Why has the president been such an immovable force when it comes to cutting spending? “Two reasons,” Mr. Boehner says. “He’s so ideological himself, and he’s unwilling to take on the left wing of his own party.” That reluctance explains why Mr. Obama originally agreed with the Boehner proposal to raise the retirement age for Medicare, the speaker says, but then “pulled back. He admitted in meetings that he couldn’t sell things to his own members. But he didn’t even want to try.”
Why has the president been such an immovable force when it comes to cutting spending? “Two reasons,” Mr. Boehner says. “He’s so ideological himself, and he’s unwilling to take on the left wing of his own party.” That reluctance explains why Mr. Obama originally agreed with the Boehner proposal to raise the retirement age for Medicare, the speaker says, but then “pulled back. He admitted in meetings that he couldn’t sell things to his own members. But he didn’t even want to try.”
“‘This is disgusting, and everybody involved should be embarrassed,’ said Rep. Steve LaTourette (R-Ohio), marching glumly from a GOP conference meeting in the House Monday evening. ‘It’s not even small ball — it’s a pingpong ball,’ he said of the latest deal the Senate was working on.”
From NASCAR to rum, the 10 weirdest parts of the ‘fiscal cliff’ bill
…Instead, McConnell and Biden had included Capitol Hill’s version of stowaways: riders,” unrelated provisions, attached to this bill because somebody in power wanted badly for them to pass.
There were dozens of rider provisions that had nothing to do with the cliff. The renewable-energy industry got one worth $12 billion over 10 years. The owners of auto-racing tracks got one that will cost $78 million. A $1 million break will help coal-mining operations on Indian lands.
…Nor does the package do anything to address stubbornly high levels of unemployment, with 12 million Americans out of work. Instead, the deal could aggravate the problem. By allowing the payroll tax cut to expire, the deal takes money out of the hands of many Americans, sucking it out of the economy and slowing economic activity.< /p>
And finally, the deal is too modest to fundamentally tame the government’s soaring debt. The nation’s long-term finances remain in peril with federal spending projected to rise dramatically as a wave of retiring baby boomers turns to the government for help in paying for ever-more-costly health care.
Don’t be fooled – the “deal” is not a solution to the long-term debt bomb. The paltry increase in revenue does not begin to address the salient issue: SPENDING.
Posturing, looking good, playing the game. Who takes the blame for the cuts in entitlements and defense? Neither caucus wants to own the bad news, next year, down the road. Easy politics it is to tell the people we trimmed taxes for the middle class.
The home team needed a touchdown to stay in the game but settled for a field goal and an on-side kick, kicking the can of certain fiscal catastrophe down the road. The numbers are inexorable.
In fiscal 2012, non-interest federal spending totaled $3.251 trillion. Of that, $762 billion went for Social Security, $469 billion for Medicare (insurance for the 65 and over population) and $251 billion for Medicaid (insurance for the poor — two-thirds goes for long-term care for the aged and disabled). Altogether, that’s 46 percent of non-interest spending. Defense, $651 billion and declining, was 20 percent.
Social Security Ran $47.8B Deficit in FY 2012; Disabled Workers Hit New Record in December: 8,827,795
This so-called ‘cliff’ is really just the first in a series of steps. The US budget is arguably the most distorted in the Western world. Greece and Japan may have higher debts, Italy and Portugal may have worse growth prospects – but for sheer budgetary insanity, the US is probably the world leader, combining huge current deficits with vast unfunded promises to retirees, and welfare entitlement program recipients. You don’t need to take my word for this. The IMF states, ‘under our baseline scenario, a full elimination of the fiscal and generational imbalances would require all taxes to go up and all transfers to be cut immediately and permanently by 35 percent. A delay in the adjustment makes it more costly.’
The Chinese official was perplexed.
“It seems clear that taxes have to go up as a share of GDP and spending has to go down. When is that going to happen?”
We were in a seminar room at the Chinese Executive Leadership Academy in Shanghai. It’s kind of an executive MBA center where rising Communist Party leaders come for training. I was there two weeks ago speaking about the future of capitalism. Since China holds more than $1.1 trillion of U.S. debt, the group was keen to learn when they could expect the United States to get its fiscal house in order.
I gave them the answer I generally give these days when asked that same question at home. Given Republicans’ denial about the need for taxes to rise as we double the number of seniors on Social Security and Medicare, and Democrats’ denial about the need to slow the growth of these huge programs as part of an overall fix, I explained, “We probably won’t get serious about taking these steps until our Chinese creditors tell us we have to.”
Updated August 9, 2012, 8:20 a.m. ET
A Business Message to D.C.: Stop Fighting, We’ll Spend
Responsibility is missing as ‘fiscal cliff’ approaches
Can Obama Give Us Confidence?
A CLOSE vote by a split electorate has handed President Obama a second term. He steps up, revived and renewed, to preside over a divided nation that often seems to agree on only one thing: today’s children will live less well than their parents. This pervasive loss of confidence, though hard to precisely measure, is of enormous consequence. It’s what sinks civilizations.
Mr. Obama understands this, but hasn’t fashioned a coherent response — and it nearly resulted in his defeat. The problem was starkly visible to 70 million viewers in that disastrous first debate when Mitt Romney showed many voters that he was confident about the future of the country. Mr. Obama seemed at a loss, conflicted and hesitant, as though he’d been found out.
To understand what was happening behind that lectern and the challenge Mr. Obama faces in his new term, it’s useful to consider what the president told me in a February 2011 interview in the Oval Office. Mr. Obama spoke of a president’s power to instill confidence in the people as something of a coin of the realm.
Citing Franklin D. Roosevelt and John F. Kennedy, he talked about how both men, regardless of their policies, were masterly at helping Americans “believe in themselves.” Ronald Reagan, he said with a hint of envy, “was very comfortable in playing the role of president,” with his actor’s background.
The president summed up what he’d learned after an optimism-bruising two years in office: “I think where the evolution has taken place,” he said, “is understanding that leadership in this office is not a matter of you being confident. Leadership in this office is a matter of helping the American people feel confident.”
Exuding confidence while not feeling it? That straddle is particularly difficult for Mr. Obama, who’s long wrestled with a dual role as appraising narrator, with those writerly skills, and main actor in the great play of events. Reconciling that split is what held him back in the campaign and left him tongue-tied when he tried to paint an alluring vision of the future. Obama the Narrator wouldn’t let Obama the Actor sell a confidence he didn’t feel, even if it’s what people were yearning for.
Now, the re-elected president must find some way to tell us how he, and the country, can rightfully feel optimistic.
To manage it, Mr. Obama will have to evolve. How? Speak from the heart and then act. It’s dangerous for anyone, even someone who published his autobiography at 33, fashioning a personal narrative that helped propel him to the presidency, to be so fixated on the storyteller’s third-person view, which looks down from the ceiling. It slows one’s step and adds a level of calculation — of how things will play — that undermines improvisations, the lightning reactions, the twists and surprises of a more dynamic leadership. It’s the difference between writing about history and shaping it.
Focusing on legacy, which is the endgame of the story, Mr. Obama has often missed what’s happening before his eyes. The great mishap of the first term was failing to direct, as a new president with a sky-high approval rating, a sea of enthusiasts. After all, before the Tea Party arose, there was an army many times its size — Obama’s Army — that he abandoned, leaving a tattered remnant that, in 2011, supported Occupy Wall Street. By then, the Tea Party had been embraced by Republicans and become an electoral force; still, Mr. Obama kept Occupy Wall Street at arm’s length.
He now has won a new first 100 days. In hopes of harvesting a few lessons, it’s worthwhile to note what he did the first time, with all that political capital. Thinking of his legacy — the passage of health care reform — he missed opportunities presented by the twin crises of a collapsing economy and the banking meltdown to restructure the American financial system. He did not push for the creation of a sound and sustainable foundation for investing, in place of speculative trading. Then, by failing to use Obama’s Army to drive the health care debate, he ceded ground to the Tea Party and had to limp across the finish line, a year later, with only a starting point for comprehensive health care reform — really, a widened coverage mandate by government.
Maybe Mr. Obama will feel the valuable bite of those early, missed opportunities in the weeks to come, as he has to negotiate terms to avoid the looming “fiscal cliff” and the demands of Tea Party representatives. We have, indisputably, entered an age of wild participatory energies, bubbling up and driving a kind of relentless direct democracy. These voices will write the narrative for the coming days. And they’re looking for a lead actor.
In our interview on that wintry day in 2011, Mr. Obama said that the key thing a president should do “is tell a story to the American people” — something he said again to Charlie Rose this past summer. As someone who’s been writing narratives for a few decades, I can’t help but think of the standard told to generations of reporters: show, don’t tell.
Don’t tell the story. Be the story, of a president who both rode and guided history’s wave and fairly earned that coin of the realm: confidence.
After Obama’s reelection, overtures from Republicans on debt negotiations
By Zachary A. Goldfarb and Lori Montgomery, Published: November7
Less than 24 hours afterthe election, President Obama and congressional leaders moved with alacrity Wednesday to show flexibility in solving the nation’s biggest economic problems and recast Washington’s often divisive politics.
With a sluggish economy facing major threats, House Speaker John A. Boehner (R-Ohio) opened the door to increased tax revenue as part of a bipartisan deal to tame the soaring national debt. Republicans are “willing to accept new revenues,” Boehner said, suggesting he is willing to break with the orthodoxy of many influential Republicans out of a desire to “do what’s best for our country.”
Earlier Wednesday, Obama called Boehner and other top lawmakers to urge them to put aside partisan interests to bolster the economy and advance the interests of the American people. Obama favors raising taxes on the wealthy to help close the nation’s yawning budget hole. Senate Majority Leader Harry M. Reid (D-Nev.) also extended a hand, saying: “It is better to dance than to fight. . . . It is better to work together.”
The conciliatory remarks came as U.S. stock markets tumbled amid investor concerns that Washington would remain gridlocked in the face of economic threats, including the year-end “fiscal cliff” of automatic government spending cuts and sharp tax hikes.
The comments could offer a path for avoiding the fiscal cliff, which economists warn could plunge the nation into recession, and for forging a compromise to slow the nation’s unsustainable borrowing. Such a deal, in turn, could pave the way for bipartisan agreement on other hot-button issues, such as immigration reform, during Obama’s second term.
But a huge gap still remains, with the White House on Wednesday claiming an electoral mandate to pursue its tax policies and Republicans remaining opposed to any proposals for raising tax rates on the wealthy. Beyond tax policy, there are also divisions over what types of changes, if any, to make to federal entitlements such as Medicare and Social Security.
Amid fears that the brutal election campaign has failed to produce new prospects for compromise, U.S. stocks slid about 2.5 percent, to a three-month low. The Dow Jones industrial average fell 312.95 points to 12,932.73, and the Standard & Poor’s 500-stock index fell 33.86 points to 1395.53.
The upcoming debate over spending and taxes could have huge consequences, beyond whether the nation goes over the fiscal cliff. Both parties could face a stiff cost if Americans believe they are playing politics with the health of the economy. Exit polling Tuesday showed that most voters believe the economy is weak and not improving.
Also at stake are the legacies of Obama and Boehner. Both men say they are seeking a long-term budget deal that controls federal borrowing and reforms entitlements so they are sustainable as waves of baby boomers retire in the years to come. In pursuit of that goal, Obama and Boehner carried out negotiations in the summer of 2011 over a “grand bargain,” but that effort failed amid mutual recriminations.
On Wednesday, both sides set down their terms for resuming the discussions. The White House argued that the election results validated its view that the George W. Bush tax cuts for the wealthy — benefiting households earning more than $250,000 per year — must be allowed to expire as scheduled at the end of the year. Officials noted that exit polls of voters showed that nearly half believe the tax cuts should be allowed to expire, while 35 percent are opposed.
Flying back from Chicago to his home in Delaware, Vice President Biden told reporters on Air Force Two that the election produced a “clear sort of mandate about people coming much closer to our view about how to deal with tax policy.”
In the past, Obama has called for proposing about $1.5 trillion in new tax revenue over a decade, allowing rates on the wealthy to rise to 39.6 percent and eliminating a host of tax deductions and loopholes for individuals and businesses.
It is not clear whether Obama will produce another tax proposal as part of negotiations with Congress. Some Democrats expect Obama to invite lawmakers to the White House for intense negotiations, as he did last year, or perhaps to Camp David.
In his remarks Wednesday, Boehner resisted that idea.
“We need to plan for a serious process, focused on substance and not theatrics,” he said. “It won’t happen around a campfire at Camp David, in a secret room at an Air Force base, or — as much as I’d like it — over 18 holes of golf.”
Boehner said Republicans still oppose Obama’s plan to take “a larger share of what the American people earn through higher tax rates.” He said, however, that the party is open to “increased revenue . . . as the byproduct of a growing economy, energized by a simpler, cleaner, fairer tax code, with fewer loopholes, and lower rates for all.”
