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As GOP delays showdown over debt limit, Democrats ponder next steps on tax hikes

With inaugural festivities over, President Barack Obama and members of Congress have returned to budget trench warfare.

House Republicans will vote Wednesday on suspending the federal government’s debt limit until May 19 in the latest chapter of this ongoing saga that has consumed Washington for the better part of the last two years.

GOP leaders hope that by passing their bill, they will not only postpone another debt limit confrontation with Obama, but will put the onus on the Democratic-controlled Senate to pass a budget resolution which would set spending levels for federal programs for the coming fiscal year. The Senate hasn't passed a budget resolution since 2009.

At a press conference Tuesday evening, House Speaker John Boehner reminded reporters that although House Republicans have passed budget resolutions for the past two years, “it’s been nearly four years since the Senate has done a budget.”

He said that the Republican debt limit bill will include a provision that if the Congress doesn't enact a budget resolution, members should not be paid.

House Majority Leader Eric Cantor added, “If this country needs to incur more debt, Senate, please show us your plan to repay that debt, please show us your plan to control spending.”

Passing a Senate budget resolution, Republicans argue, will require Democrats to show their hand: they will need to vote for additional tax increases.

That theory was given some credibility by comments by the Senate’s third-ranking Democrat, Sen. Charles Schumer, D- N.Y., who said on NBC’s “Meet the Press” on Sunday that Senate adoption of a budget resolution is “going to be a great opportunity for us. Because in our budget that we will pass, we will lift tax reform, which many of my Republican colleagues liked, but it’s going to include (additional) revenues. It’s a great opportunity to get us some more revenues … You’re going to need more revenues as well as more (spending) cuts to get the deficit down.”

He added, “We’re going to do a budget this year. And it’s going to have revenues in it. And our Republican colleagues better get used to that fact.”

By eliminating some tax credits, deductions and preferences, tax reform could make the tax system more efficient, helping spur economic growth and generating increased tax revenues.

Senate Democrats could use a budget procedure known as “reconciliation” to enact tax increases – and they would need no Republican votes in order to do so. Under Senate rules, changes considered under reconciliation can’t be filibustered, so they could be enacted by a simple majority, instead of requiring a 60-vote majority.

Senate Majority Leader Harry Reid, D-Nev., said on the Senate floor Tuesday morning that he wanted senators to “work to end wasteful tax loopholes and (to) balance thoughtful spending reductions with revenue from the wealthiest among us.”

A few hours later, Reid sidestepped a direct question from a reporter about whether the Democrats plan to use the budget reconciliation process to enact tax increases, referring reporters to Senate Budget Committee chairwoman Sen. Patty Murray, D- Wash.

And in comments to reporters Tuesday, Senate Finance Committee chairman Sen. Max Baucus, D-Mont., pointedly refused to make any commitment to using the budget reconciliation procedure to undertake tax reform. He said he was committed to working on tax reform and “I want to try to find the process that works best.”

In his response to Reid on the Senate floor, Senate Republican Leader Mitch McConnell signaled his opposition to any new tax increases on top of those which Obama signed into law on Jan. 2 and those included in the 2010 Affordable Care Act. McConnell said: “the revenue question has been settled.” Later in comments to reporters, he added, “the tax issue is over.”

McConnell complained that Obama’s “far left-of-center inauguration speech” was “not designed to deal with the transcendent issue of our era, which is deficits and debt.”

He and other Senate GOP leaders sounded like they were on the same page as their House GOP counterparts, thanking the House leaders for putting the focus on the need to enact a budget and to deal with the growing debt.

One reason for a Republican delay in a debt standoff with Obama is to allow the post-inaugural afterglow and Obama’s popularity some weeks to fade. But it’s not clear the Republicans will be in a stronger position politically in May than they are now. And it is also not clear how GOP leaders plan to handle two March spending deadlines which remain in place: the March 1 start of automatic spending cuts and the March 27 expiration of a continuing spending resolution that funds government operations.

The wording of the GOP leaders’ statements leaves the inference that they might well be willing to pass a series of short-term debt limit increases – even though Obama has said he opposes raising the debt limit in short-term increments.

If Republicans think they can use the budget process to enact curbs in the growth of entitlement spending and if Democrats believe they can use the budget process to enact tax increases, then perhaps both sides will end up disappointed.

It all hinges on the willingness of each side to accept trade offs.

It was significant that in his inaugural address Obama said, “We must make the hard choices to reduce the cost of health care and the size of our deficit.” But he said nothing about the danger of the growth of federal debt and addressed entitlement spending only by presenting its virtues. Medicare, Medicaid and Social Security, he declared, "do not make us a nation of takers; they free us to take the risks that make this country great.”