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Debt-ceiling talks stall, much like our economy under this tax climate

June 23, 2011 - Mike Maneval
Negotiations over raising the national debt ceiling may have stalled out on Thursday, with House majority leader Eric Cantor of Virginia abandoning discussions with Vice President Joe Biden. Republican Senator Jon Kyl of Arizona also declined to continue participating.

Earlier in the day, The New Republic's Jonathan Chait suggested, cynically, that the economic perils of a failure to raise the debt ceiling would harm President Barack Obama's reelection chances and consequently would be politically expedient for Republicans. Under Chait's cynicism, the best chance for a compromise is if Wall Street and the business community, which he says would "sustain enormous collateral damage" from failure to increase the debt ceiling, apply sufficient pressure to Republican leadership.

Ezra Klein is more optimistic - though probably just as cynical. Blogging for the Washington Post, he notes Cantor pulled out from further participation in the debt-ceiling talks but says the talks should continue and that progress has been made, that "a blueprint to move forward to trillions of spending cuts and binding mechanisms," in Cantor's words, is falling into place.

Klein argues Cantor's better reputation with tea party organizers and figures within the austerity movement than House Speaker John Boehner of Ohio made him ideal, strategically, to negotiate the spending-cuts side of a compromise. According to Klein, Cantor "can’t sign off on tax increases without losing his power base. But if he’s able to throw it back to Boehner, and Boehner cuts the deal, that’s all good for Cantor."

Of course, details on specific spending cuts or tax increases on the table for negotiators Cantor and Biden seem non-existent. This is unfortunate for many reasons. While an inability to assess the potential benefits and drawbacks of proposed cuts perhaps is the most obvious, it is not the only one. "I don't believe now is the time to raise taxes in light of our current economic situation," Cantor told Carl Hulse of the New York Times, raising the question: Could the deal include increases in tariffs or tax rates on unearned income in 2014, or 2016, to reduce the deficit? Or must we continue to offer the lowest tax rates in more than 60 years despite the 8-year failure of this tax climate to provide sustainable growth, even as we slide deeper into debt?


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