Republicans have long argued that reforming the tax code will generate revenue by improving the economy, an assertion that budget analysts say is difficult to evaluate. Democrats have insisted that any deal must include changes to the tax code that will provide additional revenue regardless of their effects on the economy.
On Wednesday, Boehner hinted he is also open to the latter, citing his previous willingness to support $800 billion in additional revenue over the next decade in exchange for Obama’s commitment to let the top tax rate fall below the current 35 percent.
In exchange for any agreement to raise tax revenue, however, Boehner said Democrats must not “continue to duck the matter of entitlements,” which he called “the root of the problem.”
Other top lawmakers, however, said they would resist any changes to Social Security.
“We’re not going to mess with Social Security,” Reid told reporters. “We’ll be happy to deal with entitlements, but we’re not messing with Social Security.”
Outside interest groups and advocates have already begun pressing Obama and Boehner not to compromise.
Anti-tax crusader Grover Norquist said Wednesday said the election delivered a warning against raising taxes, with voters endorsing a strong Republican majority in the House and enough Republican senators to filibuster any legislation calling for new revenue.
On the other side, Damon Silvers, policy director for the AFL-CIO, said the election “reinforced the president’s message that he is not going to extend the tax cuts on the upper-income households.”
But the leaders of the parties may be more willing to find ways of compromise.
In his victory speech Tuesday night, Obama said he is “looking forward to reaching out and working with leaders of both parties to meet the challenges we can only solve together,” naming reducing the deficit and reforming the tax code as two examples.
In his own remarks Tuesday night, Boehner was more confrontational, declaring there was “no mandate for raising tax rates.” But by Wednesday, Boehner displayed a greater willingness to engage with Obama.
“Mr. President, this is your moment. We’re ready to be led, not as Democrats or Republicans, but as Americans,” he said. “We want you to lead, not as a liberal or a conservative but as the president of the United States of America. We want you to succeed.
He then pivoted to Obama having to unify Republicans and Democrats but doing it with “power,” something Obama hasn’t done: “They [Democrats need to] go to the table and say, ‘Look, we’ll give you some stuff to get you aboard, but we’re coming with our program.’ And I think that’s something that he’s going to have to do or we’re going to be stuck with this fiscal cliff again, with the dicking around — excuse me — about debt ceilings again — all this stupid stuff that gets him involved with weakness.”
This is a a description of gridlock.
“Neither one of these presidential candidates have run a campaign that will make dealing with Congress any easier than it has been in the last three years,” said University of Texas political scientist Sean Theriault.
Winning an election is not the end, but the beginning. On the campaign trail, Mr. Obama and Republican challenger Mitt Romney offered disparate agendas on taxes, the economy, health care, job creation and foreign policy, and one of those agendas will face a withering test in the hothouse politics of Washington.
“What’s certain is there will be a Republican House and a Democratic Senate,” said Mr. Theriault. “What we’ve seen in the last two years is the Senate passes a bunch of bills, and the House doesn’t take them up. The House passes a bunch of bills, and the Senate doesn’t take them up.”
GOP’s rejection of higher tax rates an obstacle to debt deal
US politics on international trial as fiscal cliff looms
From a certain angle, the Coalition government in Britain is going to look rather good in the run-up to Christmas. It will not be of much help to David Cameron, though, because the angle is only available in America.
In Debt Talks, Obama Is Ready to Go Beyond Beltway
The cliff was not constructed intentionally, but it was no accident, either. For decades, Washington has been postponing tough decisions about taxes and spending. The result: dozens of temporary provisions that are forever expiring. This year, they all happen to come due Dec. 31.
Liberal groups mobilize for ‘fiscal cliff’ fight over Social Security, Medicare
Obama to open talks with $1.6 trillion plan to raise taxes on corporations, wealthy
U.S. President Barack Obama addresses his first news conference since his re-election.
On the looming “fiscal cliff”—the tax increases and spending cuts scheduled to take place in January absent action—Mr. Obama reiterated that he wants to see tax rates for income over $250,000 a year return to Clinton-era, higher rates. But asked if that was the only solution he would accept, the president left himself some negotiating space.
“I just want to emphasize: I am open to new ideas. If the Republican counterparts or some Democrats have a great idea for us to raise revenue, maintain progressivity, make sure the middle class isn’t getting hit, reduces our deficit, encourages growth, I’m not going to just slam the door in their face,” he said.
He said his concern is with extending the Bush-era rates for everyone, including the wealthiest, with only a “vague” promise to “sort of, kind of raise revenue” by closing unidentified loopholes or through budget estimates that rely on economic growth that isn’t guaranteed.
The president also said he wasn’t opposed to raising taxes on upper-income Americans by eliminating deductions but said it would be “very difficult” to raise the trillion dollars needed over 10 years by closing loopholes alone. “The math tends not to work.”
Barack Obama shrugs, but the debt keeps mounting
A fiscal horror is unfolding on the president’s watch, yet few seem concerned , writes Jeff Randall
By Jeff Randall
7:03AM BST 24 Sep 2012
For those of us who admire the United States and are hoping it will rediscover economic virtue and the road to recovery, last week was particularly unsettling. Both sides in the fight for the White House displayed an ignorance of fiscal issues more usually associated with contestants in a pub quiz. It was intriguing, however, that while Mitt Romney’s blunder made headlines across the globe, Barack Obama’s seemed not to disturb America’s mainstream media and went largely unreported beyond the US. The difference was that, whereas Mitt Romney impugned the integrity of millions of fellow citizens, dismissing 47 per cent of them as scroungers, the president merely insulted the nation’s collective intelligence – and almost no one seemed to care.
Romney’s observation was ridiculous: his group of alleged entitlement junkies includes pensioners, students, the disabled, many serving in the military and those on incomes too low to be taxed. For this, he was rightly pasted. By contrast, aside from the opprobrium of professional budget-watchers and diehard opponents, the man in charge of the world’s biggest economy emerged virtually unscathed from his casual confession on CBS that he did not know how much the US owes. It was a triumph of style over substance.
Asked by David Letterman on The Late Show to explain all those zeros on America’s debt clock, displayed at the Republicans’ convention, Obama replied: “I don’t remember what the number was, precisely.” Offering the president a clue, the veteran chat-show host suggested “about $10 trillion”, at which point Obama switched effortlessly to praising the budget surplus of Bill Clinton and sailed off to safety. It’s not as though America’s debt is a minor twinkle in a constellation of more serious problems. But not only was the president unable to recall the big number, he readily – perhaps deliberately – conflated the debt and the deficit.
For the record, US debt hit $5 trillion under Clinton, even though, to his credit, the 1999 federal budget was $76 billion in surplus. Not since Andrew Jackson, in 1835, has America been debt-free. A cynical man might conclude that Mr Obama knew all these details, but found dissembling a more convenient route out of trouble than discussing the fiscal horror that has unfolded on his watch.
The White House website boldly claims: “President Obama has led the way on structuring the government to live within its means.” This is not even remotely true. By any measure, the US continues to spend way above its income and, as a result, its debt position is deteriorating apace
These are the facts. George W Bush left behind a set of books that were not so much unbalanced as vertiginous. At the end of 2008, US debt was $9.9 trillion, or 69.7 per cent of GDP, and the ballooning deficit was $683 billion. Since then, all the key indicators have worsened markedly. By the end of this year, gross debt is forecast to reach $16.3 trillion (the number to which Letterman was alluding), more than 100 per cent of GDP, or a rise of two thirds under Obama. The annual deficit is close to $1.5 trillion, 10 per cent of GDP. Worse still, according to official forecasts, US debt is on course to hit $20 trillion by 2016. If this is a country living within its means, one dreads to think what would happen if Washington decided to throw a party.
Debt excusers argue that this sharp rise in obligations is good economics. The government, they say, should pump up demand with borrowed money in bad times and then claw it back after the dark clouds have passed. The trouble is, that’s not how modern liberal democracies function. What begins as maximum government intervention quickly becomes the minimum acceptable, as the electorate demands ever greater handouts of somebody else’s money. Terrified of being rejected by voters who regard temporary help as permanent rights, politicians keep spending. I spoke recently to Robert Shapiro, a former Clinton adviser and Obama supporter, and even he admitted that US health care costs are in danger of running out of control and will have to be restrained. But who has the courage?
Romney’s number two, Paul Ryan, the Wisconsin congressman, talks tough on reducing Medicare and imposing a freeze on discretionary spending. But history teaches us that a Republican in the Oval Office is no guarantee of fiscal prudence. Soundbites are so much easier to deliver than sound money. For example, Ronald Reagan’s unfunded tax cuts and a rapid escalation in defence spending saw America’s debt all but triple during his time in office. George Bush Jr went down a similar road of tax cuts and military expansion and ended up in a similar place, with national debt rising by 75 per cent to reach that $9.9 trillion figure.
A recent study by Deloitte, the accountancy firm, concludes that America’s debate on the nation’s finances is largely superficial and the debt crisis far more severe than business leaders, policy-makers and the public realise: “The US,” it says, “is on track to spend at least $4.2 trillion in interest payments over the next decade… money that could otherwise be used to make investments to boost American competitiveness.”
This makes a sustained period of exceptional growth, which has rescued the country before, far harder to achieve next time. With nearly half of publicly-held US debt in the hands of foreigners, the borrow-to-consume game is almost up.
Obama On Tax Cuts: President Rejects Republican Plan To Close Loopholes
Obama’s message to GOP is, Ante up
By Ruth Marcus, Published: November 14
As the debt ceiling loomed last year, President Obama believed that Republicans had him over a barrel. They had won the midterm election. More important, calling the GOP’s bluff seemed too big a bet: Defaulting on the debt risked plunging the global financial system into chaos.
The president’s mind-set as the “fiscal cliff” approaches is far feistier. He won reelection in a campaign that centered on higher taxes for the wealthy. Even more, in the White House view, the hazard of cliff-jumping is way less than the danger of ceiling-hitting.
So rather than extend the Bush tax cuts for higher-income taxpayers, the president is willing to risk another recession — a move he would blame, and with good reason, on Republican intransigence.
Consequently, the president has adopted a doubly tough posture as cliff negotiations commence. First, he is looking for an amount of new tax revenue far greater than House Speaker John Boehner was unable to deliver last year: $1.6 trillion over 10 years, including a $1 trillion installment to get past the cliff. That is an opening bid — an updated version of earlier proposals — but a daringly high one.
Republicans have signaled a grudging willingness to raise new revenue. What matters,Boehner said last week, is whether this comes from raising tax rates or from “a growing economy, energized by a simpler, cleaner, fairer tax code, with fewer loopholes, and lower rates for all.”
Which brings us to the second, and as it may develop, far trickier issue: tax rates. You might think this would be the easier deal, given how much we’ve heard about the allure of broadening the base and lowering rates.
But the rate standoff could be difficult to bridge. Republicans insist on starting with the current code — the Bush tax cuts made permanent — and cutting from that already low level.
The White House position is that the Bush tax cuts for wealthier households should expire, with tax reform to proceed from there. As the administration sees it, the math of lower rates from loophole-closing does not work in the real world of politics.
“I think that there are loopholes that can be closed,” the president said at Wednesday’s news conference. “But when it comes to the top 2 percent, what I’m not going to do is to extend further a tax cut for folks who don’t need it, which would cost close to a trillion dollars. And it’s very difficult to see how you make up that trillion dollars. . .just by closing loopholes and deductions. You know, the math tends not to work.”
Treasury Secretary Tim Geithner was even more emphatic about the arithmetically possible. “There is a lot of magical thinking about how much money you can raise from tax expenditures,”he said Tuesday at a conference sponsored by the Wall Street Journal. “I don’t see how you do this without higher rates.”
I’d be delighted to see the top tax rates revert to the 36 percent and 39.6 percent level they were under Bill Clinton. The Republican argument that this would stifle job creation by hurting small businesses is bogus — just a sliver of small businesses earn enough to be affected — and is refuted by the Clinton economy.
At the same time, to quote Gen. David Petraeus on Iraq, “Tell me how this ends.” If Obama insists that the Bush tax cuts expire and Republicans refuse to raise rates, where is the potential compromise to avert the plunge?
In part, the question comes down to math. Is the administration correct in its analysis that various reform proposals — cap the value of itemized deductions for the wealthy at a certain dollar amount or a percentage of income, for example — won’t generate enough revenue to cover the cost of extending the tax cuts?
If Republicans believe they have a workable tax-reform solution, they should come forward with it. Because in my conversations, the administration sounds pretty convinced that one doesn’t exist.
Obama was appropriately careful not to draw red lines about specific rates or to slam doors on compromise solutions. Yet those who took away from the news conference the lesson of the president’s conciliatory language may be overly optimistic.
The administration’s reading of the political and economic climate feels less like the debt-ceiling debacle and more like last year’s argument over extending the payroll-tax holiday. It is betting that, threatened with being tagged with raising middle-class taxes and risking a recession, Republicans will capitulate. That is one high-stakes wager.
