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Debt Talks Worry Lobbyists

K Street Uneasy Over Possibility That Industry Tax Provisions Could Be Nixed

K Street lobbyists are scrambling to defend industry tax breaks and spending programs from ending up as fodder to reduce the deficit in the debt limit talks led by Vice President Joseph Biden.

A lack of news about the specific cuts under consideration by the close-lipped bipartisan group, coupled with last week’s surprising 73-27 Senate vote to eliminate long-sacrosanct ethanol tax subsidies has put lobbyists in a defensive crouch.

Congressional negotiators left Tuesday’s three-hour meeting without a deal and refused to comment on details of what proposals are under discussion. The lawmakers are slated to meet again today, Thursday and possibly Friday, and they are under pressure to announce at least the framework for a broader deal to give Congress time to digest it before the August recess. They’ve set a July 1 deadline for themselves.

All of that means it’s a tense time to be a lobbyist.

“The thing that is really driving people nuts is there is no information,” one Republican lobbyist said. “There is no chatter. … I think that is driving the nervousness.”

The oil and gas industry and private equity companies, which have so far staved off changes to their tax breaks, are watching carefully, given that some Republicans now say they are willing to eliminate industry tax breaks to reduce the deficit.

There is a general push ­— particularly from Republicans — to delay any talk of trimming tax breaks until a broader tax reform plan can be negotiated, but in the meantime, it seems as if every industry is on its own in fighting for its narrow set of tax provisions. The ethanol industry, for example, is still trying to save its tax subsidy from the chopping block by pointing to the tax breaks oil and gas have received for nearly a century. And oil and gas companies aren’t sitting on the sidelines, either.

“I think they continue to educate the Members on the Hill on how important these things are for everybody,” one Republican lobbyist said of oil and gas and wind energy companies. “When push comes to shove, we’ll see what happens. … Any entity that has certain types of tax treatments is very worried.”

The anxiousness appears to be warranted.

Senate Republican Conference Chairman Lamar Alexander (Tenn.) last week came out strongly for eliminating tax breaks to reduce the deficit — a position that took on the party’s long-held orthodoxy embodied in Americans for Tax Reform’s anti-tax pledge. Most Republicans, including Alexander, have signed that pledge to resist tax increases in any form.

But Alexander made it clear again Tuesday that he didn’t feel bound by ATR President Grover Norquist’s pledge.

“My only pledge is to the United States flag and to the United States Constitution, and I’ve forsworn all others,” Alexander said.

But he said getting rid of tax breaks should be part of a larger tax reform overhaul, not the Biden deficit talks.

“Fundamentally, the Biden discussions are not about taxes, they are about spending,” he said.

Alexander’s position that tax breaks can be eliminated to shrink the deficit, however, is gaining support among Senate Republicans.

Sen. John McCain (Ariz.) is one of a number of Senate Republicans who voiced support for eliminating tax subsidies after the ethanol vote. He said K Street lobbyists who have been protecting special tax provisions for decades should be on notice.

“I hope they’re worried, and I believe that Sen. Alexander is right and that we should look at a lot of these subsidies and repeal a bunch of them,” McCain said.

“The debt and the deficit is obviously having an impact on what otherwise used to be sacred cows,” he added.

Sen. Lindsey Graham agreed.

“You can’t be everything to everybody, so we’re going to have to take some tax breaks and deductions off the table just to pay the bills,” the South Carolina Republican said.

House Democrats, led by Rep. Chris Van Hollen (Md.), have proposed a broad menu of tax subsidies to eliminate — from tax breaks for private jets to oil and gas provisions. They are making their inclusion a condition for backing a broader deal that cuts spending programs Democrats have long supported.

Still, House Majority Leader Eric Cantor, who represents House Republicans in the Biden talks, on Tuesday afternoon rejected the possibility of eliminating tax loopholes and subsidies as part of a final agreement on the debt limit. He argued that targeting subsidies for the oil and gas industry and other corporations won’t generate enough revenue to help solve the nation’s debt crisis. As a result, Cantor said, “You have to sort of wonder, is this about policy and substance or politics?”

The Virginia Republican insisted that when Congress does take up the issue of tax subsidies and loopholes, it must come as part of a broader reform of the tax code.

Cantor also called on President Barack Obama to step up.

“The onus is really on the president and his party, I think, to step up and show they’re willing to do that because we’ve said all along it is as reckless for us to just check the box and raise the debt limit and not reform the system and cut spending, as it is for us to just abandon the thing altogether,” Cantor said.

The lobbying push also extends to spending programs, with health care providers particularly worried that they will get whacked first in a Biden-led deal and then again later this year to help pay to extend the “doc fix” that prevents payment cuts to doctors who treat Medicare patients.

“What’s happening is most of the constituencies that seemed to avoid heavy cuts in health reform are all on the chopping block — physicians’ interests, hospitals and those that thought they had made deals are all about to take a whack this time,” one health care lobbyist said. “Everything is situational. … How long could the pharmaceutical industry fend off different proposals?”

Democrats have pledged to oppose cuts to Medicare benefits and are resisting Republican proposals that would allow states to kick millions off of the Medicaid rolls, but they have been open to cutting payments to providers.

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