Lew Plays Debt Ceiling Hardball in Private Meeting

In a private meeting with members of the Senate Finance Committee last week, Treasury Secretary Jack Lew shot down any suggestion lawmakers could attach tax reform, or any other policy, to an increase in the debt ceiling, according to multiple Senate sources.

The position surprised some who thought Lew and other administration officials would begin private discussions to negotiate an increase in the debt ceiling. Instead, Lew underscored the administration’s public position that Congress must increase the nation’s borrowing limit with no other policies attached.

Republicans have refused to agree to raise the debt ceiling without significant spending cuts or structural reforms to government programs.  Several Republicans have suggested including tax and entitlement reform to a debt limit increase.

Lew also told the senators he supported overhauling the tax code in a manner consistent with the administration’s proposals.  Democrats, led by Finance Committee Chairman Max Baucus, (D-MT), rejected the idea that the committee would simply embrace the administration’s proposal and move them through committee along party lines, according to two Senate aides.

A Finance Committee aide denied Baucus or other Democrats were pushing back on Treasury involvement in tax reform.  The preferred course, said the aide, is to develop a new tax code in Congress while working with the White House.

Lew, according to Senate aides, told the committee the administration is prepared to begin negotiations on tax reform in the context of a broader fiscal deal. Lew asked Republicans for their opening offer, pushing them to provide the amount of additional tax revenue they’d agree to.  Since January’s tax increase, Republicans have refused to agree to any tax revenue increase.

Baucus and his House counterpart, Ways and Means Committee Chairman Dave Camp (R-MI), have been writing bills to overhaul the tax code within their respective committees.  The two chairmen meet weekly, said a Finance Committee aide.