Obama presses again on taxes
Senate works on financial cliff options
Both sides appear upbeat on opening round of ‘fiscal cliff’ talks
7:55 AM EST
The very sad fact is …. we can not avoid the “fiscal cliff”. We went over that cliff when our government started spending more than it took in. We are at a point now where you could take every dime … every penny in cash and assets that the top 400 richest people in America have and it still does not pay off the overspending of government for only one year.
This new deal will have tax increases for everyone on it. Yes, the bulk will be for individuals makein $200,000 per year but all of us are going to be made poorer from the tax increesesa. The spending cuts will be on the rate of growth only…. which means all government spending will stay the same as this year AND will be increased … but the increase will be smaller. The Obama administration will still over spend by over a trillion dollars but will crow about how much they cut spending. Congress will crow about the savings they helped bring about … but we working stiffs will still pay out the nose in taxes and in the elevated cost of everything we use (gas, electricity, food, clothing …. everything)
Until we force our government to actually CUT government spending … real cuts, not reduction in the growth of spending but real cuts … we will never ever get our country back to prosperity.
I heard someone say: “The only reason Americas economy looks so good to the rest of the world is we are the last horse still standing at the glue factory.”
We have to elect leaders that really want to save America. This election we did not. Last election we did not. The election before that we did not. The people in America who actually work, earn, pay taxes and start business have to get off our rear ends and vote more than the people who want more free stuff from the government.
Democrats have own fiscal cliff issues
By JAKE SHERMAN, CARRIE BUDOFF BROWN and JOHN BRESNAHAN | 11/19/12 7:59 PM EST
Democrats are confident that an Election Day mandate will deliver a fiscal cliff deal that raises tax rates on the rich.
Perhaps a little too confident.
Republicans may be reeling from their Nov. 6 drubbing, but Democrats have their own internal issues heading into the high-stakes talks — and they’re not insignificant.
By most accounts, President Barack Obama’s win and the party’s strong showing in Senate races gave the Democrats a leg up in the negotiations to avoid across-the-board tax hikes and draconian spending cuts set to kick in Jan. 1.
Yet getting a deal that raises tax rates for the wealthy may not be so easy for the party, and not just because of inevitable GOP resistance.
Senate Majority Leader Harry Reid (D-Nev.) will have to find 60 votes to extend just the middle-income tax rates — far from a given when a swath of the Senate’s moderate Democrats are up for reelection in 2014.
Reid and the White House will also need to navigate a hardening Democratic divide on entitlements. Progressives don’t want any deep cuts that Republicans will insist on for a deal. But a Third Way poll of 800 Obama voters set for release Tuesday found that efforts to fix Medicare and Social Security enjoy broader support than liberals suggest.
Even if Speaker John Boehner (R-Ohio) were to risk his job by backing a tax-rate increase, there are Democrats who think a $250,000 income threshold is too low. So finding 218 House members to pass a bill that would extend the lower tax brackets isn’t exactly a cakewalk. Want Boehner to raise taxes? Republicans privately say the entitlement changes would have to be unimaginably sweeping.
In a nutshell, Democrats haven’t yet coalesced around a position themselves, let alone found agreement with Republicans.
So while the election might have given Obama the political leverage to insist in allowing individual tax rates for high-income earners to snap back to nearly 40 percent, getting there is another matter.
“If you look at history, mandates are what you make of them,” said Rep. Gerry Connolly, a Virginia Democrat who represents the wealthy suburbs of Washington and backs raising taxes on families making more than $1 million annually. “Some people win election by very narrow margins and make enormous mandates out of them, and some people win by enormous margins and squander whatever mandate they’ve got.”
Top Senate Democrats are confident Reid can balance the conflicting demands of liberals and moderates. He has the confidence of his Democratic Caucus, and they don’t believe — although many Republicans do — that Obama will blink on raising tax rates for the wealthiest Americans.
“Every time a deal has sputtered or failed to come together at this point, it’s been because of the Republicans’ unwillingness to deal with revenues, not Democrats’ queasiness over making serious choices on spending cuts,” said a top Senate Democratic aide. “Certainly there are members of our caucus who are laying down markers now to try to get the best deal possible. But at the end of the day, the votes will be there for a balanced package.”
The poll from Third Way, a centrist group, attempts to speak to center-left lawmakers who may be sympathetic to the rising calls from liberals to not compromise. Unions and other progressive groups have pointed to surveys showing that Democrats don’t want lawmakers to touch entitlements, don’t view the debt and deficit as a top priority, and don’t favor Obama working with Republicans.
Actually, they want all three, concluded the survey by Peter Brodnitz of the Benenson Strategy Group, which does Obama’s polling. It was conducted Nov. 7-9 and has a margin of error of plus or minus 3.5 percent.
“There is a debate raging in this town among groups on the left about what this election means and what Obama should do on the fiscal cliff and the deficit,” said Jim Kessler, senior vice president for policy at Third Way, which provided the findings to POLITICO ahead of its Tuesday release. “A lot of the D.C.-based liberal groups seem to be representing a position that doesn’t exist in the Obama coalition.”
When asked if Democrats and Republicans needed to make “real compromises” to reach a deficit-reduction deal, 80 percent said that statement described their views extremely well, “making this the most strongly supported statement in the entire poll,” according to a Third Way memo on the survey.
Fifty-three percent of Obama voters ranked increasing taxes on the wealthy as “very important,” but fixing Social Security and Medicare was not far behind with 48 percent. Almost 80 percent said it would be better for the country if Congress and the president made changes to the programs, while 17 percent opted for no changes.
And 69 percent of the voters viewed the federal deficit as a major problem.
“The president, during the campaign, really sold the idea of a balanced deal that puts everything on the table,” Kessler said. “The people who voted for him are sold on it.”
And yet, moderate Democrats are still skittish.
Sen. Mark Pryor (D-Ark.) is a case in point. When the Senate voted for dueling GOP-Democratic proposals on extending the Bush tax cuts — keeping them in place for all tax rates and then just those for families making less than $250,000 annually — Pryor voted for both. So far, Pryor wants to see what deal is out there before he decides whether to back it.
“My view is that everything should be on the table,” Pryor told Arkansas reporters last week. “Where I am right now, I don’t want to rule anything out.”
Sen. Mary Landrieu (D-La.) told POLITICO that she wants to make sure that tax rates for those families making under $250,000 don’t rise. Yet she also supports efforts to keep estate tax rates — set to soar on Jan. 1 if no deal is reached — from increasing as well. That’s an important issue for small-business owners nationwide.
“With the economy still recovering, this is not the time to raise taxes on middle-class families or our small businesses,” Landrieu said. “The Senate should focus first on areas in which we all agree — specifically, extending the tax rates for those who earn less than $250,000 a year. Then, if we can afford to do more, given the fiscal pressures on our budget, we will make every effort while continuing to move our country down a more sustainable fiscal path.”
Sen. Mark Begich supported Reid’s floor proposal this summer to extend the Bush tax cuts for those families under the $250,000 limit. The Alaska Democrat won’t say what he’ll do now.
Pryor, Landrieu and Begich are all up for reelection in 2014.
This week, as Washington emptied out for the Thanksgiving recess, top aides across the Capitol are engaged in staff-level discussions on how to forge ahead on a fiscal cliff deal. On Monday, House Republican aides — including staff from Rep. Paul Ryan’s Budget Committee staff — huddled with White House staffers, aides said. Ryan’s staff and other committee aides are involved in the discussions.
All of this uncertainty of the ability to craft a deal — and get it through Congress — has some Democrats pondering the unthinkable: Maybe it’s better to plunge over the fiscal cliff. Rep. Peter Welch, an outspoken Vermont Democrat, said it will be a “challenge” for Obama and Boehner to “come up with a grand bargain where people generally do agree that it’s good for the middle class and good for the economy.”
The most important thing is we end up with a balanced deal,” Welch said, describing the thinking of those who are prepared to allow all tax rates to jump. “If we end up with a balanced deal on July 15, that’s much better in the long term for the middle class and the economy than if we end up with a bad deal on Dec. 15.”
Dead ideas on taxes
Lindsey Graham, Peter King break with Grover Norquist
Bipartisan ‘gangs’ in Congress ready for a deal on fiscal cliff
WASHINGTON —Armies of lawmakers from both parties are sending signals that they stand ready to back a bipartisan deficit reduction compromise, giving President Barack Obama and House Speaker John Boehner an instant base of support if they can reach an agreement.
Rank-and-file members of the Senate and House of Representatives from both parties have been meeting privately to discuss cooperation. They’re not talking specifics. Their aim is to provide, sometimes in writing, assurance that if negotiators hammer out an agreement perceived as fair, “we’ll have their back,” said Rep. Heath Shuler, D-N.C., one of the effort’s organizers.
Obama and congressional leaders are expected to resume talks shortly aimed at avoiding the “fiscal cliff.” Bush-era tax cuts are set to expire at the end of this year, and $109 billion of automatic spending cuts are due to take effect Jan. 2 unless negotiators – and Congress – agree on an alternative.
In the House, about 20 lawmakers met Nov. 16, the same day Obama, Boehner and other leaders were holding their first negotiating session. The lawmakers discussed a letter they would circulate among colleagues, saying that “to succeed, all options for mandatory and discretionary spending and revenues must be on the table.”
The letter, whose chief backers include Shuler and Reps. Mike Simpson, R-Idaho, Jim Cooper, D-Tenn., and Steven LaTourette, R-Ohio, makes no mention of the key flashpoints, such as raising income tax rates on the wealthy, a problem for many Republicans, or tinkering with Medicare and Social Security, a problem for Democrats.
That general but genial tone is the letter’s strength, said Simpson, and “with enough members signed on, we believe it sends a very powerful message.”
The letter quickly got about 30 signatures when it was circulated just before Congress left for its Thanksgiving recess Nov. 16.
A similar letter last year to the congressional “supercommittee,” which tried but failed to find $1.2 trillion worth of deficit reduction, got 102 House signatures. A Senate letter urging bipartisan cooperation was signed by 45 members. Shuler saw the signatures from members of both parties as evidence that bipartisanship was possible, particularly since the letter was circulated as members of Congress were about to face primaries and caucuses.
The new letter tries to reassure Obama and Boehner that a bipartisan deal could start with a strong base of support. Shuler showed the letter to Boehner, who offered his encouragement.
Boehner for years was regarded as a leader willing to compromise, but he has had trouble in recent years as the Republicans, who currently have a 241-193 House majority, became more dominated by diehard conservatives reluctant to deal with Democrats.
A bipartisan base of support could be important, since budget deals usually need backing from members of both parties. In the Senate, 60 votes are needed to cut off debate, and Democrats now control 53 of the 100 seats.
The summer 2011 package that avoided default and raised the nation’s debt ceiling won the backing of 95 Democrats and 174 Republicans in the House and 45 Democrats, 28 Republicans and one independent in the Senate.
“The bipartisan groups can be meaningful in getting something enacted. It would keep up the momentum,” said Robert Bixby, executive director of the Concord Coalition, a nonpartisan budget watchdog group.
Rep. Jo Ann Emerson, R-Mo., saw the bipartisan effort as having two advantages now that it didn’t have last year. “It’s not an election year,” she said, “and the public is more educated and informed on the issue.”
The bipartisan Senate effort this year has gone in a somewhat different direction from the House. Last year, the “Gang of Six” – Republicans Tom Coburn of Oklahoma, Mike Crapo of Idaho and Saxby Chambliss of Georgia, and Democrats Dick Durbin of Illinois, Mark Warner of Virginia and Kent Conrad of North Dakota – had an outline of a plan to reduce deficits and were criticized for appearing to undermine Obama-Boehner talks.
This year, the gang expanded by two – Democrat Michael Bennet of Colorado and Republican Mike Johanns of Nebraska – and has conducted intense negotiations aimed at fashioning another big package. It met last month for several days at Mount Vernon, Va., and then in Washington on Nov. 13.
The senators were unable to agree on the big issues of revenue or entitlements and were reluctant to be painted as damaging any momentum the White House talks could generate.
“We don’t want to do anything that would foul up the negotiations,” said Crapo.
The group has no more meetings planned, but like the House contingent it is hoping it can provide a bipartisan foundation for any agreement.
“The eight of us can be very instrumental in taking whatever agreement is reached between the president and leadership,” said Johanns, “and hopefully we can help try to get that passed, assuming we get a sensible plan.”
White House not yet ready to declare a ‘fiscal cliff’ impasse
Despite talk of compromise, fiscal deal elusive
November 26, 2012
By JIM KUHNHENN, Associated Press
WASHINGTON (AP) — Talk of compromise on a broad budget deal greeted returning lawmakers Monday, but agreement still seemed distant as the White House and congressional Republicans ceded little ground on a key sticking point: whether to raise revenue through higher tax rates or by limiting tax breaks and deductions.
House Speaker John Boehner, R-Ohio, pressed his case for revenue derived by reducing tax loopholes rather than raising tax rates on wealthy taxpayers, as President Barack Obama insists.
