that contributes to the reduction of the debt.”
With Obama offering major savings from entitlement programs, Republican intransigence on taxes looms as the biggest sticking point in the debt negotiations. Policymakers are rushing to craft a debt-reduction deal big enough to persuade reluctant lawmakers to approve an increase in the legal limit on government borrowing, which now stands at $14.3 trillion.
The national debt hit the limit in mid-May. Unless Congress acts before Aug. 2, Treasury Secretary Timothy F. Geithner has said, the government will begin to default on its obligations for the first time in history.
Staff writers Felicia Sonmez and Roz Helderman contributed to this report.
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