The notion of updating the tax code got support from Sen. Rob Portman, R-Ohio, a former White House budget director, who said the “current system is antiquated” and “it’s obvious to me that this is urgent.”
The conference committee was formed as part of the deal to reopen the parts of the government that were shut down for 16 days during a congressional battle over the Affordable Care Act and raising the nation’s debt ceiling. The shutdown and the threat of a potential default on U.S. debt zapped consumer confidence and are widely viewed as having slowed an already underperforming economy.
In fact, as lawmakers met to discuss ways to prevent another shutdown, the Federal Reserve ended a two-day meeting Wednesday by leaving in place its controversial bond-buying program, which was designed to stimulate the economy.
“Fiscal policy is restraining economic growth,” the Fed said in a statement, suggesting that the sharp cuts in government spending are dragging down an otherwise stronger underlying rate of growth.
That may be true, but the combination of tax hikes that began in January and spending cuts that began in March led to a steep drop in the budget deficit. The Treasury Department released final budget numbers late Wednesday for the 2013 fiscal year, which showed a deficit of $680 billion. That’s $409 billion below the previous year and $293 billion less than the Obama administration had anticipated in its proposed budget for fiscal 2014. The deficit, expressed as a percentage of the total economy, fell by 2.7 percentage points to 4.1 percent.
Conference committee members must reconcile differences in competing budget plans: the $3.53 trillion budget passed by the Republican-controlled House and the $3.7 trillion budget passed by the Democratic-held Senate.
The House plan would repeal most of the health care law, significantly revamp Medicare and Medicaid, and overhaul the tax code, in part by reducing the corporate tax rate and eliminating the alternative minimum tax.