House Speaker issued the following statement tonight:
"Despite good-faith efforts to find common ground, the White House will not pursue a bigger debt reduction agreement without tax hikes. I believe the best approach may be to focus on producing a smaller measure, based on the cuts identified in the Biden-led negotiations, that still meets our call for spending reforms and cuts greater than the amount of any debt limit increase.”
A Republican familiar with the talks emails details of how negotiations broke down over a deal to reduce the deficit by $4 trillion over a decade:
All year long the Speaker has pressed the president to "go big" and do something dramatic to reduce the deficit. Over the last week, the Speaker saw a potential opportunity for a landmark agreement between the president and Congressional Republicans that included reforms to all three major entitlement spending programs, strict caps on future spending, and comprehensive tax reform with a broader base and lower rates – all aimed at increasing America’s competitiveness and supporting the creation of jobs. Due to Democrats' insistence on tax increases, the Speaker is now skeptical that such an agreement can be reached. He now believes a smaller package, potentially one built on spending cuts identified through the Biden talks, may be the more likely vehicle for moving forward. Such a package would still have to meet the Speaker’s call for spending reforms and cuts greater than the amount of any increased debt authority being granted to the president in order to be passed by the House. The potential opportunity emerged because the Speaker urged the president to lock arms with Republicans and pursue entitlement reform that put those programs on a sounder financial footing in exchange for a debt limit increase. In response, the president indicated that in order to do entitlement reform, he would have to have additional revenues. The Speaker countered by saying that Republicans would only discuss new revenues if they came from economic growth and tax reform instead of tax increases. The Speaker also insisted on a ‘trigger’ that mandated deep spending cuts and other consequences if the tax reforms were not implemented before the end of 2011. A number of days have been spent by the Speaker and the White House exploring the possibility of a 'big' agreement built on such a framework. But it has become increasingly apparent that Republicans and Democrats are unlikely to reach agreement on such a package because of the White House commitment to tax increases. On Friday, the Speaker proposed a set of tax reform principles as a guarantee against tax increases. Unfortunately, the White House would not agree with the core elements of tax reform proposed by the Speaker. A gulf also remains between the Speaker and the White House on the issue of medium and long-term structural reforms. Consequently, the Speaker believes a package that is smaller but still consistent with the standards he has outlined may now be the most appropriate option.
In other words, Boehner was interested in a compromise on tax reform.
Republicans have proposed tax reform that would reduce or eliminate tax breaks (i.e. deductions, exemptions) in order to lower tax rates, thus creating a more competitive pro-growth economy. Republicans want "revenue neutral" tax reform, so that every dollar saved by paring back tax breaks went toward lowering tax breaks. Boehner was willing to compromise, allowing some of the money saved by scrapping tax breaks to go toward deficit reduction. For example, the Simpson-Bowles commission came up with a plan that would have nixed almost all deductions and established three new lower tax rates of 9%, 15%, 24%. The plan would generate $1 trillion over a decade while reducing all tax rates.