New Details Emerge Over Stalemated Debt Talks

Democratic and Republican debt negotiators had made progress in identifying hundreds of billions of dollars in cuts to Medicare during their discussions, though talks abruptly ended two weeks ago when Democrats demanded higher income taxes for wealthier families in return for those cuts, said a Republican source with knowledge of the talks.

Democrats and Republicans had been making solid progress on possible Medicare cuts for the better part of a month, though after the Democrats introduction of increased taxes, the negotiations reached a low point, said the Republican source. The source said the sides have made no substantial progress since.

A Democratic official with knowledge of the talks agreed the two sides had made progress on identifying cuts to Medicare. The Republican source said they had negotiated with the understanding that Democrats would not require tax increases as a condition for cutting Medicare. The source said Republicans were surprised when Democrats suddenly demanded higher income taxes for wealthier families in return for the Medicare cuts; a stipulation the Republican said moved the goal posts significantly.

Democrats had made an earlier attempt in the negotiations to raise taxes, said the Republican source. The talks began with a discussion about Social Security. Democrats demanded more tax revenue from wealthier taxpayers on the payroll taxes that fund Social Security and Republicans refused, citing their position against raising taxes, said the Republican source.

The Democratic source said Democrats have proposed capping itemized tax deductions for families earning more than $250,000 a year, eliminating oil and gas subsidies and a deduction for corporate jets, changing Last-in-First-Out (LIFO) accounting and taxing hedge fund managers at standard income rates instead of capital gains rates.

Republicans maintained their opposition to tax hikes through limiting deductions, saying they will stunt economic growth. They said Democrats proposed accounting change targets manufactures and retailers. Democrats acknowledge eliminating the corporate jet deduction will net the government only $3 billion over 10 years. Republicans said Democrats repeated references to eliminating that tax break, and reluctance to cut spending further, proves they are unserious about addressing the nations debt problems.