Two years ago, Congressional Republicans took the unprecedented step of holding the debt ceiling hostage in order to extract draconian spending cuts. Now, the GOP's willingness to sabotage the American (and global) economy may be about to take an even more dangerous--and obscene--turn. House Republicans are suggesting they will not support an increase in the U.S. borrowing authority this fall unless Democrats agree to "revenue-neutral" overhaul of the tax code. That is to say, Republicans are threatening to trigger a default unless they get a deal that doesn't reduce the deficits at all.
The latest GOP extortion couldn't come at a worse time. After all, the federal budget sequester which began in March is already slowing economic growth and costing American jobs. Meanwhile, the CBO and analysts like Goldman Sachs have forecast that Uncle Sam's rapidly shrinking annual budget deficits will soon put U.S. national debt levels on a sustainable path. (That reality even prompted House Speaker John Boehner and Budget Committee Chairman to admit that "we have no immediate debt crisis.") Now, two years after the GOP's first debt limit blackmail hammered consumer confidence and job growth, Republicans are preparing a new ransom note. As Politico recently explained:
Now, momentum is building to tie a rewrite of the Tax Code to hiking the debt cap, which will need to be raised by the fall because the limit will technically be hit this month. Top lawmakers and aides on the House Ways and Means Committee have quietly begun mulling over and crafting mechanisms that would attempt to "commit Washington" to tax reform over the next five months, several sources involved with the planning say.Word of that gambit prompted an incredulous Ezra Klein to ask in wonderment:
Seriously? Republicans' new debt-ceiling demand is...tax reform? And not even deficit-reducing tax reform?As you'll see below, you read that right.
While House Ways and Means Committee Chairman Dave Camp (R-MI) is working with Senate Finance Committee chief Max Baucus (D-MT) on a tax reform plan that would lower rates and supposedly close loopholes, they don't agree on the critical point of actually raising new revenue. Thus far, Camp has insisted the top individual and corporate tax rates should be slashed to 25 percent, while remaining publicly silent on which of the $1.1 trillion in annual tax expenditures would be ended:
Although he didn't say which tax breaks are on the chopping block, he did assert that comprehensive tax reform would not be used to generate more tax income.Nevertheless, some House Republicans appear eager to once again block a debt ceiling increase and bring the U.S. to the brink of what John Boehner described in 2011 as "a financial disaster, not only for our country but for the worldwide economy." Unless, that is, Democrats agree to a tax reform deal that raises no new revenue and thus makes no impact on the national debt Republicans pretend to decry. It's no wonder that Citizens for Tax Justice charged that Congressional Republicans demanding revenue-neutral tax reform in return for agreeing to President Obama's request that the federal debt ceiling be raised is the "most ridiculous idea aired recently."
That may put him at odds with President Barack Obama, who is seeking more tax revenue to be used for deficit reduction. Most Republicans have vowed that the tax-rate increases included in the New Year's Day fiscal-cliff bill are all that Mr. Obama will get.
"The comprehensive reform I'm looking at is revenue-neutral," Mr. Camp said.
Ridiculous, and incredibly dangerous. As the Washington Post's Ezra Klein and Evan Soltas warned Wednesday, "the debt ceiling is becoming all-purpose leverage":
This isn't desperate times forcing desperate measures. These are normal times being punctuated by dangerous measures. Having repeatedly failed to win back control of the government, Republicans are trying to turn the debt ceiling into a continuous and flexible form of leverage for the minority. That's an immensely dangerous precedent to set even if the underlying demands and aims are reasonable.