Kyl: Treasury may extend Aug. 2 debt deadline

Senate Minority Whip Jon Kyl (R-Ariz.), a member of the suspended Biden deficit talks, said Tuesday he had heard that the Treasury Department in the coming days may extend the debt-ceiling deadline from Aug. 2 into later August.

“I have simply heard that they may be announcing that they can expand this to a later time in August. As I said that wouldn’t be surprising to me,” Kyl said.

The extension would give lawmakers more time to revive stalled talks over raising the $14.3 trillion debt ceiling, which Treasury had said would be breached by Aug. 2.

Treasury is due to issue a revised estimate of the date in early July and increased revenues may push the date back. There is a $23 billion Social Security payment due on Aug. 3 currently that has been a major factor in setting the current deadline. 

"We will provide an update on the debt ceiling outlook at the beginning of July, as we have done at the beginning of each month this year, but it is unlikely that the date will move by more than a day or two - if at all." Treasury spokeswoman Colleen Murray said.

On Tuesday, the Bipartisan Policy Center estimated that the real deadline could be extended as far as Aug. 9. But failure to raise it would lead to a 44 percent cut in federal spending. 

Kyl said that it could take weeks to put any deficit deal into legislation and the GOP will not allow a White House deal to be “parachuted” into the Capitol and rammed through in three days.

Kyl indicated that House members have nixed any short-term increases to the debt ceiling. But he denied that he has shut the door on that option.

“What I would do is refer you to the members of the House of Representatives,” he said.

Senate Majority Leader Harry Reid (D-Nev.) on Tuesday lambasted Republicans for protecting oil companies and the corporate jet tax treatment in the deficit talks.

Kyl told reporters that the first he heard of the corporate jet tax depreciation schedule proposal was from media reports, not from the Biden talks he participated in. Democrats have said they pushed for the changes in the talks. 

He said that raising taxes on oil companies will hurt the economy due to higher gas prices. Kyl also said that the administration's proposals on tax treatment of inventory affects primarily retailers and also manufacturers and is therefore especially bad in an economic downturn.

“Obviously we want to get people back to work and the two key areas that you start with are the retail and manufacturing areas,” he said. “Why do something to burden those sectors of the economy with more taxes? It just doesn’t make sense.”

“We will not raise tax rates nor will we cut deductions in a way that will result in an increase in taxes paid,” he said.

There are some exceptions, Kyl said, such as ethanol tax breaks. GOP senators voted to end ethanol subsidies in a recent vote.

“First of all I called that a one-off proposition. It is a bad provision of the tax code that needs to be eliminated. Whether it raises revenue or doesn’t raise revenue, it ought to go. And there are some other provisions like that,” he said.

Kyl said that negotiating these tax issues is difficult due the backing of special interests.

“There are things that the administration thinks are wonderful policy in tax expenditures most Republicans don’t like. The things we think are good they don’t like. So I am not sure there is room for much of an agreement there even if you are talking about things on a theoretical basis,” he said.

He said major tax deductions such as home mortgage interest for second homes can only be negotiated in the context of overall tax reform, something impossible to do by Aug. 2.

Asked about a Senate Democrat proposal to extend payroll tax holidays to stimulate the economy, Kyl indicated mixed feels.

He said that in general he supports such tax stimulus, but because the money has to come from the general treasury to pay for it, the holiday could end up having a smaller benefit than estimated.

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