Boehner, voicing the Republican stance, said: “The American people support an approach that involves both major spending cuts and additional revenue via tax reform with lower tax rates.”
At the White House, Obama spokesman Jay Carney reiterated the president’s pledge not to sign legislation that extends current tax rates to the top 2 percent of income earners — households with incomes over $250,000. “That is a firm position,” Carney said.
Congress and Obama have until the end of the year to avoid across-the-board tax increases that would do away with rates set during the administration of President George W. Bush and restore higher tax rates in place during President Bill Clinton’s administration when the economy was robust and the federal government had a budget surplus.
White House and congressional leadership aides said Obama spoke separately with House Speaker John Boehner and Democratic Senate Majority Leader Harry Reid over the weekend. The aides would not reveal details of the conversations. Obama last met with the bipartisan congressional leadership to discuss the fiscal cliff on Nov. 16. No new meetings have been announced.
Boehner and other GOP leaders planned to meet Wednesday with members of a bipartisan coalition of former members of Congress and business leaders that has advocated cuts in spending in major health care programs as well as changes in the tax code to raise more money but also to lower rates.
Obama met with some members of that same coalition earlier this month. Top officials from the U.S. Chamber of Commerce and from the Business Roundtable met with senior White House aides on Monday.
In addition to looming tax hikes, the new year could also result in steep spending cuts in defense and domestic programs. Lawmakers and the White House fear that such a combined “fiscal cliff” would undercut the military and set back an economic recovery. Republicans say that while they are open to revenue increases, Obama also has to agree to reductions in entitlement spending, particularly in massive health care programs such as Medicare and Medicaid.
Carney on Monday said Obama was open to changes in those programs, but said Obama does not want to address Social Security as part of the fiscal cliff discussions.
“The president has long made clear that he is open to discussions about strengthening Social Security as part of a separate track,” Carney said, adding that Social Security is not contributing to the deficit.
Looking to buttress their case on taxes, White House economists warned Monday that the uncertainty of a potential hike in taxes next year for middle class taxpayers could hurt consumer confidence during the crucial holiday shopping season.
In a new report, President Barack Obama’s National Economic Council and his Council of Economic Advisers said that if lawmakers don’t halt the automatic increase in taxes for households earning less than $250,000, consumers might even curtail their shopping during the current holiday season.
“As we approach the holiday season, which accounts for close to one-fifth of industry sales, retailers can’t afford the threat of tax increases on middle-class families,” the report said.
Meanwhile, the stock market edged lower in the morning as the outcome of the budget talks remained inconclusive.
Retailers such as Macy’s, Target and Saks were down, amid fears that consumers might cut back this season. But the National Retail Federation reported earlier that 247 million shoppers visited stores and shopping websites during the long Thanksgiving weekend, up 9 percent from a year ago. They spent an average of $423, up 6 percent.
The White House report also said a sudden increase in taxes for middle-income taxpayers would reduce consumer spending in 2013 by nearly $200 billion, significantly slowing the economic recovery.
The figures echo estimates by private forecasters and by the Congressional Budget Office.
According to the report, a married couple earning between $50,000 and $85,000 with two children would see a $2,200 increase in their taxes.
Congressional Republicans, led by Boehner, have said they are open to including discussions about additional revenue but have balked at any plan that raises tax rates on the wealthy. They argue that the higher rates would also hit some small businesses, stifling economic growth.
Instead, they have advocated changes in the tax code that would eliminate tax breaks and loopholes that primarily benefit the wealthy. Several key Republican lawmakers have also said they would not be bound by a no-tax-increase pledge that they have adhered to in the past.
Tennessee GOP Sen. Bob Corker is circulating a bill claiming $4.5 trillion in deficit savings over the coming decade, including $749 billion in higher tax revenue by capping itemized deductions at $50,000, a proposal that hits wealthier taxpayers the hardest.
Corker’s plan — shared with the White House and congressional leaders — contains a roster of other budget proposals, including a less generous inflation adjustment for Social Security, and a gradual increase in Social Security eligibility to 68, and 67 for Medicare. Upper income earners also would pay more for Medicare.
But Carney said the tax revenue sought by Obama can’t be achieved by simply restricting tax deductions.
“Math tells us that you can’t get the kind of balanced approach that you need without having rates be part of the equation,” he said. “We haven’t seen a proposal that achieves that, a realistic proposal that achieves that.”
Teetering over the ‘fiscal cliff’
By Ruth Marcus, Published: November 27
Before the “fiscal cliff” comes the political roller coaster. Agreement will seem unattainable until, suddenly, it isn’t. The sickening plunge will feel endless until the car starts to climb again. But at the moment, things are not looking good.
The public talk from Republicans has been heartening, certainly. They have offered not only soothing words about compromise but also explicit acknowledgment that revenue must be on the table. The no-new-taxes pledge has lost its punch. As Joe Biden would say, this is a big deal, folks.
The problem is that the behind-the-scenes deal-making has been way more disappointing than the public posturing. After the kumbaya White House meeting Friday with congressional leaders, it took until the following Monday evening for Republicans to return to the White House with an initial offer.
It was, in a word, pathetic.
As described to me by several sources with direct knowledge, the “bargain” was that all the Bush tax cuts would be extended. Revenue would be raised through later tax reform — although no amount was specified and, as important, no trigger mechanism put in place to enforce the deal. In return for the vague promise of future revenue, the defense-spending sequester would be canceled, the age for Medicare eligibility would rise and changes would be made to the formula for calculating increases in Social Security benefits. Cuts now, revenue later. Sound familiar?
Oh, and by the way, that increase in the debt ceiling? Republicans want to address that separately, a key issue for the administration.
Even as an opening bid, this offer is dishearteningly low-ball and insincere. It does not bode well for crafting a deal by year-end. A reasonable offer would contain, at the very least, a revenue number, an enforcement mechanism and a debt-limit increase.
The White House has an important responsibility here too. In his meeting with the leaders, the president emphasized his willingness to tackle entitlement reform. He said he was braced for, and willing to take on, blowback from liberals in his party and outside groups.
In previous negotiations, the president was willing to raise the Medicare eligibility age, change the formula for calculating Social Security increases and cut Medicaid. Intervening events changed the calculus. The election strengthened his bargaining position. The Supreme Court’s health-care ruling, making the Medicaid expansion optional for states, further complicated matters. Raising the Medicare age becomes harder if lower-income seniors aren’t eligible for Medicaid. Cutting Medicaid is more difficult when the administration wants to entice states to participate.
But as the president has long recognized, entitlement reform is essential — to the politics of crafting a bargain and the substance of achieving fiscal stability. So what, exactly, does he propose? Republicans can’t take the tax plunge if Democrats aren’t willing to give on entitlements — not later but simultaneously.
Another cause for pessimism is the willingness of extremes on both sides to engage in cliff-jumping. From the right, the theory is that automatic cuts are better than no cuts at all, and that Republicans would get to blame Democrats for raising taxes and imperiling national security.
From the left, the theory is that time is on their side, that with the scheduled expiration of the Bush tax cuts comes leverage and, absent any action, trillions in new revenue. The left has a mirror-image assessment of the blame game: Republicans would pay the price for holding tax cuts for nearly everyone hostage to tax cuts for the 2 percent.All this makes for an especially dangerous game of fiscal chicken. And what begins as tactical bravado can easily edge into unintended stalemate.
A few weeks past the cliff would be extremely messy but not necessarily disastrous. People could wait to file their 2012 tax returns until the alternative minimum tax is patched. Medicare could hold off on reimbursements until rates are increased. Government agencies could postpone cuts.
The threat of delay is twofold: that the protracted resolution would further depress investors’ confidence in the capacity of the government to manage its affairs, and that the standoff could drag on. It will be difficult for a newly constituted Congress — one scarcely scheduled to be in session — to resolve this question in the first few weeks of January. A resolution by, say, the beginning of February might avert a recession but still take a big toll on growth.
For a meaningful deal to be reached, more groundwork should have been laid by now. Tick, tick, tick.
Tom Cole, GOP Congressman, Urges Republicans To Agree To Obama Tax Plan
Wall Street Journal edit board to anti-tax brigade: Time to face reality
The bare truth about the ‘fiscal cliff’
Boehner: No tax cuts for middle class without tax cuts for top two percent
McConnell ‘Burst Into Laughter’ as Geithner Outlined Obama’s Plan
6:14 PM, NOV 29, 2012 • BY FRED BARNES
Mitch McConnell, the Senate Republican leader, says he “burst into laughter” Thursday when Treasury Secretary Tim Geithner outlined the administration proposal for averting the fiscal cliff. He wasn’t trying to embarrass Geithner, McConnell says, only responding candidly to his one-sided plan, explicit on tax increases, vague on spending cuts.
Geithner’s visit to his office left McConnell discouraged about reaching a “balanced” deal on tax hikes and spending reductions designed to prevent a shock to the economy in January. “Nothing good is happening” in the negotiations, McConnell says, because of Obama’s insistence on tax rate hikes for the wealthy but unwillingness to embrace serious spending cuts.
Geithner suggested $1.6 trillion in tax increases, McConnell says, but showed “minimal or no interest” in spending cuts. When congressional leaders went to the White House three days after the election, Obama talked of possible curbs on the explosive growth of food stamps and Social Security disability payments. But since Geithner didn’t mention them, those reductions appear to be off the table now, McConnell says.
Obama is pushing to raise the tax rates on couples earning more than $250,000 and individuals earning more than $200,000. But those wouldn’t produce revenues anywhere near $1.6 trillion over a decade.
The “guess” of those involved in the negotiations, Politico reported, is that a bipartisan deal “will include a rate hike, higher taxes on carried interest and probably capital gains and dividends, and either a cap on total deductions for rich people or some form of a minimum tax rate for them.”
House speaker John Boehner said today that nothing has been agreed to. “No substantive progress has been made.”
Obama and Boehner seem to hit wall as ‘fiscal cliff’ looms
President Obama and Republicans stand their ground on proposed tax hikes for the wealthy as ‘fiscal cliff’ talks appear to stall.
Obama makes fresh demands on ‘fiscal cliff’
HATFIELD, Pa. The key players in a looming budget crisis talked to news cameras Friday rather than each other, each accusing the other side of blocking progress.
HATFIELD, Pa. — President Obama traveled to this Philadelphia suburb Friday to deliver the same sharp message he gave directly to House Speaker John A. Boehner earlier in the week: Get on board with the White House’s tax proposal, or get out of the way.
The relationship between the two most powerful men in Washington, who together will effectively decide the fate of negotiations over the feared “fiscal cliff,”has broken down badly since the heady days 17 months ago when they shared a golf course.
Obama’s 14-minute speech at a toy manufacturing company here amounted to a verbal poke in the eye, warning that taxes will go up without a plan — and likening Boehner and other Republicans to one of the most reviled figures of the holiday season.
“That’s sort of like the lump of coal you get for Christmas,” Obama said at K’nex, the maker of Tinkertoys. “That’s a Scrooge Christmas.”
Boehner (R-Ohio) fired back less than an hour later on Capitol Hill, saying House Republicans had reached a “stalemate” with the White House. “It’s not a serious proposal,” he said of Obama’s plan.
Obama Warns of Prolonged Talks as Republicans Rebuff Plan
President Barack Obama and U.S. House Speaker John Boehner each demanded the other compromise as they ended a week of public jockeying for advantage in fiscal cliff negotiations with a standoff over taxes.
Sen. Hatch: Obama fiscal proposal ‘classic bait and switch’
By Molly K. Hooper – 12/01/12 09:16 AM ET
The top-ranking Republican on the Senate Finance Committee accused President Obama of pulling a “bait and switch” this week with the administration’s proposed deal to avert the so-called “fiscal cliff.”
“What [Obama] proposed this week was a classic bait and switch on the American people—a tax increase double the size of what he campaigned on, billions of dollars in new stimulus spending and an unlimited, unchecked authority to borrow from the Chinese,”Sen. Orrin Hatch (R-Utah) said in Saturday’s weekly GOP address.
“Maybe I missed it but I don’t recall him asking for any of that during the presidential campaign. These ideas are so radical that they have already been rejected on a bipartisan basis by Congress.”
On Thursday, Treasury Secretary Tim Geithner was dispatched to Capitol Hill to share Obama’s plan with House Speaker John Boehner (R-Ohio) and Senate GOP Leader Mitch McConnell (R-Ky.) The deal included $1.6 trillion in tax hikes, $50 billion in economic stimulus spending and $400 billion in spending cuts. Republicans have demanded more severe spending cuts – including entitlement reform – to begin a discussion on raising taxes.
If Congress fails to act within the next 30 days, a bevy of tax increases and severe spending cuts are set to go into effect, potentially unleashing a devastating blow to the precarious U.S. economy.
“If we don’t act by the end of the year, 28 million more families and individuals will be forced to pay the Alternative Minimum Tax, 21 times as many farmers and ranchers will be hit with the death tax, and the average middle-class family would see their taxes go up by at least $2,000,” Hatch said.
