Raising the Debt Ceiling

Debt ceiling deal unlikely to tackle taxes

Marketplace Staff Aug 1, 2011

Steve Chiotakis: After congressional Republicans and Democrats — and the White House — all said they have a deal the voting gets underway today. The proposal calls for at least $2.4 trillion in spending cuts over the next decade, including cuts to defense and entitlement programs in that debt deal. But many economists from across the political spectrum have said if the U.S. wants to get its debt under control, more revenues are needed.

Marketplace’s David Gura is with us live, in Washington, with the latest. Good morning, David.

David Gura: Good morning, Steve.

Chiotakis: The Republicans insisted on no new taxes — so are they off the table in this deal?

Gura: Well, remember, the president said, all along, he wanted a “balanced approach” to this. Both spending cuts and new revenue — from raising taxes and changing the tax code. There’s a chance we could see taxes on the table in a few months. This deal cuts a trillion dollars now, but pushes the bulk of the cuts back a few months. It calls for a new special committee of made up of six Democrats and six Republicans. And the idea is they’d suggest more savings and more ways to save down the line. Now, some Republicans are saying they won’t appoint anyone to that committee who would support raising taxes. So this could be trouble. And besides that, Stephen, it looks like raising taxes would be exceeding difficult under the rules of that committee.

Chiotakis: And what about the Bush tax cuts? What happens to those tax cuts now?

Gura: Well, under this deal, nothing would happen to them. Remember On December 31, 2012, next year, all of them, affecting everyone from the middle class to the wealthy. Those rates are scheduled to expire. White House officials have said that President Obama would veto any extension on these cuts if there aren’t broader tax reforms.

Chiotakis: OK but as we said, some say tax revenues are required to fix the budget problems — so does this deal solve anything?

Gura: In a way, that’s a tough one. Let’s not forget what this deal would do — it would raise the debt ceiling. The U.S. would be able to pay its bills. And we’d get some new caps on spending. I talked to Marc Goldwein. He’s with the Committee for Responsible Budget, and he told me he’s still holding out hope we could see tax reform soon.

MARK GOLDWEIN: There’s disagreement on the number, but I think there’s increasing agreement from all parties that we want to do tax reform that broadens the base, gets rid of a lot of these loopholes, deductions and credits, and then lower rates.

Gura: But there are a lot of ifs here still, Steve. It’s up to Congress — it’s up to this committee so we’ll just have to see what happens.

Chiotakis: Marketplace’s David Gura in Washington. David, thanks.

Gura: Thanks.

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