House Speaker John Boehner set the stage Tuesday for another tense, partisan showdown over tax and spending policy later this year, as he vowed to insist on big spending cuts before he’ll agree to a new debt ceiling – much like last summer’s debt showdown debacle – and he also promised a vote before November’s elections on whether to prevent Bush-era tax cuts from expiring at year’s end, as scheduled.
Boehner’s address to a Washington budget forum had chilling echoes of the 2011 clash over increasing the debt ceiling, a weeks-long standoff between the Obama White House and Republicans in the House of Representatives that roiled financial markets, led to a downgrade of federal credit and nearly forced much of the government to close.
Another vote on raising the debt ceiling is expected later this year, probably after the Nov. 6 elections. Boehner on Tuesday pledged to make it an “action-forcing event in a town that has become infamous for inaction. . . . When the time comes, I will again insist on my simple principle of cuts and reforms greater than the debt limit increase. This is the only avenue I see right now to force the elected leadership of this country to solve our structural fiscal imbalance.”
The Ohio Republican also pledged to fight to extend Bush-era tax cuts, now set to expire at the end of this year, and called on President Barack Obama to join him. “If there’s one action-forcing event that trumps all the rest – even the debt limit – it’s presidential leadership,” Boehner said.
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“Republicans are once again choosing millionaires over the middle class and Speaker Boehner is threatening to take our nation into another manufactured crisis that will harm America’s families,” said House Minority Leader Nancy Pelosi, D-Calif. Added Senate Democratic Policy Committee Chairman Charles Schumer of New York, “The last thing the country needs is a rerun of last summer’s debacle that nearly brought down our economy.”
The White House was somewhat more measured.
"Everyone except for elected members of Congress, the Republican Party, agrees with that general proposition that we need to take a balanced approach to our deficit and debt challenges," said spokesman Jay Carney. “A balanced approach” to deficit reduction is Democratic shorthand for a package including tax increases as well as spending cuts.
Boehner flatly rejected higher taxes.
“Any sudden tax hike would hurt our economy, so this fall – before the election – the House of Representatives will vote to stop the largest tax increase in American history,” Boehner said, referring to the expiration of the Bush-era tax cuts. Since the House has a 242-190 GOP majority, the cuts are sure to pass. But they’re likely to go nowhere in the Senate, where Democrats control 53 of the 100 seats.
President Obama and House Republicans last summer engaged in weeks of negotiations over cutting spending and increasing revenues. They ultimately agreed to raise the debt ceiling in stages and to impose automatic spending cuts, set to begin taking effect in January. The first round will total about $110 billion next year, half from defense and half from domestic programs.
More crucial to the fate of the debt are the Bush-era tax cuts, which have lowered income tax rates for the past 12 years and which will expire at the end of 2012. So will a host of other tax breaks, including the 2 percent cut in the Social Security payroll tax. Extending the Bush-era tax cuts would cost roughly $3.8 trillion over 10 years, according to the nonpartisan Congressional Budget Office.
Obama and most Democrats want current income tax rates extended only for those earning less than $250,000. They would limit deductions for the wealthy and impose a higher tax rate on millionaires. Republicans want all the Bush-era rates extended, and presumptive GOP presidential candidate Mitt Romney wants them cut another 20 percent.
Boehner said his plan “will give Congress time to work on broad-based tax reform that lowers rates for individuals and businesses while closing deductions, credits and special carve-outs.” The bill would establish a process by which Congress would consider “real tax reform” next year.
“The bottom line is if we do this right, this will be the last time we ever have to confront the uncertainty of expiring tax rates,” he said.
Doing it right, though, would require the kind of political give and take that’s been scarce in Washington in recent years. The 2011 scars are still fresh.
“We were on the verge of an agreement that would have reduced the deficit by trillions, by strengthening entitlement programs and reforming the tax code with permanently lower rates for all, laying the foundation for lasting growth,” Boehner recalled. “But when the president saw his former colleagues in the Senate getting ready to press for tax hikes, he lost his nerve. The political temptation was too great. He moved the goalposts, changed his stance, and demanded tax hikes.”
To House Minority Whip Steny Hoyer, D-Md., it all sounded like more of the same.
“The Republicans are good at buying and lousy at paying. They borrowed a lot of money. As a result, we owe a lot of money,” he said.
Lesley Clark of the Washington Bureau contributed.