On Friday, Boehner held a news conference decrying the state of negotiations calling them a “stalemate.”
Hatch said that the country needs leadership and compromise to get back on track.
“Americans want Washington to work together to get our country back on track, and to ensure we leave it in a better place than we found it for future generations. This is our chance. Let’s make the hard decisions. Let’s make those decisions we know must be made.”
If Deal Is Not Reached, the Impact Won’t Be Instant
If Washington fails to reach a tax and spending deal by Jan. 1, paychecks will shrink as rates rise. But defense contractors will keep working. Parks and monuments will remain open. Financial markets will either slump or not.
America’s fiscal condition will be altered without a deal between President Obama and the Republicans in Congress. But not radically so, and in many cases not immediately.
This budget stalemate is unlike the many previous ones that threatened to cause a government shutdown. Agencies are not facing the immediate loss of authority to spend money. The danger of defaulting on the nation’s financial obligations is not at great as it was during the 2011 impasse over raising the nation’s borrowing limit. And some of the tax and spending changes would not be felt for months.
The president and his Democratic allies are still deeply nervous about life on the other side of the fiscal deadline, and they continue to say they are eager to avoid that possibility. But Mr. Obama’s re-election victory and the few immediate implications from a breakdown in negotiations have emboldened them.
Democrats are betting that if Washington wakes up without a tax and spending deal on New Year’s Day, the country will heap blame on Congressional Republicans. In recent polls, more people said that it would be the fault of Republicans if a deal could not be reached.
Democrats in the House will seek to make that point again this week by trying to force Republicans to vote on a bill to extend tax cuts for the middle class but not the wealthy.
“Tax cuts for the rich, which do not create jobs, just increase the deficit, heaping mountains of debt onto future generations,” Nancy Pelosi, the Democratic leader in the House, told reporters on Friday. She added that the economy would benefit greatly if “we do not go over the cliff.”
But many Democrats also believe that failing to reach a deal for a brief period early next year would provide new leverage for Mr. Obama and a quick capitulation from Speaker John A. Boehner and his Republican colleagues on a package of tax cuts for the middle class and increased rates for the nation’s wealthiest citizens.
Mr. Obama pressed his case confidently on Friday at a toy manufacturer in Pennsylvania. He warned that the Republicans’ refusal to reach an acceptable deal by the end of the year would be “sort of like the lump of coal you get for Christmas.”
And in a message to the millions of people subscribed to the White House e-mail list, David Plouffe, a senior adviser to Mr. Obama, urged supporters to keep the pressure on lawmakers and warned of the dire consequences if the negotiators were unable to find common ground.
“Unless Congress acts, 114 million middle-class American families are staring down a tax increase starting January 1,” Mr. Plouffe wrote in the e-mail.
But the lack of immediate consequences could also serve to empower Republicans to hold firm for days or weeks against a deal with the president, believing that the public would not exert the kind of political pressure that Democrats expect.
Without concrete ramifications, Mr. Obama’s recent efforts to keep his campaign supporters energized about the tax and spending debate could fizzle.
Republicans could also conclude that people are more likely to blame Mr. Obama and his party for tax increases because it is Democrats who have been pushing for them.
In Washington at the end of last week, Republicans offered a defiant tone, scoffing at the president’s proposal for $1.6 trillion in tax increases on the wealthy combined with new stimulus spending and other Democratic priorities. On Saturday, Senator Orrin G. Hatch of Utah denounced what he called “radical” and “unserious” proposals by the president that he said represented an utter lack of leadership.
“Some on the other side of the aisle are advocating a disastrous ‘Thelma & Louise’ strategy,” Mr. Hatch said in the weekly Republican radio address, referring to the movie heroines who drove their car off a cliff.
The ability of Republicans to maintain their position may depend on what actually happens if no deal is reached by the end of the year. Government officials, tax specialists and business representatives said they did not expect major implications right away.
Pentagon officials and military contractors said that billions of dollars in automatic spending reductions would be delayed for weeks, if not months, as they figured out where they needed to cut and by how much. Defense Department hiring would be stopped temporarily, officials said. But no one would be fired immediately, and no programs would end.
“While a hiring freeze is likely to be implemented quickly, it will take time to implement further budget cuts and the number and types of personnel to be furloughed,” said Lt. Col. Elizabeth Robbins, a spokeswoman for the Defense Department.
Large companies that do business with the Pentagon are likely to wait for guidance before cutting back weapons programs or laying off civilian workers.
Parks, libraries and monuments would remain open in the new year, unaffected by the lack of a deal in the way that a budget stalemate threatens immediate closure. Government employees would show up for work whether or not they had been deemed “essential” to the operation of their agency.
Many workers would see their first paychecks in January shrink as employers adjust for higher payroll taxes. And the Internal Revenue Service would race to reprogram computers, possibly forcing an eventual delay in refunds. But tax preparation for 2012 would march forward as usual toward Jan. 22, when the I.R.S. is expected to begin processing electronic returns.
“There is this period in which Congress can continue to arm wrestle and wait for a settlement on this without affecting many people,” said Bob Meighan, a vice president of TurboTax, which makes tax preparation software.
At the I.R.S., the biggest concern is about the alternative minimum tax, which would eventually force higher tax payments from about 60 million Americans unless the president and Republicans agree to adjustments like the ones that have been made regularly since 1969.
“There would be serious repercussions for taxpayers,” Steven T. Miller, the acting commissioner of the I.R.S., wrote to lawmakers in November.
Among the murky uncertainties: what happens in the financial markets if a deal is not reached.
Some market watchers predict a huge sell-off of assets that would drain wealth from retirement plans and undermine consumer confidence. The Dow Jones industrial average has dropped almost 600 points since September, in part because of uncertainty about the presidential election and the ability of politicians to reach a deal on taxes and spending this year.
But the stock market has rebounded somewhat in the last two weeks. On Friday, investors shrugged off heightened partisan bickering in Washington a day earlier.
Your taxes jump if U.S. falls off ‘cliff’
40,000 Ohio jobs in danger if deal can’t be reached
By Jessica Wehrman
The Columbus Dispatch Sunday December 2, 2012 6:23 AM
WASHINGTON — Call it this decade’s Y2K — except this time, there truly is reason to worry.Unless President Barack Obama and Congress agree on a sweeping budget compromise by the time the ball drops in Times Square on New Year’s Eve, it could mark the start of: • An increase of up to 5 percentage points in your federal income tax.
Two percentage points more withheld from your paycheck for Social Security taxes.
An estimated 40,000 jobs lost in the state because of a reduction in federal spending.
And that’s just the beginning.
Higher taxes combined with dramatic cuts in spending — known as the “fiscal cliff” — could be disastrous to an economy sputtering through recovery.Even as Democrats and Republicans remain at a standoff on how to resolve the issue, Ohioans are preparing. According to a study by the Tax Foundation, an Ohio family of four earning $72,764 would see an average income-tax increase of $3,437 — a 4.7 percent chunk of their income.
The expiration of a vast list of tax cuts will affect virtually every American who pays taxes. The IRS will shift withholding to accommodate the new tax rates, meaning if you withhold taxes from your paycheck, then you will see less coming in. You’ll also see less because the expiration of the payroll tax holiday will mean more money withheld from your paycheck.
If you use the child tax credit, you’ll be paying more: The credit will fall from $1,000 to $500 and will no longer be refundable. The so-called marriage tax penalty will return. And about 20 million more Americans might face the Alternative Minimum Tax, originally designed to tax the very wealthy who weren’t paying taxes.
Then there are the federal funding cuts. Because Congress could not agree last year on $1.2 trillion in budget cuts over 10 years, it has instituted sweeping, across-the-board cuts to discretionary programs.< /p>
Next year’s cuts will be $109 billion — divided equally between defense and nondefense programs. While some programs, such as Social Security and Pell Grants, are exempt, cuts would impact almost everything else, including the federal prison system, federal flood-control efforts, the National Institutes of Health and Immigration and Customs Enforcement.
Defense installations such as Wright-Patterson Air Force Base and their contractors — which have been a bright spot in Ohio’s economy — would face a particular hit.
“I think the thing that frustrates me the most is this is a point of time in our country that we need to be as productive as we can possibly be,” said Deborah Gross, executive director of DaytonDefense, an organization representing Dayton-area government contractors. “And the inadequacy of the government to get these decisions made in a timely manner affects the productivity of working people out here. That’s just shameful. There is nothing good about this for America. Absolutely nothing.”< /p>
Gross compares the budget-cutting process to cutting a family’s budget across the board.< /p>
“You’re still going out to dinner, but you’re also cutting 20 percent out of the electricity, the house payment, the car payment — the things you really need that are essential,” she said. “You don’t have enough money in the budget to pay the house budget because you’ve elected to cut across the board, and you still go out to dinner.”
The cuts have yet to happen, and it’s unclear how the situation will play out. But the uncertainty is a killer. People “literally don’t know what’s going to happen to them in another three weeks,” Gross said.
Steve Kelly, vice president for Columbus-based Battelle’s national-security division, said the uncertainty has created a chilling effect for businesses.
“It’s just, ‘Cut everything by X percent,’ ” he said. “It doesn’t really matter what it is.”
He continued: “The government machine is not geared to make all sorts of accounting changes midway through the year, so things stop while they recalibrate. … It just greatly slows down the normal course of business.”
Battelle does about $800 million to $900 million worth of business with the federal government annually, with another $5 billion to operate the federal labs.
On odd-number days, Kelly said, he thinks “the adults will come to the fore and work out a compromise.” On even-number days, he said, he is afraid “the Thelma and Louise crowd” will drive the country over the fiscal cliff. If that happens, he said, “it gets pretty ugly, pretty fast.”
While most in Congress seem to agree that an across-the-board spending cut would be disastrous, the tax issue is among the more contentious subjects in the debate over the fiscal cliff — and it has the potential to affect virtually every taxpayer.
For starters, at the end of this year, the 2001 and 2003 investment and income-tax cuts expire: • If your family makes $17,900 or less a year, your income-tax rate will jump from 10 percent to 15 percent and more money will be withheld from your weekly paycheck. • The 25 percent bracket would rise to 28 percent. • The 28 percent bracket would rise to 31 percent. • The 33 percent bracket would rise to 36 percent. • The top bracket would rise from 35 percent to 39.6 percent.
The Social Security payroll tax will jump from 4.2 percent to 6.2 percent, which means less money in your take-home pay.
Additionally, the patch on the Alternative Minimum Tax is set to expire, meaning as many as 20 million more people could get hit by that tax next year. That tax was originally written to affect wealthy Americans but was never indexed to inflation, so it could particularly hit the middle class if it isn’t fixed.
In addition, a handful of tax provisions affiliated with Obama’s health-care bill would go into effect next year, including a payroll-tax increase for high-income earners and new limitations on Flexible Spending Accounts.
The Tax Foundation, which has studied the impact of the tax increases, estimates that in all, taxpayers will pay $514 billion more next year if something isn’t done.
Some have argued that it might be good to just let the nation go over the cliff. It would, after all, solve many of the nation’s deficit problems. But most economists and many lawmakers say by doing so, the nation risks a recession.
Sen. Rob Portman, R-Ohio, said the economy is already weak, and he’s seeing signs of a chilling effect even though Congress has yet to miss its deadline. “I’m very focused on trying to figure out how to avoid going over the cliff,” he said.
Will McBride of the Tax Foundation said the return to Clinton-era tax rates — combined with new taxes from Obama’s health-care law — could put an onerous tax burden on the public.
But not everyone is convinced the tax rates would represent a lethal hit.
Steve Buser, an Ohio State University professor emeritus of finance, said that if Congress lets the tax cuts expire, rates would go back to Clinton-era tax rates — “and under the Clinton administration, the economy grew very rapidly.”
More worrisome, he said, is whether Congress can actually govern, or whether it’ll be stuck fighting for the next four years.
“It’s much scarier that Congress can’t work together,” Buser said. “The fact that there is or is not going to be an agreement is going to be important. What we end up with, I think, is less important.”
He said both sides will have to give to find a solution.
“No matter what we do or don’t do, it’s going to be rough,” he said.
As the White House and Republican leaders enter the final month of negotiations to avoid a year-end “fiscal cliff,” both sides struck an uncompromising tone Sunday, as warnings mounted that they will be unable to forge an agreement to stop an automatic series of deep spending cuts and large tax hikes that could push the economy into recession.
Following private meetings last week, the senior negotiators for the White House and the Republicans took to the airwaves Sunday to accuse the other side of intransigence and to demand that the opposition concede on the central question of how much to raise taxes on the wealthy.
“Right now, I would say we’re nowhere, period. We’re nowhere,” House Speaker John A. Boehner (R-Ohio) said on “Fox News Sunday.” Boehner added that the Republicans have offered a way to break the stalemate — by compromising on an overhaul of the tax code that would limit deductions that disproportionately benefit the rich.
