After insisting they would not agree to a deal on raising the debt ceiling and cutting the deficit without some form of tax increase, Democrats have backed down and are now touting a proposal from Senate Majority Leader Harry Reid that calls for no new taxes.
Reid on Sunday said he is working on a plan to raise the debt limit by $2.7 trillion and reduce future spending by that amount, provided the new debt level would remain in place past the 2012 elections.
A plan put forth by House Speaker John Boehner would raise the debt ceiling by only $1 trillion and match that with similar-sized spending cuts, but would last only through the rest of this year.
The debt limit “must be extended in a way that gives certainty to the economy through 2013 and not some short-term gimmick, where we’re right back in this fix in six or seven months,” White House Chief of Staff Bill Daley told NBC News on Sunday.
Noting that it now appears to be “a safe bet” that Reid’s plan won’t include any tax increases, Washington Post political analyst Ezra Klein said that “means that whether Republicans realize it or not, they’ve won.”
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Republicans had rebuffed several Democratic deficit-reduction proposals that included at least some form of revenue increases.
Republicans said “there would have to be a deal that disavowed taxes, and it would have to be cut between the congressional leadership of the two parties,” Klein adds. “Obama couldn’t have this as a win.
“If you take the Republicans’ goals as avoiding a deal in which they have to vote for tax increases and denying Obama a political victory, it looks like they have succeeded.”
Citing Reid’s plan, Sen. Chuck Schumer of New York, the third-ranking Senate Democrat, told MSNBC: “I think there’s some hope today” for progress on the deficit-reduction negotiations.
“Senator Reid is going to put forth an offer that meets the Democrats’ main criteria, going past 2012, and the two Republican criteria — enough cuts to equal the amount you raise the debt ceiling and no revenues.
“Hopefully it’s the kind of thing that Speaker Boehner can rally his tea party troops toward.”
But Schumer sought to downplay talk that Democrats had given in to GOP demands, Politico reported.
“Surrender would be putting in all the entitlement cuts without a nickel of revenue,” he said.
“We’ve held the line on that and that’s not the case.”
The Treasury Department says the government will reach its $14.29 trillion borrowing limit on August 2, and if that ceiling is not raised many government payments will have to be suspended and the nation’s top credit rating will likely be downgraded.