How the Budget Deal Will Die

Rep. Paul Ryan began the budget conference committee last month by warning Democrats that they would sabotage the negotiations by insisting on a debate over more revenue.

“If this conference becomes an argument about taxes, we’re not going to get anywhere,” Ryan told the group on Oct. 30. It took Democrats all of one week to dismiss his advice.

Several liberal lawmakers on the committee drafted a memo last week detailing “egregious tax loopholes” that could be closed to raise revenue and help soften sequester cuts—a nonstarter for Ryan and the House Republican Conference.

Meanwhile, Senate Budget Committee Chairwoman Patty Murray, D-Wash., raised Republican eyebrows over the weekend with a Washington Post op-ed arguing that it would be “unacceptable” to craft a budget deal that doesn’t include closing certain tax loopholes.

“All we’re saying is that, look, here are a menu of options, a menu of loopholes. It can’t possibly be that you’re protecting all of these,” a senior Democratic aide said Tuesday.

Against this backdrop, Ryan and Murray are poised to convene Wednesday’s meeting amid the type of partisan bickering both chairmen had hoped to avoid.

“Unhelpful,” said one senior Republican aide, in response to Murray’s op-ed. Additionally, the aide said, Murray’s recent profile in The Huffington Post, in which she seemed to compare Republicans to preschoolers, was “surprising” after the collegial tone initially taken by her and Ryan.

While discussions continue between Murray and Ryan, neither camp would offer any indication of whether progress is being made.

“I think both members in their opening statements [Wednesday] will talk about the fact that negotiations are ongoing—and that in itself is progress, that nothing is at a standstill,” a senior Democratic aide said Tuesday.

Ryan has endorsed the concept of hiking various “user fees” to help craft a budget agreement. But he refuses to consider closing tax loopholes for the purpose of raising revenue. This may in part be because his friend, House Ways and Means Committee Chairman Dave Camp, R-Mich., could target those same loopholes in a bipartisan tax-reform blueprint.

In that light, Ryan’s small-ball approach to the budget negotiations made sense. His bipartisan budget conference should be about cutting spending, Ryan concluded, while Camp’s bipartisan tax-reform talks should be about closing loopholes and crafting an overhaul of the nation’s tax laws.

“Today, our tax code is full of carve-outs and kickbacks. We need to get rid of them—and those bipartisan [tax-reform] talks are just the way to do it,” Ryan said Oct. 30. “So let’s do all we can to encourage that effort. And let’s focus our energy on the task at hand: a budget that cuts spending in a smarter way.”

But Democrats, long insistent that any budget agreement cutting spending must also include revenue hikes, don’t share Ryan’s approach. Murray, for her part, agreed with Ryan about their committee’s scope, but said a few targeted fixes won’t endanger the work being done by Camp and Senate Finance Committee Chairman Max Baucus, D-Mont.

“A budget conference is not the place to debate comprehensive tax reform,” Murray wrote in her Post op-ed, and later added, “But closing a few wasteful loopholes now would not threaten the much larger debate over simplifying the 75,000-page tax code.”

While staking out their respective positions, there has been an expectation that Ryan and Murray would ultimately come together as a “committee of two” and attempt to reconcile their differences with a scaled-down deal that would be palatable to both parties.

That effort, however, could be complicated now that Murray and her fellow Democrats on the committee have made known their determination to close tax loopholes, which some Republicans say is a rejection of Ryan’s approach.

Meanwhile, both parties continued to ratchet down expectations heading into Wednesday, arguing that the public meeting will be another opportunity for conference members to discuss the issues, not to outline any specifics on a workable plan.

Democrats hope the fiscal crises that led to the government shutdown earlier this year will push Republicans to negotiate. Yet Ryan and his team, while hopeful for a deal, aren’t feeling pressured by the Dec. 13 deadline to report the committee’s recommendations.

“It’s a deadline without any consequences, obviously,” Ryan spokesman William Allison said. “If we don’t do anything, the government doesn’t shut down, there’s not a second sequester that hits, there’s not a debt limit, so if we fail to reach an agreement by December 13, the world keeps spinning and everything’s fine.”