But Treasury Secretary Timothy F. Geithner rejected that proposal Sunday, insisting that the wealthy pay higher tax rates and that Republicans come forward with a plan that meets that requirement. “There’s no path to an agreement that does not involve Republicans acknowledging that rates have to go up on the wealthiest Americans,” he said on NBC’s “Meet the Press.”
While it had always seemed likely that the two sides would reach a stalemate before finally coming to agreement — as has been the pattern over the past two years — lawmakers and congressional aides tracking the back-and-forth said there’s a growing probability that no deal will be reached in time to avoid the fiscal cliff.
Updated December 3, 2012, 4:03 a.m. ET
Fiscal Cliff Talks at Stalemate
Both Sides Offer Compromises but Are Still Far From Inking a Deal by Year-End
House GOP makes a $2.2 trillion debt counteroffer to Obama on cliff
By Russell Berman – 12/03/12 08:17 PM ET
House Republican leaders on Monday made a counteroffer to President Obama in the “fiscal cliff” negotiations that would cut $2.2 trillion from the deficit with a combination of spending cuts, entitlement reforms and $800 billion in new tax revenue.
Republican officials said their 10-year plan contained more deficit reduction than the offer the White House presented last week while standing firm against Obama’s demand to increase tax rates on the wealthy.
The White House quickly panned the offer, saying it contained “nothing new” and did not “meet the test of balance.”
The Republican offer came in the form of a three-page letter to the White House signed by House Speaker John Boehner (R-Ohio), Majority Leader Eric Cantor (R-Va.) and four other senior Republicans, including Rep. Paul Ryan (Wis.), the party’s just-defeated vice presidential nominee.
The offer marks the second significant movement in the fiscal talks in the last week, after Treasury Secretary Timothy Geithner outlined an Obama proposal that called for $1.6 trillion in tax increases, $400 billion in entitlement program savings and $50 billion in new stimulus spending, among other provisions. The president is also seeking to permanently limit the ability of Congress to block an increase in the debt ceiling.
“What we are putting forward is a credible plan that deserves serious consideration by the White House,” Boehner told reporters in a brief appearance at the Capitol. He characterized it as a response to what he called the “la-la land” offer that Geithner presented to congressional leaders last wee
The Speaker last spoke to Obama on Wednesday and indicated he did not plan to personally present his offer to the president. “I think the letter’s appropriate,” he said.
Boehner was scheduled to attend the White House holiday party on Monday evening. Asked if he might speak to Obama there, the Speaker smiled and replied, “I might run into him.”
Republicans said their offer was based on a proposal outlined by Erskine Bowles, the former chief of staff to President Clinton, in testimony last year before the congressional “supercommittee” on deficit reduction. That offer is distinct from the widely cited Simpson-Bowles deficit plan released two years ago.
Bowles rejected the comparison, and said that while he was “flattered” by the citation, the GOP letter “does not represent the Simpson-Bowles plan, nor is it the Bowles plan.”
The Republican counteroffer does not include an increase in the debt ceiling, but a GOP aide said the party remained open to negotiating additional borrowing authority for the Treasury before the end of the year.
GOP officials said their offer amounted to $4.6 trillion in deficit reduction when compared directly to the White House offer, because in its own $4 trillion deficit plan, the White House counts legislation that has already been enacted, savings from future interest on the debt, and savings from the end of the wars in Iraq and Afghanistan. Republicans do not count those as new savings, so their offer amounts to $2.2 trillion in future deficit reduction.
The $800 billion in new tax revenue matches what Boehner offered Obama during their 2011 negotiations for a grand bargain. Republicans are holding the line against tax rate increases, and believe the $800 billion in revenue can be raised from the wealthy through other means, which their offer does not specify.
The GOP also did not specify what kind of revenue the party would accept as an immediate down payment in 2013, and aides said their goal remained a comprehensive tax overhaul that would generate $800 billion in new revenue while lowering overall rates.
Democrats rejected that approach.
“The Republican letter released today does not meet the test of balance,” White House communications director Dan Pfeiffer said in a statement. “In fact, it actually promises to lower rates for the wealthy and sticks the middle class with the bill. Their plan includes nothing new and provides no details on which deductions they would eliminate, which loopholes they will close or which Medicare savings they would achieve.
“Until the Republicans in Congress are willing to get serious about asking the wealthiest to pay slightly higher tax rates, we won’t be able to achieve a significant, balanced approach to reduce our deficit our nation needs,” Pfeiffer added.
Senate Majority Leader Harry Reid (D-Nev.) and House Minority Leader Nancy Pelosi (D-Calif.) also criticized the GOP proposal, saying it would force the middle class to pay higher taxes.
“Republicans have made an offer, but now it is time for them to get serious about forging a balanced approach,” Reid said.
Pelosi said Democrats would move ahead with a discharge petition on Tuesday to try and force Republicans to bring up a Senate-passed bill extending current tax rates on annual family income up to $250,000.
A spokesman for Boehner responded by challenging Democrats to come up with something better.
“If the president is rejecting this middle-ground offer, it is now his obligation to present a plan that can pass both chambers of Congress,” said Boehner spokesman Brendan Buck.
Senior Republican aides argued that their offer represented a “fair middle ground” because unlike the White House, they did not use their budget proposal as their opening bid. The House budget contains no revenue increases and included far-reaching changes to Medicare and Medicaid that Democrats consider non-starters.
“We’re not doing that today, because we don’t have time,” one top GOP aide said, speaking on condition of anonymity during a background briefing.
The House counteroffer drew immediate praise from Senate Republican Leader Mitch McConnell (Ky.), who issued a statement calling it a “good-faith effort to find common ground.”
The letter sent by the full House leadership, along with Ryan, indicates Boehner has the full support of key players in his conference.
“This is by no means an adequate long-term solution, as resolving our long-term fiscal crisis will require fundamental entitlement reform,” the leaders wrote in their letter to Obama. “Indeed, the Bowles plan is exactly the kind of imperfect but fair middle ground that allows us to avert the fiscal cliff without hurting our economy and destroying jobs. We believe it warrants immediate consideration.
“If you are agreeable to this framework,” they continue, “we are ready and eager to begin discussions about how to structure these reforms so that the American people can be confident that these targets will be reached.”
In addition to the $800 billion in revenue, the Republicans are proposing $600 billion in health savings, $300 billion in savings from other mandatory spending and $300 billion in further cuts to discretionary spending.
The GOP is also proposing to raise $200 billion through changes to the way inflation is calculated for the purpose of determining benefits and tax policy across a range of programs, including Social Security.
The offer is consistent with a framework that leaders in both parties have agreed to: averting the looming tax hikes and spending cuts with a “down payment” of deficit reduction while settling on targets for tax and entitlement reform in 2013.
The Republican proposal does not specify what would be immediately enacted as a down payment, and aides said it could replace the $1.2 trillion in automatic spending cuts set to begin taking effect next year, although it does not explicitly eliminate them.
Updated at 8:17 p.m.
With only 28 days left until a perfect storm of tax increases and spending cuts hits the economy, why is the President spending his afternoon on Twitter? Any deal to avert the fiscal cliff will be an inside job. If it happens, it will have to come down to a deal made between Obama and House Speaker John Boehner. But the two of them aren’t meeting regularly. And so the president has taken to playing an outside game. Last Friday, he took a campaign-style trip to Pennsylvania to discuss taxes. On Sunday, he dispatched Treasury Secretary Tim Geithner to the talk shows to speak aggressively. The White House is trying to push the country into pressuring Republicans to compromise—or to soften public opinion in the event that we do, in fact, go over the cliff.
The Twitter press conference was essentially partisan warfare by other means. Before it started, House Majority leader Eric Cantor played his usual role of being a non-constructive jerk: “Mr. President, time to get serious. Let’s protect small businesses and families from a harmful increase in tax rates and cut spending,” @GOPLeader. Note that Cantor’s tweet was not, in fact, a question. It was a statement. And it highlighted the general Republican modus operandi throughout these budget talks: don’t show any sign of actual engagement, just grandstand and repeat talking points.
In Talks on a Budget Deal, Boehner and Obama Stand Alone
The cliff negotiations between President Obama and House Speaker John Boehner have taken on the aspect of a game of chicken. Boehner needs spending cuts; Obama needs revenue. America needs both.
Who will blink first before we plummet off the edge into automatic tax increases for all, government spending cuts and a probable recession?
After so many years of partisan intransigence, it’s easy enough to assume that all parties are equally guilty, but this time Obama is driving the herd. Elections have consequences, as the president keeps reminding us. By this, he apparently means that he will have things his way, the rest of the country be damned.
Boehner’s good-faith attempts at a deal, offering new revenue through reforms as well as leaning toward some limited tax-rate increases, have been met with mockery. Obama’s laughable idea of a balanced deal includes taking control of the debt ceiling and doubling revenue demands, while offering little in the way of spending cuts.
Fiscal Cliff Poll: What Do Americans Want In A Deal?
Fiscal cliff’ talks show no progress; hope dims for a deal before Christmas
Democrats losing their ‘balance’ on entitlement reform
By Editorial Board, Published: December 13
DEMOCRATS LIKE TO say that they are for “balance” in the fiscal debate and that Republicans favor spending cuts. That argument is increasingly difficult to credit.
Since the election last month, a few modest proposals have been floated to slow the growth in entitlement spending. None of these would fix the problem, but they would at least acknowledge that a problem exists. One by one, the ostensible advocates of balance have shot them down, portraying each in turn as a mortal threat to the poor or the aged.
Nudging the Medicare eligibility age from 65 to 67, which President Obama supported last year? Unconscionable. Changing the way cost-of-living adjustments are calculated, which Mr. Obama also supported? Brutally unfair to veterans and seniors. Reform of Medicaid provider taxes, which liberal Senate Majority Whip Richard J. Durbin (D-Ill.) only days ago described as a “ charade” used by states to jack up funding from Washington? Unthinkable, the White House now says:In fact, with the Supreme Court having struck down a facet of Mr. Obama’s Affordable Care Act involving Medicaid, nothing in that program can be touched. And, while they’re at it, put Social Security off the table, too. We’re asked to accept the mythology that, though the pension and disability program is facing ever-widening shortfalls, it isn’t contributing to the overall deficit.
We’ve said time and again that revenue must rise. The latest Republican position on taxes, while an improvement, remains inadequate. GOP leaders now admit the need for more revenue, but they refuse to say how they would obtain it. Given the political difficulty of limiting any deduction or loophole, their supposed commitment to tax reform isn’t worth much without specifics.
But the underlying fiscal problem is that federal expenditures are slated to rise faster than economic growth because of rising health-care costs and an aging population. The long-term drivers are Medicare, Medicaid, Social Security and subsidies for the health-care exchanges established by the Affordable Care Act.
That’s not a partisan statement. It is reality. The nonpartisan Congressional Budget Office estimates that, without reform, spending on Social Security and federal health-care programs will rise from 10 percent of gross domestic product today to 16 percent 25 years from now. If that sounds manageable, consider this: Over the past 40 years, the entire federal budget has averaged 18.5 percent of GDP.
The cartoon version of the fight is that Democrats want to soak the rich, and Republicans want to slash the poor. But here’s the problem: There’s no way for either of them to solve this problem without affecting the middle class, which in the end will have to pay more and accept something less than what has been promised. Neither party likes either side of that equation.
There are better and worse ways to bend the entitlement curve. Raise the Medicare age, but shield the neediest seniors. If you think Republicans are proposing the wrong way to adjust the cost-of-living index, finance expert Robert C. Pozen has proposed a progressive alternative.
But there’s no way to fix America’s problem without doing something on entitlements. If the Democrats — and Mr. Obama, in particular — don’t get more seriously into that discussion, they have no standing to complain about the Republicans’ lack of balance.
‘SHUT UP!’ NEIL CAVUTO AND DEM REP. BATTLE IT OUT IN MUST SEE INTERVIEW
While discussing the looming “fiscal cliff” on Thursday, Fox News’ Neil Cavuto and Rep. Eddie Bernice Johnson (D-Texas) had a rather unpleasant exchange of words:
Cavuto repeatedly pressed Rep. Johnson for specifics on what Democrats would be willing to cut as part of a budget agreement. For her part, the Texas congresswoman insisted on focusing on “revenue generation.”
“No, you told me things you’d do to raise taxes. That’s what you told me. Credits, allowances, that sort of stuff. That’s what you told me,” Cavuto said.
“You’ve got to talk about revenue generation,” the congresswoman replied.
“I know that, but it’s 100 percent of what you’re talking about, congresswoman,” said Cavuto.
“It is not 100 percent of what I’m talking about. If you’d shut up for just a second, I would try,” she responded.
Cavuto shot back: “You got to tell me one thing you’d cut. I beg you congresswoman, one thing you would say, I would cut this. What would it be?”
Rep. Johnson thought for a moment and responded: “You.”
“You don’t know, do you?” asked Cavuto.
“Well, yes I do know, but I have to have time to explain it. I can’t tell you I’m going to walk in and cut this and cut that. First of all, it has to have be some type of dialogue. We have not had that,” she said.
