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Debt Deal May Not Have to Be All Cuts

Senate Democrats Want to Add Stimulus

Suddenly, the debt limit negotiations aren’t just about distributing painful cuts. They’re also about including sweeteners that could make it somewhat easier for Members to stomach the political risks of such a plan.

In fact, Senate Democratic leaders Wednesday demanded new job-creating stimulus measures to be included alongside any spending cuts or entitlement reforms in bipartisan debt negotiations led by Vice President Joseph Biden.

After a disappointing May jobs report, Democrats sensed an opening to put Republicans on the defensive rather than simply play on the GOP’s preferred turf of spending cuts.

Democrats aren’t proposing a specific package but are instead floating various ideas they hope might get bipartisan support, including another payroll tax cut, infrastructure spending, job training programs, research and development and clean energy incentives.

“This is a stimulus program,” said Sen. Charles Schumer (N.Y.), the No. 3 Democratic leader, adding that a package would be paid for in the long run as part of the larger deficit reduction effort.

“Let’s say it costs $50 billion or
$100 billion, we’re going to have to make that up to keep with the president’s goal of $4 trillion in deficit reduction over 10 years,” Schumer acknowledged.

He said the payroll tax cut in particular would be hard for Republicans to oppose, even though a number of them have said they don’t like the idea.

“It’s hard to figure out why Republicans would say ‘no’ for three reasons: It’s pro-business, it’s a tax cut and … many of them have supported it in the past. … You ask yourself, ‘Are they against all job creation?'” he said.

Schumer said the U.S. Chamber of Commerce and other business groups across the country would get behind the idea, and the White House likes it.

“We’re talking about policies that should be able to pass the Senate because they’ve received support from Democrats and Republicans in the past,” Senate Majority Leader Harry Reid (D-Nev.) said.

But Republicans aren’t particularly enthusiastic about trying to lessen the pain of any deficit reduction plan.

Sen. Dan Coats said the credibility of stimulus programs is shot.

“I think the Democrats have pretty much run out of stimulus options. … I think the focus ought to go back to what this is all about, and that is [the] government overspends and overtaxes,” the Indiana Republican said.

House Republicans accused Democrats of “reopening the failed stimulus playbook.”

And a Senate GOP leadership aide questioned the seriousness of Schumer’s pitch.

“Since Sen. Schumer’s last great political idea was a tax hike that failed with bipartisan opposition, this latest proposal, as you can imagine, causes one to consider where the serious Democrat proposals will come from,” the aide said, referencing Schumer’s push to eliminate oil-and-gas tax breaks.

Republicans have been insisting that any deal to raise the debt ceiling includes steep cuts in federal spending and a reduction of the deficit.

Democrats, however, took the relatively muted opposition to the payroll tax idea as a sign it might win support.

Democratic leaders, meanwhile, aren’t the only ones hoping to use the deficit reduction plan to their advantage.

While many industries are feeling defensive lest their tax breaks or subsidies face the ax, others see an opportunity to hitchhike on the must-pass debt limit measure.

Some telecommunications lobbyists have pointed out that a broadcast spectrum auction could garner tens of billions of dollars to reduce the deficit, although the industry is worried about how such an auction would be structured.

CTIA, which represents the wireless industry, said it is open to it being included but is more focused right now on spectrum bills moving through the Senate and House committee process.

“We are not today making the case that that needs to be the way to do this,” CTIA’s Jot Carpenter said.

Still, Carpenter acknowledged that lawmakers have previously used spectrum auctions as a relatively painless revenue raiser.

“We’ve never had spectrum through communications policy initiatives. It’s always been in the budget process,” Carpenter said.

The National Association of Broadcasters’ Dennis Wharton said the trade group is closely watching whether spectrum becomes a part of a final deal.

“We are not opposed to the concept of stations turning in their licenses and being compensated if they want to go out of business. The real critical point for us is we should not be penalizing the viewers of those stations who do not volunteer,” Wharton said.

Online gaming would also welcome being included in a final deal. The long-controversial issue has languished in recent years without critical support in the House and Senate. Gaming supporters are expecting Rep. Joe Barton (R-Texas) to introduce a gaming bill as a way to get GOP leaders more comfortable with moving the legislation this Congress.

That isn’t stopping them from looking for opportunities in the budget talks. One key argument lobbyists continue to make is the potential to add billions of dollars a year in revenue if the federal government was to tax online gaming companies.

“Tax us. We’re here,” Poker Players Alliance’s John Pappas said. “We would love to be part of the deficit talks. As of right now, I don’t think we have an official seat at the table. Certainly, if it does come to a point where they want to look in this direction, we’d certainly be willing to put a full press to make this happen.”

But Rep. Barney Frank (D-Mass.) predicted it wouldn’t make the cut.

“I’m all for it, [but] it’s too controversial,” he said. “I don’t see that happening.”

There’s ample precedent for big debt deals including policy sweeteners to get votes. The big 1997 balanced budget agreement, for example, created the State Children’s Health Insurance Program alongside cuts to Medicare and other programs. And the 2006 deficit reduction package passed by Republicans included a variety of incentives, including a milk subsidy and a spectrum auction.

Must-pass bills also tend to attract miscellaneous policy riders, and with so few bills making it to the president’s desk, a debt limit package makes an attractive target.

Democrats, meanwhile, plan to continue the drumbeat for jobs bills this fall.

Reid said he is instructing his committee chairmen to present bipartisan jobs proposals to him by Aug. 1.

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