What’s Prolonging the Shutdown? You Guessed it: Taxes.

October 10, 2013 — 1 Comment

This shutdown was supposed to be about Obamacare – but like every major showdown in Washington these days it appears to be all about taxes. Rep. Paul Ryan explained in the Wall Street Journal:

Here are just a few ideas to get the conversation started. We could ask the better off to pay higher premiums for Medicare. We could reform Medigap plans to encourage efficiency and reduce costs. And we could ask federal employees to contribute more to their own retirement.

The president has embraced these ideas in budget proposals he has submitted to Congress. And in earlier talks with congressional Republicans, he has discussed combining Medicare’s Part A and Part B, so the program will be less confusing for seniors. These ideas have the support of nonpartisan groups like the Bipartisan Policy Center and the Committee for a Responsible Federal Budget, and they would strengthen these critical programs. And all of them would help pay down the debt.

As Ryan notes, these are President Obama’s ideas. Most of them are in his budget, and this is a budget which he wants to pass immediately. This raises the obvious question: If Obama supports these ideas, and these ideas are what the Republican Party needs to end the shutdown and raise the debt ceiling, then where does the problem lie?

Rep. Paul Ryan (R-WI)

Rep. Paul Ryan (R-WI) (Photo credit: Wikipedia)

The problem is taxes. The deal Obama proposes in his budget is he’ll agree to those entitlement reforms and more (Ryan doesn’t even mention chained-CPI) if Republicans agree to raise tax revenues by cutting various tax breaks. This is also the kind of deal proposed by the Bipartisan Policy Center and the Committee for a Responsible Federal Budget.

English: U.S. President is greeted by Speaker ...

English: U.S. President is greeted by Speaker of the House before delivering the . (Photo credit: Wikipedia)

But Republicans don’t want to raise taxes. They want to get the spending cuts they support in return for nothing. And that’s what the shutdown/debt-ceiling fight seems to be about now. The Republicans believe that instead of trading taxes for entitlement cuts they can trade reopening the government and raising the debt ceiling for entitlement cuts. Since they actually support reopening the government and raising the debt ceiling that means they’re not trading anything at all.

Ross Douthat of the New York Times had an interesting article last week, which argued that the White House has confused matters by refusing to do this thing called “negotiating” until the shutdown ends.

What could the president say instead? Well, he could say something like this: I join with Congressional Republicans in favoring further steps to reduce the budget deficit in advance of the debt ceiling vote. I have made an offer, embodied in my budget, to combine entitlement cuts with a tax reform that closes loopholes and deductions and uses the savings to reduce the deficit. I await a reasonable counteroffer from Speaker Boehner: I am open to many possible deals, but as I have said on many occasions, I will not let the Republicans balance the budget while exempting the wealthy from their fair share of the burden. My preference is always to compromise, but in the event that the Speaker cannot present a reasonable counteroffers, and continues to make unreasonable demands, I trust that the House will fulfill its duty and raise the debt ceiling cleanly, rather than throwing the American economy into a recession and threatening the full faith and credit of our republic.

Perhaps that’s a better communications strategy – perhaps not. But it does get to a fundamental truth here: The budget side of this showdown is really about the Republican Party’s refusal to 1) strike a budget deal that includes higher taxes and 2) accept that if they won’t agree to higher taxes there can’t be a budget deal. If the GOP were open to higher taxes, then the negotiations could have happened long ago, and we’d already have had a grand old bargain on the budget.

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Trackbacks and Pingbacks:

  1. Shutdown Ends, Tax War Begins Again « The Joy of Tax Law - October 17, 2013

    […] (See Related: What’s Prolonging the Shutdown? You Guessed it: Taxes.) […]

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