Shortly after that, and a little after Rep. Johnson made a crack about Fox News “consulting with the Republicans,” Cavuto decided to end the interview and cut to a commercial break. When he came back, he issued an apology.
Herein lies the danger in the fiscal negotiations and the reason a deal may have to wait until after Jan. 1. In negotiating with Boehner, the White House is up against what might be called an irrational-actor problem.
Boehner himself surely wants a deal. But while he is the titular leader of House Republicans, he is at the mercy of backbenchers who have a fanatical opposition to tax increases.
A top negotiator for the administration said privately week that he now expects the government to go over the fiscal cliff, because the ensuing panic may be the only thing that will allow Boehner to gain the leverage he needs in his “Lord of the Flies” caucus. But that notion — risking recession to increase Boehner’s bargaining position within his own caucus — is the riskiest of gambles.
Some tax hikes, spending cuts now seen as inevitable in January
White House won’t accept new tax offer from Republican leader
By Thomas Ferraro and Steve Holland
WASHINGTON | Sat Dec 15, 2012 11:02pm EST
President Barack Obama is not ready to accept a new offer from the Republican leader of the U.S. the House of Representatives to raise taxes on top earners in exchange for major cuts in entitlement programs, a source said late Saturday.
The shape and details of Boehner’s offer were uncertain Saturday night, as was the exact reason the president was prepared to reject it.
The source said Obama sees the offer made on Friday by U.S. House Speaker John Boehner as a sign of progress, but simply believes it is not enough and there is much more to be worked out before Obama can reciprocate.
Tax rates and entitlements are the two most difficult issues in the so-far unproductive negotiations to avert the “fiscal cliff” of steep tax hikes and spending cuts set for the new year unless Congress and the president reach a deal to avoid them.
The Boehner offer is the first significant sign of a shift in the Republican insistence that low tax rates set to expire on December 31 be extended for all taxpayers, and comes at some risk to the speaker.
Conservatives, particularly Tea Party-supported Republicans, see opposition to tax increases for anyone as an abandonment of party principles, and of the Republican base.
Obama wants high earners – those earning roughly $250,000 a year or more – to pay higher taxes in order to put the burden of deficit reduction on those he says can best afford it.
Republicans have privately spoken of coming back at Obama with a threshold of $1 million. Obama has previously called that unacceptable because it would not raise enough money on its own to cut the deficit significantly or provide enough money to avert across-the-board spending cuts.
On entitlements, the president faces pressures of his own from Democrats, who see protecting Medicare, the government health insurance program for seniors, as a bedrock principle.
A major bloc of congressional Democrats has already signaled they will not accept major cutbacks in Medicare as part of any deal.
It was unclear on Saturday if the president had communicated his response to Boehner.
NOT A COMPLETE SURPRISE
Boehner’s shift did not come as a complete surprise. Recent polls have suggested little public support for his position and he has been getting pressure from Senate Republicans to be more flexible.
The massacre in Connecticut silenced fiscal cliff talk in public on Saturday as the both sides got ready for a final scramble, with sessions of the House now scheduled just days before Christmas.
Obama canceled a trip he had planned to make next Wednesday to Portland, Maine, to press his case for tax hikes for the wealthy. He is heading on Sunday to Newtown, the site of Friday’s school shootings, in which a gunman killed 20 children and six adults before taking his own life. The gunman also killed his mother, according to police.
Boehner of Ohio canceled the standard Republican radio response on Saturday to Obama “so that President Obama can speak for the entire nation at this time of mourning,” he said in a statement issued late on Friday.
The moratorium on cliff pronouncements masked a growing recognition the two sides could remain deadlocked at the end of the year on the key sticking points – taxes and entitlements.
Senate Republicans prodded their counterparts in the House to beat a retreat on tax hikes, in a fashion that would allow Obama’s proposal to pass the Republican-controlled House while allowing Republicans to cast a face-saving vote against it.
Republicans could then shift the debate onto territory they consider more favorable to them, cutting government spending to reduce the deficit.
“Just about everyone is throwing stuff on the wall to see if anything sticks,” one Republican aide said in reference to various proposals being discussed on how to proceed.
Alluding to public opinion polls, the aide added: “We know if there is no deal, we will get blamed.”
“We could win the argument on spending cuts,” said a Republican senator who asked not to be identified.
“We aren’t winning the argument on taxes.”
However, Republican leaders in both chambers are leery about seeming to cave on taxes. “There’s concern that if we did that, Obama would simply declare victory and walk away and not address spending,” said one aide. “We don’t trust these guys.”
‘A BALANCED PLAN’
Some of the prodding was coming from Senate Minority Leader Mitch McConnell of Kentucky.
Don Stewart, a McConnell spokesman, said the minority leader in the Democratic-controlled Senate hasn’t embraced any single plan, but has discussed and circulated measures offered by fellow Senate Republicans.
“Senator McConnell does not advocate raising taxes on anybody or anything,” Stewart said.
“We’re focused on getting a balanced plan from the White House that will begin to solve the problem of our debt and deficit to improve the and create American jobs,” said Boehner spokesman Michael Steel.
“Right now, all the president is offering is massive tax hikes with little or no spending cuts and reforms,” Steel said.
House Majority Leader Eric Cantor scheduled “possible legislation related to expiring provisions of law,” a reference to the expiring tax cuts, for the end of the week, portending a weekend session.
Cantor has said the House would meet through the Christmas holidays and beyond.
Hopes expressed after the November 6 general election of some “grand bargain” on deficit reduction have all but disappeared, at least for this year.
This is partly because time is running out and partly the result of growing warnings from Democrats in Congress that they would not support big changes in the Medicare program, the government-run health insurance program for seniors that is a major contributor to the government’s debt.
House Democratic Minority Leader Nancy Pelosi of California ruled out one frequently mentioned proposal – raising the age of eligibility for Medicare, in a December 12 CBS television interview.
Asked if she was drawing a “red line” around that idea, Pelosi said her comments were “something that says, ‘don’t go there,’ because it doesn’t produce money.
Soured History Hampers Talks Between Obama and Boehner
By JACKIE CALMES and JONATHAN WEISMAN
Published: December 15, 2012
WASHINGTON — At a closed-door Capitol meeting on Wednesday, Representative Peter Roskam of Illinois was regaling other Republicans with his imitation of Speaker John A. Boehner, imagining him in the current budget negotiations with President Obama. He pretended to drag on a cigarette like the chain-smoking speaker, and blew away smoke and Mr. Obama’s tax demands in one raspy retort: “Ain’t gonna happen.”
Then the actual speaker stepped to the podium to poke fun at the president. “He’s chewing Nicorette,” Mr. Boehner said to the laughter of the Republicans.
A day later, an Obama adviser was recalling the failed budget talks between the president and Mr. Boehner last year and joked about one tactic for dealing with the speaker, who favors merlot: “Give him a glass of wine, and he’ll be better to deal with.”
These episodes, while lighthearted, capture the personal gulf between the 51-year-old president and the 63-year-old speaker as they try once again, alone and in private, to negotiate an elusive “grand bargain.” The goal is to raise tax revenue and shrink spending to stabilize the national debt and, more immediately, prevent a fiscal crisis come January, when more than $500 billion in tax increases and across-the-board spending cuts are to take effect absent a deal.
But it is a negotiation between two men who have little regard for the other’s bargaining skills, with a relationship soured by the mutual recriminations after their failure 18 months ago, people on both sides say.
An Oval Office meeting last Sunday was their first one alone since that time. They met again on Thursday night and spoke by phone on Friday. People familiar with the talks said Mr. Boehner offered to allow tax rates to rise for income above $1 million; Mr. Obama is holding out for the $250,000 threshold, but administration officials considered the Boehner overture a sign of progress.
With little in common, Mr. Boehner and Mr. Obama never have had more than a distant, respectful relationship. Both avid golfers, they have played together just once, an outing in June 2011 that led to their first attempt at a budget deal.
Mr. Boehner has told friends, “We just don’t speak the same language.” Mr. Obama told the author Bob Woodward that if the speaker “had more control of his caucus,” they would have sealed the deal last year. Referring to two past Republican leaders, Mr. Obama added: “I could have done a deal with Bob Dole. I could have even done a deal with Newt Gingrich.”
Past and current Obama administration officials say Mr. Boehner has little grasp of strategy and less of a hold on policy details. Yet Mr. Boehner is confident that he is the one with depth and experience in deal-making and regards Mr. Obama as a naïf.
A Republican aide familiar with the talks said the president had spent long stretches trying to persuade Mr. Boehner of the wisdom of his positions, which the speaker views as “an enormous waste of time,” the aide said. Conversations in the past few days have been 90 percent Mr. Obama, 10 percent Mr. Boehner, the aide said.
Aside from their divergent views of their abilities, the two men’s goals are at cross-purposes. Mr. Obama vows to end the Bush-era tax cuts for high incomes so that the wealthy contribute toward deficit reduction that would otherwise fall on the poor and middle class. Before his latest offer that included tax-rate increases, Mr. Boehner had said that he was willing to increase revenue somehow but not by raising tax rates — though to do even that, he needs to show his fellow Republicans a presidential commitment to significantly more savings from entitlement spending, chiefly Medicare, than Mr. Obama has proposed.
Last year, Mr. Boehner had the edge as Mr. Obama faced a difficult re-election campaign and needed Republicans’ support to increase the nation’s borrowing limit, lest the government default. Now, after a decisive re-election victory and Democratic gains in Congress, Mr. Obama has the stronger hand. He also made higher taxes for the wealthy a central campaign issue, suggesting a mandate borne out in public polls. And he benefits from a hard deadline, Dec. 31, after which all of the Bush-era tax cuts expire if action is not taken to extend them.
Polls show that voters would hold Republicans responsible if no deal is reached in time.
Unlike last year, when Mr. Obama and Mr. Boehner negotiated while looking toward the 2012 elections, they now meet knowing that in all likelihood they will be dealing with each other for the foreseeable future and that their legacies and the good of the country depend on constructive engagement.
“Neither one can afford to win an absolute victory over the other,” said one Republican lawmaker who is close to the speaker but did not want to be identified commenting on the delicate talks. “If you push him into a deal that costs him his speakership, the next guy up is not going to be to the left of John Boehner. And we don’t want a weak president.”
The men’s relationship did not start badly. Mr. Obama has said that Mr. Boehner reminded him of the Midwestern “Rotary Club Republicans” he worked with in the Illinois Senate. Aides say Mr. Obama especially appreciated Mr. Boehner’s geniality, given what administration officials see as the contemptuousness of the Senate Republican leader, Mitch McConnell of Kentucky.
“I think in ’11 they had a pretty good relationship,” said William M. Daley, Mr. Obama’s chief of staff at the time. “The president always thought: ‘I know this guy. I used to work with people like that in the legislature in Springfield — kind of a moderate Republican, suburbanite. And I can deal with this guy.’”
“Things are very different now with the re-elected President Obama and the way he relates to Republicans,” Mr. Daley added.
Mr. Obama spent his first two years with large Democratic majorities in the House and the Senate, which obviated much need for bipartisan negotiations. Then Republicans seized control of the House in the 2010 midterm elections; a humbled president was immediately forced into a series of fiscal negotiations with the empowered opposition.
The results were one-sided: Republicans won a two-year extension of all Bush tax cuts and lower estate taxes, as well as $1.4 trillion in spending cuts and not a penny in higher taxes. That left many Democrats grousing that Mr. Obama was getting snookered, and convinced Republicans that their leaders could always out-negotiate the president.
“The president has enjoyed legislative success when he’s had open-field running,” Mr. Roskam said, referring to the years when his party controlled the White House, the Senate and the House. “But in terms of divided government, he’s not the person who seems to be able to put the deal together.”
Yet Mr. Obama won some concessions, including temporary payroll tax cuts and terms in last summer’s debt limit compromise that gave him another advantage in these talks. That compromise required the deep across-the-board cuts that will take effect in January if the parties do not reach an agreement, and those cuts fall harder on military spending while exempting Medicaid — giving Republicans arguably more cause to try to avoid their taking effect.
Republicans acknowledge that Mr. Boehner has the weaker hand, but they say he has the stronger skills, having participated in difficult negotiations dating to his days as a committee chairman, including against Senator Max Baucus of Montana, the chairman of the Senate Finance Committee, and Senator Edward M. Kennedy.
Shortly before Mr. Kennedy died, a teary Mr. Boehner told how he had once been alone in his House office late one night, with talks on an education bill bogged down, and looked up to see a grinning Mr. Kennedy in the doorway. Rarely do senators cross over to the House for legislative chitchat, let alone one so famous and senior.
Mr. Obama’s critics say he would have been wiser to court Mr. Boehner in a similar fashion. But the president’s supporters say he is constrained by Republicans’ sense of political risk if they are seen as too close to him.
