President Barack Obama will apparently not insist on increasing income tax rates that were lowered and signed into law by his predecessor, President George W. Bush, as part of any deal to increase the debt ceiling.
Rather, the Obama administration will seek a higher tax rate on a narrow slice of the mega-rich - such as owners of private jets, thehill.com reported Monday. If that proposal becomes law, it means that Americans who earn up to $250,000 will get a reprieve.
Obama entered the talks after two key Republicans, U.S. Sen. John Kyl, R-Ari., and Majority Leader Eric Cantor, R-Va., last week walked out of Vice President Joe Biden's bipartisan talks, saying they will not agree to a tax increase as part of a deal to both cut the nation's budget deficit and raising the national debt ceiling.
Republicans argue that Congress should substantially cut government spending to decrease the budget deficit. Meanwhile, Democrats insist that revenue increases must be a part of the talks for any meaningful and enduring deficit reduction to occur.
Details on the substance of Monday's talks were thin, as of 6:30 p.m. EDT, but earlier in the day White House Press Secretary Jay Carney said Obama wants a balanced deal to lower the deficit.
To get a significant deal... there has to be a balanced approach, Carney said, The Wall Street Journal reported Monday. He said that means reducing domestic discretionary spending, defense spending, and entitlements-as well as raising revenue, including taxes.
However, Carney underscored that the White House is not looking to increase tax rates, at least not right now. That would suggest that Obama is more-receptive to eliminating tax provisions that benefit special interests, bush as oil and gas tax provisions, and corporate jet owners, the Journal reported.
The talks occur amid a Wall Street audience that eagerly awaits - perhaps seeks is a more-accurate descriptive - any word of substantive progress on the nation's high budget deficit. Wall Street professionals also, in general, favor raising the debt ceiling. The possibility that Republicans may attempt to block raising the debt ceiling for political reasons - once considered absurd - has become a remote possibility - something that has concerned bond market participates and other holders of U.S. debt.
During the past few months, U.S. Treasury Secretary Timothy Geithner has repeatedly underscored to almost anyone who would listen - including Congressional leaders on both sides of the aisle - that no good can occur from a U.S. default or other credit event that would result in the United States not paying its obligations on time and according to the lender's original plan.
The U.S. Government runs out of borrowing capacity on August 2. U.S. Government bonds are considered the safest, lowest-risk investment in the world and they serve as a benchmark for interest-rate determination for higher-risk bonds and notes.
A default or credit event by the U.S. Government, while it would not guarantee that bond and credit markets would react negatively, almost certainly would lead to an increase in interest rates in the U.S. and globally, among other probable consequences in capital markets.