Debt Ceiling Games: Negotiating when Everything is a 'Tax Hike'

COMMENTARY | The current problem with the debt ceiling negotiations doesn't seem to be the whether or not the Democrats are willing to budge with spending cuts. They've offered $1 trillion in spending cuts, according to CNN Money. But instead of negotiating and going toward the middle, Republicans have walked away from negotiations and flat-out refused to consider revenue-generating measures in any form, calling everything from a subsidy to a tax loophole a "tax hike." Instead of offering some of the decidedly unnecessary loopholes, they instead want the Democrats to cave on more spending cuts. So how are the Democrats supposed to negotiate with a counterpart that sees everything that generates revenue as a "tax hike?"

Part of the reason why the national debt is as large as it is comes from tax breaks signed into law by the Bush administration and kept on the rolls for almost a decade. Those tax breaks benefited mostly the wealthy (and continue to do so) at the cost of taking revenue from the U.S. government, which then mired itself in two wars it could not pay for. Then along came the Great Recession and a couple exorbitant stimulus packages and, when added to a decade of unbalanced budgets, the tax breaks, and the aforementioned wars, saw the national debt reach runaway and astronomical proportions.

The Republicans, who were just as complicit, if not more so, in the accrual of the debt, now want to drastically cut spending while concurrently allowing all the tax breaks and loopholes and subsidies that generally benefit businesses, corporations, and the wealthy (revenues that would, by the way, help move the federal budget toward balance), to remain in place.

It is part of the Grover Norquist-Tea Party "no tax hikes" mantra that Republicans have been spouting since just before the 2010 midterm elections. And since quite a few Republicans made it to Washington -- or made it back to Washington --with the help of the tea party movement, there is no doubt some pressure to adhere to at least some of their tenets.

But calling everything a "tax hike" because it takes away from businesses and the wealthy does not make it a tax hike. What it makes it is word games used to appear to be negotiating when there is no intent of one side -- in this case, Republicans -- in reaching a compromise.

At present, farm, ethanol, solar energy and mortgage tax breaks are all considered "tax hikes" if they're eliminated. However, the "breaks" reduce their amount of taxation, which is their legal tax burden. It isn't a tax increase. It is a tax revenue reacquisition.

Tax loopholes that allow companies like General Electric to pay nearly nothing in taxes and Hollywood Film companies to write off their first $15 million in production costs ($20 million if filming in a depressed area), if closed, are considered tax increases by the GOP. A loophole closing is a revenue increase and a reapplication of an extant tax code that has been circumvented.

Yet, Republicans like House Minority Leader Eric Cantor, R-Va., want to play games with the debt ceiling, while pushing Democrats to offer more and more in Medicaid and Medicare spending cuts, not to mention student loan cuts. Cantor's last move -- after walking out of the negotiations last week because Democrats wanted to consider revenue increases -- has been to say that "we'll be glad to talk loopholes."

According to the Associated Press, he said they would consider them as long as they were used to pay for tax cuts. That zero-sum game leaves the negotiations again at Democrats offering $1 trillion in spending cuts and the Republicans protecting the tax breaks and loopholes for corporations and the wealthy. In sum, Republicans offer nothing.

The debt ceiling was reached on May 16. Treasury Secretary Timothy Geithner says he can juggle expenditures to keep the government operational until Aug. 2, then the debt ceiling will have to be raised so that the government can borrow in order to remain solvent. If the debt ceiling is allowed to remain static, the government will default on its loans and be forced to shut down, operating only essential services.

There is no true compromise reached when only one side makes a move toward the middle to find mutual agreement. When only one side is willing to negotiate, it is not negotiating. It is a simple capitulation to demands of the opposition.