Moody's Investor Service warned yesterday it would likely downgrade the U.S. government's debt unless policymakers in Washington reached an agreement on debt reduction. It's not altogether clear what has Moody's spooked -- if there's no deal, there would be large tax increases and spending cuts that would lower the deficit in a hurry.
Nevertheless, the warning served as a reminder of the looming deadline and the need for some kind of resolution. House Majority Leader Eric Cantor (R-Va.) appeared on CNBC yesterday to once again say his Republican caucus won't accept a compromise that raises taxes on anyone.
As Annie-Rose Strasser noted, Maria Bartiromo asked Cantor, "So what are you willing to give on, congressman? When you look at what the two sides are, basically sticking to their guns, can it really be realistic to say taxes can never go up, that, you know, taxes should stay where they are forever in any environment? What are you willing to give on?" The Republican leader replied, "[R]aising taxes is not the answer. We all know that."
It's worth clarifying that Cantor's response is all-encompassing -- he says he wants to reduce the debt, but he also says that it's completely unacceptable for any tax on anyone to go up any amount at any time for any reason. Full stop.
Reporters asked House Speaker John Boehner (R-Ohio) yesterday about the prospects of some kind of agreement. "I'm not confident at all," Boehner said. For a change, I'm inclined to agree with the Speaker.
In case anyone's forgotten, without an agreement, Bush-era tax breaks will expire on Jan. 1, and massive spending cuts, demanded by congressional Republicans as part of last year's debt-ceiling agreement, will kick in automatically. Democrats have said they're open to a "balanced" compromise -- some spending cuts, some tax increases on the wealthy -- but for now, the GOP isn't interested in a deal.