WithU

It's no surprise Democrats and Republicans in Congress are having a hard time reaching a deal to extend the national debt limit when they can't even agree on the definition of tax increases.

Rep. Cedric Richmond, D-New Orleans, argues "closing loopholes that allow some people not to pay their fare share of taxes is not what I look at as a tax increase."

But Louisiana's seven Republican congressional members are holding to a pledge they signed from the conservative Americans for Tax Reform that defines tax increases much more broadly.

The pledge commits the signers "to oppose increases in the marginal income tax rate for individuals and business and oppose any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates."

That would mean savings from eliminating tax breaks could not go for deficit reduction.

President Barack Obama wants to eliminate some tax breaks for oil and gas companies, hedge fund managers, and those who purchase or lease corporate aircraft, producing one dollar in extra tax revenue for every two dollars in budget cuts as part of deal to extend the debt limit. Without an extension by Aug. 2, Obama's Treasury Department and many private economists predict a sudden rise in interest rates that could trigger an international economic crisis.

Republicans continue to say there won't be deal if the president and Democrats insist on tax increases that they argue would harm an already struggling economy. Democrats argue that only cutting programs that primarily benefit the middle class and poor, without touching the special tax breaks reserved for America's wealthiest businesses and individuals, isn't true to the American tradition of shared sacrifice.

Rep. Jeff Landry, R-New Iberia, who got extensive news coverage when he declined a presidential invitation to join the GOP House caucus for a deficit reduction discussion, said his constituents don't want any tax increases.

"I don't think there's any appetite for that right now because people don't think we've gotten government spending under control," Landry said.

Sen. David Vitter, R-La., and Rep. Charles Boustany, R-Lafayette, support elimination of special tax breaks, but only as part of a deal to lower overall tax rates. Rep. Steve Scalise thinks "any change in tax policy should result in lower overall taxes," spokesman Stephen Bell said.

Those positions, though dominant among congressional Republicans, aren't universal.

Sen. Lindsey Graham, R-S.C., and several other GOP senators are pressing their colleagues to end the tax subsidy for ethanol, the corn-based additive to gasoline. Vitter and 32 Republicans went along, but not as part of a deficit reduction package.

Graham has said savings ought to go toward reducing the deficit. Do away "with the ethanol subsidy and a bunch of other subsidies that go to a few people, take that money back into the federal treasury and pay off the debt," Graham suggests.

Democratic members of Congress seeking re-election this fall have been working overtime to fill their coffers for tough campaign fights. In fact, many have raised more money in this election cycle than ever before, in the face of what polls show is a growing anti-incumbent mood around the country.

But Democrats can't rest easy, particularly with their control of the House and, perhaps, the Senate now on the line. Republican challengers are narrowing the money gap in November's most contested races and widening their leads in open races. Second-quarter campaign fundraising reports show that, with their primaries behind them, challengers in the hottest Senate races are benefiting from the anti-incumbent sentiments, diminishing incumbents' monetary advantages.

In many of these races, incumbents are on pace to far exceed their previous fundraising totals. The GOP's No. 1 target, Senate Majority Leader Harry Reid of Nevada, for example, has raised over $19 million in this campaign cycle, more than double what he raised in 2004. California Democratic Sen. Barbara Boxer, facing millionaire businesswoman Carly Fiorina, has also raised $19 million, exceeding her 2004 final total of $16.7 million. [See who gives the most to Reid.]

Incumbents generally try to build up big campaign war chests to deter challengers or, failing that, to be ready to pay for an aggressive campaign. "Once a race gets close, the incumbent is already on the defensive," says Michael Malbin, executive director and founder of the Campaign Finance Institute, an organization affiliated with George Washington University in Washington, D.C. "Incumbents raise more in close races than in safe ones." [See which industries give the most to Boxer.]

And Senate Democrats are on the defensive. Among the 15 Senate races considered most in play, all threatened incumbents are Democrats. Those senators seeking re-election this year had a hefty lead in fundraising at the end of the first quarter, bringing in a total of nearly $56 million—about six times the $9.6 million raised by their Republican challengers. But in the second quarter, challengers stepped up their game, rivaling Democratic incumbents, with a reported $11.4 million to the Democrats' reported $12.6 million.

Most incumbents, with their fundraising head start and access to Washington's lobbyists, remain way ahead in terms of cash on hand. Reid, for instance, reports $8.9 million compared to GOP challenger Sharron Angle's $1.8 million. The question, says Malbin, isn't whether challengers can match incumbents dollar for dollar but if they can raise enough to cross the threshold amount needed for an effective campaign. [See a gallery of cartoons about the Tea Party.]

At this point, many challengers are putting up stiffer fights than their opponents are accustomed to facing. With more than three months still to go, challengers in some of the most contested Senate races have raised more money than the 2004 challengers to those incumbents raised in their entire campaigns. Nevada's Tea Party-backed Angle, who narrowly trails Reid in the polls, has raised more than $3.5 million, over five times the total for Reid's 2004 challenger. Perhaps more significantly, $2.6 million of Angle's donations came in the second quarter alone, a surge that topped Reid's $2.4 million in second-quarter receipts. Arkansas Republican John Boozman, who polls now put ahead of Democratic Sen. Blanche Lincoln, has received $1.5 million, more than eight times the total raised by Lincoln's 2004 challenger. In California, Fiorina's $10.6 million (half loaned from her personal accounts) is nearly $4 million more than the final total for Boxer's 2004 challenger. [See where Lincoln's campaign cash comes from.]

The partisan gap in fundraising decidedly favors the GOP in the 10 closest open-seat Senate races. Republicans in these battles ended the first quarter with a major fundraising lead and widened it considerably in the second quarter. GOP candidates had $65 million in receipts at the end of March, compared to around $35 million for Democrats. As of the end of June, that $30 million GOP lead had grown to $46 million. Furthermore, Republicans in those open races raised on average $2.2 million each in the second quarter, compared to the Democratic average of around $1.2 million.