By msnbc.com's Tom Curry: How will Friday’s depressing employment report affect Sunday’s debt limit talks between President Obama and congressional leaders?
Too early to tell for sure but consider how bad the news was: with 14.1 million seeking work and unable to find it, there are now 5.6 more people unemployed than three summers ago, in June of 2008.
At first blush the reaction was true to form – party leaders blamed their opponents and reverted to their economic dogma – seeming to harden their positions going into Sunday’s parley.
Republicans argued that the moribund economy cannot tolerate any tax increases, saying such a move would siphon off money that might be used for spending and investment.
“As we address the debt limit increase we shouldn’t do so in a way that raises taxes and impedes the ability of small businesses to create jobs and get people back to work,” said House Majority Leader Eric Cantor.
In a mirror image, Dems used the new jobs data as evidence that no, really, it is spending cuts that would further depress the sickly economy – even though big reductions in spending are at the heart of what Obama and congressional leaders are negotiating about on Sunday.
A leading Democrat, House Budget Committee ranking member Rep. Chris Van Hollen told NBC’s Chuck Todd, “The disappointing jobs numbers this morning underscore what a lot of us have been saying, which is that even as we work to come up with a plan to reduce the deficit over the next ten years, we (should) do nothing in the short term to harm the economy – and deep, immediate cuts would do just that.”
So in Sunday’s talks, Obama and House Speaker John Boehner will find themselves squeezed even more tightly between the true believers in their own ranks.
How can future deficits be reduced if most GOP members resist raising more revenue either through higher tax rates or by cutting deductions and credits – most of which go to middle-and upper-income people?
And conversely – how can deficits be reduced without cutting spending, which at least in the short term, most Democratic members resist doing, except in defense?
So instead of the “deep, immediate cuts” that Van Hollen warned against, Obama and Boehner could try to design a plan that made smaller cuts in the next year or two and deeper cuts starting in say, 2014 or 2015. And likewise they could propose revenue increases that would take effect only in 2014 and 2015.
But the question then would be: would bond market investors find such a plan credible in reducing the government’s growing debt burden?
Van Hollen seemed to reject one idea that has been much discussed in recent days as part of the debt/deficit parley – changing the inflation index used to cost of living adjustments for Social Security recipients.
“I’m not saying we’re going to tinker with COLA,” he told Todd.
Von Hollen reverted to the familiar Democrat argument: income tax rates, at least for upper-income people, ought to be lifted to where they were when Bill Clinton left office.
He also said people earning over $500,000 a year should begin to have their itemized deductions phased out.
A deduction limiting proposal similar to what Van Hollen described would raise $1.1 trillion over ten years, according to the Congressional Budget Office. It would affect about one out of every four taxpayers.