Reaching a deal to reduce the nation's deficit and raise the debt ceiling appears to now lie on the shoulders of President Obama and House Speaker John Boehner, R-Ohio, at least for now. Top aides say the negotiations are honing in on a package to reduce deficit spending by $3 trillion during the next decade through spending cuts and a revenue-increasing tax code overhaul in 2012. That would mean tax rate reductions for individuals and corporations while eliminating or curbing many tax breaks during election season. That is a challenge in itself, but another challenge is the fact that taxes have been a debt talk road block for a while.
The problem is there's less than two weeks left before the August deadline when the government could default if the $14.3 trillion debt ceiling isn't raised and they're running out of options. Republicans favored the Cut, Cap and Balance legislation, which failed to advance in a Senate vote of 51 to 46 to table the bill. Senate Majority Leader Harry Reid, D-Nev., says the talks between Obama and Boehner sound serious enough that he and Senate Minority Leader Mitch McConnell, R-Ky., have put their preparations for moving Plan B through the Senate on hold.
Republicans are cautious of committing to a future tax overhaul that would bring more revenue than the government would collect if current tax rates were extended. But Democrats are wary that spending cuts would be made without the guarantee of new revenue that would come from addressing the Bush tax cuts. Fiscal year 2012 begins Oct. 1, but committees would have until next spring to complete the tax code overhaul and change entitlement programs if they were required to by reconciliation instructions. Senate Finance Chair Max Baucus, D-Mont., says his committee would need at least until the end of 2012 to create major tax legislation.