Let's Make A Debt-Ceiling Deal

President Obama meets with lawmakers today for talks on the debt ceiling. "I don't think the American people sent us here to avoid  tough problems," he told reporters Tuesday. i

President Obama meets with lawmakers today for talks on the debt ceiling. "I don't think the American people sent us here to avoid tough problems," he told reporters Tuesday. Charles Dharapak/AP hide caption

itoggle caption Charles Dharapak/AP
President Obama meets with lawmakers today for talks on the debt ceiling. "I don't think the American people sent us here to avoid  tough problems," he told reporters Tuesday.

President Obama meets with lawmakers today for talks on the debt ceiling. "I don't think the American people sent us here to avoid tough problems," he told reporters Tuesday.

Charles Dharapak/AP

On Thursday morning, President Obama will meet in the White House with top Democratic and Republican lawmakers — four from the House and four from the Senate — to continue work on a massive debt-reduction deal.

The goal is to complete a long-term, multitrillion-dollar budget reduction package by about July 22. That would give Congress enough time to write the deal into legislation, pass it and get it to Obama for his signature before the federal government reaches its $14.3 trillion debt limit on Aug. 2.

The U.S. Treasury says that on that date, it no longer would have the borrowing authority to continue paying all of the government's bills. Republicans have balked at raising the debt ceiling unless Congress also slashes spending.

Economists say a government default on its debts would convulse financial markets.

Republican leaders have suggested that they would consider a short-term budget package to avoid default, but Obama has rejected that idea. "I don't think the American people sent us here to avoid tough problems," Obama told reporters at the White House.

Republicans repeatedly have said they would not increase tax revenues as part of a budget deal. But on Wednesday, House Majority Leader Eric Cantor (R-VA) suggested that House Republicans may be willing to eliminate particular tax breaks under certain conditions.

"If the president wants to talk loopholes, we'll be glad to talk loopholes," Cantor said, adding that closing any loopholes "should be coupled with offsetting tax cuts somewhere else."

Obama and Democratic lawmakers have been floating ideas to raise revenues by roughly $400 billion over the coming decade.

On Wednesday, White House spokesman Jay Carney said a compromise to reduce the national debt by more than $2 trillion over the next decade is possible but would involve both spending cuts and tax revenue increases.

"The president believes, we believe, that there are enough members of both parties in both houses who support the idea that a big deal has to be balanced," Carey aid.

In his July 2 weekly address, Obama reiterated some of his ideas for changing the tax code to raise revenues enough to avoid some cuts. "If we choose to keep those tax breaks for millionaires and billionaires, or for hedge fund managers and corporate jet owners, or for oil and gas companies pulling in huge profits without our help — then we'll have to make even deeper cuts somewhere else," he said.

What's On The Table

These are some of the tax changes Obama is expected to promote while meeting with congressional leaders Thursday.

  • Itemized Deductions

    Tax deductions would be capped for high-income families.
    Karen Bleier/AFP/Getty Images

    Congress could cap itemized tax deductions for a family whose adjusted gross income is $250,000 or more, or an individual making $200,000 or more. Reports say the White House plan would limit the value of these deductions to 28 percent of the affected income, down from the current top rate of 35 percent.

    Impact: raise $290 billion over a decade.

  • LIFO Accounting Method

    Companies that produce goods would change their accounting methods.
    Mira Oberman/AFP/Getty Images

    The IRS could eliminate a tax-accounting method — known as LIFO or Last In, First Out. More than a third of U.S. businesses, including many small businesses, use this method when figuring out their taxes. With this accounting technique, the most recently produced goods are recorded as the first sold. That reduces companies' taxes in times of inflation. Getting rid of LIFO would effectively increase taxes for an array of companies.

    Impact: raise $60 billion over a decade.

  • Subsidies For Oil And Gas

    Oil companies would lose tax breaks.
    Mark Ralston/AFP/Getty Images

    Companies involved in drilling and production can use special expensing and depreciation rules that can reduce their tax bills. Democrats have been trying to repeal these tax breaks, which are vigorously defended by oil companies.

    Impact: raise $45 billion over a decade.

  • Hedge Fund Manager Tax Breaks

    Tax deductions would be capped for high-income families.
    Spencer Platt/Getty Images

    Managers of investment funds typically get compensated with an interest in the future profits of the partnerships they manage for clients. That share gets taxed at the capital gains rate of 15 percent, rather than the much higher rate for wages. Critics say these hedge-fund executives don't invest their own cash, and instead are mere managers — no different from managers of grocery stores. Hence, their income should be taxed at the same rate as any manager who is earning an income.

    Impact: raise $20 billion over a decade.

  • Corporate Jets

    Corporate jets would be one target.
    Jim Bryant/AP

    The depreciation period for corporate jets is five years. Many Democrats want to lengthen the period to seven years, which would increase the tax burden of jet owners.

    Impact: raise $3 billion over a decade.

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