Rep. Van Hollen: Romney would be hurdle to grand bargain in White House

Mitt Romney would have a tough time securing a grand bargain on the federal deficit if elected president, Rep. Chris Van Hollen (D-Md.) warned Tuesday.

Romney, the presumptive GOP presidential nominee, has repeatedly vowed that he would not increase taxes on individuals or businesses, a position consistent with Grover Norquist's no-taxes pledge, which Romney has signed.

Van Hollen, the senior Democrat on the House Budget Committee, said Romney's stance would all but ensure the failure of a sweeping budget deal featuring a combination of spending cuts and revenue hikes: the balanced, bipartisan approach most economists maintain is the only viable way to curtail soaring deficits.

"Revenue has to be part of the solution, and cuts and other reforms need to be part of the solution," Van Hollen said Tuesday during an economic summit in Washington sponsored by Bloomberg News.

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"If one major-party candidate is running on a platform of absolutely no revenue increase — in fact, running on a platform of additional tax cuts, which will lose revenue — that makes it very difficult for that candidate to then turn around and enter into a balanced, bipartisan deficit-reduction agreement.

"I've seen people turn very quickly on their positions," Van Hollen added, "but I just think that that is a ... set of gymnastics on the budget that is very politically unlikely."

Alice Rivlin, who headed the Congressional Budget Office (CBO) under the Clinton administration, agreed. 

"It's going to be very interesting, if Mr. Romney wins, how he gets out of this box that he has built for himself," Rivlin said at the same Bloomberg event.

On the campaign trail, Romney has vowed to lower tax rates across the board while simultaneously "limiting" some of the many deductions and exemptions in the current code. The former Massachusetts governor has suggested the proper combination would lead to a fairer tax system without gutting the government of needed revenues.

Romney told CNBC last month, "Virtually all the of the deductions and exemptions, particularly for high-income taxpayers, are going to be on the table because we are going to have to eliminate — well, limit, rather, not eliminate, but limit — for high-income individuals some of the deduction and exemptions in order to compensate for the deductions in rates."

That strategy jibes with Norquist's pledge, under which signers vow to “oppose any and all efforts to increase the marginal income tax rates for individuals and/or businesses ... and oppose any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates."

In the 112th Congress, 238 House members and 41 senators have endorsed the pledge, according to Norquist's group Americans for Tax Reform. 

Democrats have warned that a deficit-neutral approach to tax reform puts 100 percent of the deficit-reduction onus on spending cuts, largely to programs benefiting low-income people who suffered disproportionately from the recession. They argue several attempts at a bipartisan grand bargain in recent years — including an effort by President Obama's fiscal commission, and another by Congress's supercommittee — all ended in failure because Republicans drew a line opposing any new tax revenues.

"If you believe we need an agreement and you believe that the only real, likely outcome is a balanced approach … how would a Republican president who ran on a platform of no new revenue — not one penny for deficit reduction — turn around and enter into a balanced agreement?" Van Hollen asked.

Rivlin suggested one such path. 

"One way out for Republicans in general is to say, 'Well, we really meant lower the rates, we didn't mean that we wouldn't raise more revenue, and we believe that the lower rates will raise more revenue and therefore we are willing to broaden the base drastically,' " said Rivlin, who teamed up with former GOP Sen. Pete Domenici (N.M.) in 2010 to craft a grand-bargain plan on deficit reduction.

One influential Republican is already suggesting higher rates for some Americans in the context of broader reform. House Majority Leader Eric Cantor last month decried the fact that many Americans currently pay no federal income tax at all. The Virginia Republican floated the notion of making them contribute more. 

"[O]ver 45 percent of the people in this country don’t pay income taxes at all, and we have to question whether that’s fair," Cantor said in an interview with Politico. "And should we broaden the base in a way that we can lower rates for everybody who is paying taxes?"

Rivlin warned that lowering rates on middle- and upper-income taxpayers would leave a huge revenue hole that could be filled only by killing most tax breaks.

"You would have to get rid of almost all deductions, exemptions [and] exclusions," she said. "And that means the tough stuff that nobody wants to talk about: the home mortgage deduction, the exclusion of employer-paid health benefits, charitable deductions, state and local taxes, you name it."

The political complexity of tax reform has led to the growing likelihood that Congress will push off any real action until after November's election, at the earliest, and perhaps into 2013. 

Van Hollen said the "combustible cocktail" of expiring benefits and tax reform issues means Congress probably doesn't have time to pass a grand bargain in the lame duck. He was hopeful, though, that the sheer size of the problem presents an opportunity for Congress to do something significant next year. 

"If we don't seize that opportunity, I think we're in a world of hurt," he said. 

Rivlin delivered a similar warning. 

"If the Congress does not act, then we will have an economic catastrophe which will force the next Congress to do something," Rivlin said. "But we ought to have the good sense to avoid it."