House Speaker John Boehner told the Republican caucus today why his talks with President Obama broke down. A big part of it is that President Obama wants to make taxes more progressive, meaning the rich would pay more. Mr. Boehner is more in line with Senator Orrin Hatch, who says folks on the bottom don't pay enough.
From Mr. Boehner's remarks, as reported by NBC's Luke Russert:
"I wanted tax reform that broadens the base, simplifies the code, and lowers rates, to boost economic growth. The president could not accept that because he wanted to increase the 'progressivity' of the current system. This is where things began to break down."
The full text is after the jump. Above, a Reuters chart by way of Felix Salmon -- note the employment tax, which is paid by anyone who has a job at even a very low wage. People who don't owe federal income tax still typically pay a range of others like a sales tax or the Social Security tax. Below, a chart from Citizens for Tax Justice, by way of Ezra Klein.
Speaker Boehner's full address to the House Republican Caucus, as reported by NBC:
"You all saw Friday's jobs report, and you know our economy is struggling to create jobs. On top of that, we face a crushing burden of debt - driven by out of control government spending. In three decades - our debt will grow to more than three times the size of our entire economy. We've had high levels of debt before - including WWII - but those were temporary increases in the size of government. The trajectory today is catastrophic. There is no way our economy can sustain this explosive growth of government.
"We also have a tax code that is making our country less competitive. We can't solve our budget challenges unless we address the growth of our entitlements, specifically our health care entitlements.
"These problems are caused by government. They're hurting our future, and hurting our ability to create jobs. I came here because I wanted to address problems like this. So did you. All of us did. Unfortunately, we have a White House that doesn't share our seriousness about dealing with these problems.
"Over the past couple weeks I engaged the president in a conversation directly about the possibility of an agreement that would tackle all of these problems. This would be an agreement built on the solid work done by the Biden group, negotiated by Leader Cantor. I pushed the president to go even further, and lock arms with us and make structural reforms to all three entitlement programs. The president said he was willing to talk about it. He said he was willing to talk about reforming Medicare, Social Security, and Medicaid -- but in order to talk about that, he had a list of tax increases that would have to be a part of it. I told the president that tax hikes were off the table, but we could talk about tax reform -- because comprehensive tax reform could generate additional revenue through economic growth. He was willing to talk about corporate tax reform. I told him we have to talk about personal AND corporate tax reform, because if you don't do both, you leave out the small businesses who often pay at the personal rate, and therefore would be at a disadvantage. He then asked for a 10-year revenue number. I said it should be no more than 19% of GDP - about the same level as the House-passed budget. . .with fewer tax rates and a top rate less than it is today. He said he that to go there, we would have to make permanent the bottom four Bush tax rates. I said I could only talk about that if there was a guarantee that tax reform with three personal rates -- and a top rate lower than the current rate -- would be enacted by the first quarter of next year. This would guarantee the decoupling would be an irrelevant political statement because a new code would be in place before the scheduled tax hikes could take effect. I wanted tax reform that broadens the base, simplifies the code, and lowers rates, to boost economic growth. The president could not accept that because he wanted to increase the 'progressivity' of the current system. This is where things began to break down. And this is where there's been some confusion.
"Let me be crystal clear on this: at no time, ever, during this discussion did I agree to let taxes go up. I haven't spent 20 years here fighting tax increases just to throw it all away in one moment. What I did do was lay out the conditions that would be necessary to make sure there would be no tax hikes. As the week went on, it became clear that the president wouldn't accept those conditions. It became clear that they weren't serious about structural reforms to the entitlement programs. It became clear that they would only do entitlement reform if it came along with tax HIKES. It became clear that their vision of tax reform was to maintain many of the current code's flawed features. That's when I walked away.
"Am I angry about it? I sure as hell am. I believe we are missing a great opportunity. We all know the problems we face as a nation. We've acted with courage this year, passing a budget that begins to address them. At the White House yesterday, when the president talked about 'shared sacrifices,' I noted that our members weren't exactly doing cartwheels over daring to make reforms to Social Security and Medicare. The president said Republicans had already voted to do that. My response: 'Well excuse us for trying to lead, Mr. President.'
"The agreement we talked about is no longer operative -- not because we weren't willing to lead, but because the White House wasn't willing to listen to the American people. Like it or not, though, we still have to do something about the debt limit. In a few moments, the Majority Leader is going to show you the options that have been discussed in our meetings the last few days. As you know, we've planted three 'stakes' in the ground:
· Cuts must be larger than the hike
· There must be restraints on future spending
· There cannot be any tax hikes.
"These are the stakes, and they've always been the stakes. And I want to be clear about something else: I support a Balanced Budget Amendment, and we're going to fight for one. Any debt limit bill we pass will have to include enforceable caps on future spending -- and I can't think of any better way to enforce those caps than a constitutional amendment requiring Washington to balance the budget.
"The president keeps talking about the need for a 'balanced' approach. He thinks 'balance' means 'I spend, you pay.' Most Americans would beg to differ. They would say a 'balanced' agreement is this: the president gets his debt limit hike, and the American people get spending cuts larger than the hike. That's what we're going to fight for -- the will of the people. Adding tax increases to the mix doesn't "balance" anything. If the president is going to take his case to the American people, I am going to do the same."