But debt-reduction talks halted two weeks ago when lawmakers reached an impasse, with discussions now focusing on raising the debt limit by the Fed’s August 2 deadline. Still, Obama’s plan will highlight his party’s willingness to negotiate and the stubbornness of GOP members unwilling to do away with tax cuts for the wealthiest Americans despite the current crisis. Obama has already spoken with Republican leader and House Speaker John Boehner about his debt-reduction plan, including options for overhaulting the tax code and cutting entitlement spending, but the two came to no agreement, with Boehner unwilling to consider any tax increases.
However, Republican House Majority Leader Eric Canton has announced his willingness to end tax breaks for corporations, hedge-fund managers, and owners of corporate jets, but only as long as the deal only does away with tax breaks and doesn’t actually raise tax rates or overall federal tax collections. Cantor says any aforementioned tax increases should be offset by cuts elsewhere. The White House has proposed temporarily reducing payroll taxes for employers.
But Democrats in general disagree with Cantor’s offer, saying that tax cuts have no place in discussions about how to reduce borrowing. According to Senator Charles E. Schumer, “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.”
National debt exceeded its legal limit of $14.3 trillion in May. If Congress is unable to reach an agreement by August 2, Treasury Secretary Geithner says the government will begin to default on its obligations for the first time in U.S. history.