Debt ceiling talk hit impasse! Markets freak! Investors panic!
First, a summary of today’s galaxy-shattering news from my beloved colleagues at REUTERS:
U.S. budget talks hit an impasse on Thursday after a both Republicans walked out, throwing doubt on Washington’s ability to reach a deal that would allow America to continue borrowing and avoid a debt default. Representative Eric Cantor, the No. 2 Republican in the House of Representatives, said participants had identified trillions of dollars in potential spending cuts but were deadlocked over tax increases that Democrats want. ”Regardless of the progress that has been made, the tax issue must be resolved before discussions can continue,” he said in a statement. Republican Senator Jon Kyl also left the talks, an aide said. House Speaker John Boehner said Democrats must abandon any tax increases for negotiations to continue. ”These conversations could continue if they take the tax hikes out of the conversation,” Boehner said. He added tax increases could never pass the Republican-controlled House in any event.
TPM adds this color:
A Senior Democratic aide suggested to TPM earlier that Cantor “threw Boehner under the bus” by calling on him to leap into talks, keeping his own hands clean of any tax increases unpopular with the GOP base. Pushing back on the notion, a senior GOP aide told TPM in an e-mail that the “White House has secretly been negotiating with Senior Republicans behind the Democrat Leaders backs, so it is understandable they don’t understand the dynamic at play.”
Will Republicans crack and agree to the elimination of some tax breaks in order to raise revenue? I sure hope not. There is certainly no economic reason to raise taxes. The U.S. economy is not optimized for growth. If we want more revenue, growth the pie. Or cut more spending. Or, preferably, both. And certainly there is no way Rs should accept higher taxes for anything less than structural healthcare reform that moves the system to a form that is more patient-centric and market friendly.