First the basics from Reuters:
Here is what’s happening on Friday in negotiations to raise the U.S. government’s $14.3 trillion debt limit by Aug. 2 and avoid a credit default:
* U.S. House Speaker John Boehner walks away from talks with President Barack Obama on a deficit reduction deal that was to clear the way for an increase in the debt limit. Boehner says Obama wanted to raise taxes. Boehner says he will now begin talks with U.S. Senate leaders.
* Obama says it “hard to understand” why Boehner would walk away from what he called an “extraordinarily fair” deal. Obama says deal would have cut $1 trillion in discretionary spending and $650 billion from Medicare, Medicaid and other entitlements. Deal would have sought $1.2 trillion in revenues, which could have been achieved with raising income tax rates.
Roll Call is all over this, too. And here is the take of congressional GOP source to me:
We never had agreement on a revenue number. But the WH did demand more revenue post gang of 6 – a lot more revenue. Entitlements [changes included] Medicare raising age, significant savings, combining Medicare parts A and B, means testing. Also chain cpi on social security and additional savings. GOP proposed over 200 billion in medicaid savings, WH up to 120. But n agreement on$800 billion. But there would have been tax reform and 3 flat rates – broadened base, lower rates. WH wanted higher rates post gang.
Here is how I see it: Boehner says they had an agreement on $800 billion in revenue, but then Obama asked for $400 billion post Gang of Six report. The “goal posts” were moved. That extra $400 billion would come from higher tax rates. That is an absolute, no-go, red-zone issue for Republicans. Where would the original $800 billion have come from? First, extra revenue from more economic growth generated by tax reform efficiencies. Second, and this is a pretty good guess based on what Boehner said, better tax enforcement. Here is Boehner describing where the money came from ” … and a tax system that was more efficient in collecting the taxes that were due the federal government>”
That is a classic item on the liberal agenda, and I can easily see Obama pushing it. Here is the Center for American Progress describing it:
An estimated $400 billion to 500 billion in taxes go uncollected every year in the United States because of tax evasion and noncompliance. … This yawning “tax gap” increases the deficit and undermines the faith of honest taxpayers who don’t cut corners. Every additional $1 invested in tax enforcement and compliance can shrink the deficit by at least $3. President Barack Obama’s proposal to invest an additional $13 billion in IRS enforcement and compliance activities over the next decade will generate more than three times that amount in additional revenues—$42 billion, according to official estimates. The funding will allow the IRS to contact potentially noncompliant taxpayers that “it currently identifies but cannot contact given resource constraints” and strengthen pre-refund compliance checks, according to the Government Accountability Office. Better enforcement leads to greater compliance: After the IRS in recent years began targeting people using offshore bank accounts to evade taxes, about 19,000 taxpayers entered a voluntary compliance program and paid billions in back taxes and penalties.
My best guess is still $1.5 trillion in cuts (no tax increases) plus a debt hike through 2012.
UPDATE: Here is bit more from another GOP aide:
Despite what WH briefers may be saying, any new revenue in the framework would NOT have been generated by letting the current tax rates expire. That is simply false. Under the framework discussed, a CEILING was agreed upon that could generate $800 billion in new revenue over ten years. This would be done through comprehensive tax reform that would clear out deductions, credits, and loopholes in the system – and spur economic growth. After the gang of six plan came out, the White House moved the goal posts and insisted on $400 billion more in higher taxes – a 50% increase in revenue – and wanted that to be the FLOOR instead of the ceiling. The President acknowledged this in his remarks tonight. “Letting tax cuts expire” was never part of the tax reform agreed to.