US Senate minority leader Mitch McConnell has said further tax changes are off the table as lawmakers and the president gear up for a fight next month over raising the US government’s debt limit.
“The tax issue is finished, over, completed,” Mr McConnell said on ABC’s This Week yesterday. “Now the question is what are we going to do about the biggest problem confronting our country and our future, and that’s our spending addiction.”
Less than a week ago, US president Barack Obama and lawmakers reached a compromise that averted a package of spending cuts and tax increases known as the fiscal cliff.
Spending cuts
Republicans attempted yesterday to shift the debate away from taxes to focus on cutting government spending. Democrats countered that everything including taxes had to be a part of the negotiations.
“Mitch McConnell is drawing that line in the sand; it’s a recipe for more gridlock,” Chris Van Hollen, the top Democrat on the House budget committee, said on Fox News Sunday.
The US reached its $16.4 trillion (€12.54 trillion) legal debt limit on December 31st, and the Treasury began using extraordinary measures to finance the government. It will exhaust that avenue as early as mid-February, the congressional budget office says.
Markets rallied last week following passage of a law raising income-tax rates to 39.6 per cent for couples with annual income above $450,000 while extending tax cuts for lower incomes and delaying automatic spending cuts until March 1st.
House minority leader Nancy Pelosi, a Democrat, said yesterday taxes were “not off the table”. “Put it all on the table and see what is working,” she told CBS’s Face the Nation.
“I’m fairly agnostic about what it could be now that we have injected some fairness into the process. But if it works for us, if it grows our economy, if it’s something that justifies its existence, it should be there.”
Partisan gridlock
After partisan gridlock brought the government to the brink of default in August 2011, the stock market fell and Standard and Poor’s cut the US’s credit rating to AA+ from AAA. House speaker John Boehner, a Republican, withdrew from talks on July 22nd, 2011, and the SP 500 index fell more than 16 per cent in the next 11 trading days.
“One thing I will not compromise over is whether or not Congress should pay the tab for a bill they’ve already racked up,” Mr Obama said yesterday in his weekly radio address. “The last time Congress threatened this course of action, our entire economy suffered for it.”
Mr McConnell said the focus should turn to cutting spending. “I wish the president would lead us in this discussion rather than putting himself in a situation of having to be dragged kicking and screaming to the table to discuss the single biggest issue confronting our future,” he said on NBC’s Meet the Press.
Mr Obama said any reductions in spending should come alongside higher levies on rich Americans and companies by changes to the tax code. – (Bloomberg)