“It’s a myth that the president didn’t reach out to Congress,” said Phil Schiliro, formerly Mr. Obama’s chief liaison to Congress. “But socializing with the president doesn’t always make it easier for Speaker Boehner or other Republican leaders to get their caucuses to come along.”< /p>
However the budget talks end, the Obama-Boehner relationship has broken into pop culture. “Saturday Night Live” recently portrayed a joint news conference in which the self-confident president announced a deal with “zero tax increases.”
“I had the leverage — why give in?” said the president, played by Jay Pharoah. “Well, simply put, I felt sorry for this man. I realized how badly the Republican Party treats him when he even considers raising taxes.”
Posted on Tuesday, December 18, 2012
Obama, Speaker John Boehner edge toward deal on federal budget
By David Lightman and Anita Kumar | McClatchy Newspapers
WASHINGTON — President Barack Obama and House Speaker John Boehner appeared to inch nearer Tuesday to a grand bargain aimed at averting the “fiscal cliff,” as their numbers on taxes and spending crept closer together.
Asked whether a deal could be reached in the next 24 to 48 hours, Boehner said, “I’ve made it clear to the president that I would put a trillion dollars’ worth of revenue on the table if he were willing to put a trillion dollars of spending reductions on the table. That, at this point, would be my version of a balanced approach.”
Publicly, the two sides traded barbs throughout the day, but privately, they aren’t that far apart, and key signs were emerging that a deal might be near. Obama on Monday offered a new plan that would raise taxes for those households that earn more than $400,000 a year, up from the $250,000 he’d been seeking – a significant concession, since the president had campaigned on keeping that $250,000 lid on tax increases.
He also wants $1.2 trillion in new revenue, not far from the $1 trillion Boehner is said to be discussing, and $1.2 trillion in spending reductions. Republicans are wary of that spending figure because they disagree with some of the White House’s calculations.
The bigger controversy is likely to involve whether Obama and Boehner, an Ohio Republican, can sell a plan to the lawmakers who have to approve it.
Many Republicans remain resistant to raising any taxes. Boehner told a closed-door meeting of House of Representatives Republicans on Tuesday that he’ll seek a vote later this week on a “Plan B” that would raise taxes on million-dollar earners. Everyone else would continue to pay the current tax rates, which are due to expire at the end of the year. The plan got a mixed reaction from Republicans.
But a vote on a millionaires’ tax could help push a deal along, because it would show Boehner how many Republicans are at least willing to back some tax increases.
Democrats have been sympathetic to such proposals in the past, but they quickly distanced themselves from the maneuver this time.
“Speaker Boehner’s ‘Plan B’ is the farthest thing from a balanced approach. It will not protect middle-class families because it cannot pass both houses of Congress,” said Senate Majority Leader Harry Reid, D-Nev. Democrats control 53 of the Senate’s 100 seats.
Democrats faced some turmoil of their own, as interest groups, as well as many in their party, weren’t pleased with the White House proposal to change how the Social Security cost of living is calculated.
“If . . . the White House is considering this benefit cut, then President Obama has broken faith with seniors and his commitment to keep Social Security out of the deficit debate,’’ according to a statement from the National Committee To Preserve Social Security & Medicare.
Beneath the tough talk, though, were a softer tone and expressions of guarded optimism.
“I think it is more of a political ploy than it is a serious move forward,” House Minority Whip Steny Hoyer, D-Md., said of Boehner’s plan. But he quickly added, “The good news, however, is that Speaker Boehner indicated that the talks are continuing, so he is not disengaging from the negotiations.”
Members of Congress are in a somewhat more somber mood because of the shootings last Friday of 26 people, including 20 children, at an elementary school in Newtown, Conn. Lawmakers crowded the Senate and House floor offering statements of sympathy, and there was some sense that now isn’t the time for harsh rhetoric.
“The death of those little children was a message to adults – that more is expected of them,” said Ross Baker, a Rutgers University professor and an expert on Congress.
Boehner agreed. “This is a difficult time for Americans. That’s why we continue to have conversations with the White House,” he said Tuesday. “It’s not a time to put Americans through more stress.”
Lawmakers also are dealing with reality: Poll after poll finds, in strong terms, that Americans are tired of rigid partisanship and want compromise.
Sources in the White House and the speaker’s office say they’re getting close. Obama’s $2.4 trillion proposal offers an equal amount of revenue and spending cuts. More than $122 billion would come from the change in the Social Security inflation measurement and $290 billion in savings would derive from lower-interest costs on the national debt.
But the two sides disagree on how to define the spending cuts and revenues. By Republican calculations, the spending cuts don’t reach the amount that the White House claims.
“Any movement away from the unrealistic offers the president has made previously is a step in the right direction, but a proposal that includes $1.3 trillion in revenue for only $930 billion in spending cuts cannot be considered balanced,” Boehner spokesman Brendan Buck said. “We hope to continue discussions with the president so we can reach an agreement that is truly balanced and begins to solve our spending problem.”
The White House offer isn’t expected to be its last.
Failure to reach a deadline by the end of the year would mean that $500 billion in tax increases take effect early next year, coupled with $109 billion in forced spending reductions, the first installment toward $1.2 trillion in eventual cuts.
Republicans divided over next moves
Senate and House Republicans are headed in different directions on addressing the fiscal cliff.< /p>
Some GOP senators want to strike a quick deal this year, while House conservatives prefer holding out for major structural changes to the tax code and entitlements that would be enacted in 2013.
Fiscal Cliff Talks: Wheels Closer To Coming Off Deal Bus
Boehner’s tax-hike start: $1M
By Jessica Wehrman
The Columbus Dispatch Wednesday December 19, 2012 8:56 AM
WASHINGTON – House Speaker John Boehner floated the idea yesterday of a “Plan B” approach to the looming “fiscal cliff” that would extend current tax rates for all but those making $1 million or more a year. But that plan was quickly panned by the White House and Senate and House Democrats, and so the standoff continued.
Boehner, R-West Chester, brought the idea before a meeting of House Republicans, saying that he’d prefer a deal with the White House but has to prepare for the possibility that the sides won’t reach an agreement.
“Our hope continues to be to reach an agreement with the president on a ‘balanced’ approach that averts the fiscal cliff,” Boehner said. “What we’ve offered meets the definition of balance, but the president is not there yet.”
He was responding to a White House offer made on Monday that he said would bring in $1.3 trillion in new revenue in exchange for about $850 billion in net spending reduction.
He said he floated Plan B because if Congress does not act, then “every income-tax filer in America is going to pay higher rates come January.”
“I believe it’s important that we protect as many American taxpayers as we can,” Boehner said, still holding out hope for a broader agreement with Obama.
But the White House rejected the proposal within hours, saying Obama had put out a “balanced, reasonable proposal” on Monday night.
White House spokesman Jay Carney said Boehner’s Plan B “can’t pass the Senate and therefore will not protect middle-class families and does little to address our fiscal challenges with zero spending cuts.”
Senate Majority Leader Harry Reid, D-Nev., also was unimpressed.
“Now is the time to show leadership, not kick the can down the road,” Reid said. “Speaker Boehner should focus his energy on forging a large-scale deficit-reduction agreement. It would be a shame if Republicans abandoned productive negotiations due to pressure from the tea party, as they have time and again.”
Reaction among local Republicans, too, was mixed.
“I’m not doing cartwheels over it, that’s for sure,” said Rep. Jim Jordan, R-Urbana.
He said he understands Boehner’s goal of keeping current tax rates for most Americans, but “once you bust that line and say it’s OK for some people’s taxes to go up, I think it’s a mistake for the Republican Party. I think that’s what a lot of members are struggling with.”
Rep. Pat Tiberi, R-Genoa Township, said Boehner was working hard to avoid tax increases for most Americans.
“The speaker is trying to figure out every possible way to get the majority — or as many Americans as possible — to not see their taxes go up on Jan. 1,” he said.
Tiberi said Obama would face risks if he allows the nation to go over the fiscal cliff. “People don’t remember who Herbert Hoover’s speaker of the House was or majority leader,” he said. “It was Herbert Hoover’s economy.”
But Boehner’s backup plan also would do nothing to prevent the across-the-board spending cuts scheduled to go into effect next year.That led Rep. Steven C. LaTourette, R-Bainbridge Township, to say he hopes that Boehner and Obama reach an agreement.
The cuts, he said, would be “pretty irresponsible.”
Sen. Rob Portman, R-Ohio, also was skeptical. “I’m still pushing for an agreement,” he said. “I think a more-comprehensive agreement is better for the country. … I’m not ready to move on any plan other than one that has a balanced approach on spending and revenue.”
Taking a different view, Rep. Steve Stivers, R-Upper Arlington, said the backup plan would have the advantage of “getting stuff going” between the two houses of Congress. “I think the beauty of Plan B is that it gets something moving,” he said. “Nothing happens until something passes the House and Senate, then the president decides whether he’ll sign it or veto it.”
Fiscal Cliff Negotiations: Obama And Boehner Staffs Haven’t Talked Since Monday
Obama and Boehner Diverge Sharply on Fiscal Plan
John Boehner To Obama On Fiscal Cliff: Act On Plan B Or Get ‘Serious
Boehner Cancels Tax Vote in Face of G.O.P. Revolt
Boehner Budget Failure Followed Pressure From Conservative Groups
Posted: 12/21/2012 2:38 am EST | Updated: 12/21/2012 2:50 am EST
WASHINGTON — Thursday night’s failure by House Speaker John Boehner (R-Ohio) to garner enough support among House Republicans for his fiscal cliff “Plan B” was a major setback for his role as speaker. It was also a clear example of the growing influence of outside groups over the GOP caucus.
“We were on the phone all day long today, talking to members of Congress,” said Mike Needham, executive director of Heritage Action, the political arm of the powerful conservative nonprofit Heritage Foundation. “I think we definitely changed people’s minds today, absolutely.”
Lacking the votes to pass his bill, Boehner on Thursday night canceled a floor vote on Plan B and dismissed the House for the rest of the year. Republican leaders had been trying to persuade rank-and-file members to back Boehner’s budget all week and by Thursday afternoon, Boehner and House Majority Leader Eric Cantor (R-Va.) were confident they had enough votes to send the bill to the Senate. “We’re going to have the votes,” Cantor said at a press conference.
But as the afternoon wore on, the situation changed rapidly. By the time Boehner called the hastily scheduled caucus meeting, his bill was doomed. The bill, Boehner said after the meeting, “did not have sufficient support from our members to pass.”
A leading Tea Party group, Teaparty.net, said it enlisted the help of former Rep. J.D. Hayworth (R-Ariz.) to urge Republicans in Congress to vote against Boehner’s plan. “For the last three days, we’ve had Hayworth calling members of Congress,” said Teaparty.net spokeswoman Scottie Nell Hughes. “And other staffers of ours have been calling chiefs of staff to make sure they knew what our positions are.”
A spokesman for the Club for Growth, another major conservative group cited as an active participant, said that after it publicly issued a statement opposing Plan B on Wednesday afternoon, group representatives needed to make few phone calls on Thursday.
“Members of Congress know we’re not afraid to get involved in a primary,” Club for Growth’s communications director, Barney Keller, told HuffPost on Thursday night. “Members know that the first thing we do is look to our scorecard, and decide who is a pro-growth vote and who isn’t. And we felt that to vote in favor [of Boehner's plan] would be to vote for a tax increase, and against economic growth”
The efforts derailed the Republican leadership at the last minute.
The failure leaves President Barack Obama and Senate Majority Leader Harry Reid (D-Nev.) with little opposition in crafting a measure to avert the so-called fiscal cliff. When the House returns, its members will have few options — either back the Senate bill or allow taxes to rise for the middle class.
Club for Growth’s clout stems from its campaign spending. The group aims its spending on a few select races, and rewards fiscal conservatives while challenging moderate Republicans. It spent more than $20 million during the 2012 election cycle.
Keller was unapologetic about Club for Growth’s impact on congressional races. “The number one thing people in Congress fear is losing their jobs,” he said. “So we don’t lobby members, we help educate them. And if you look at the rising stars of the [Republican] party, it’s a lot of people who were supported by” Club for Growth.
The power of Club for Growth and other conservative groups to swing Republican votes in Congress underscores the defeat for Boehner and other House Republican leaders. At least one grassroots conservative group, American Majority Action, is calling for Boehner’s replacement as speaker. “Tonight’s vote is a harbinger of things to come. Speaker Boehner is on the ropes & his speakership is in jeopardy,” the group Chad Pergram said. This is not the first time that American Majority Action has called for Boehner’s replacement.
A senior GOP leadership aide emphatically denied that Boehner’s role as speaker was under threat following Thursday’s failed vote. But Keller, the Club for Growth spokesman, painted House leadership under Boehner in painfully unflattering terms. “The House leadership should be grateful that they were saved by their conference from raising taxes tonight,” Keller said.
The Heritage Foundation, another group involved in the opposition to Plan B, is poised to see its influence rise in coming years. In January, Sen. Jim DeMint (R-S.C.) will retire to become chairman of the group, a 501c3 nonprofit affiliate of Heritage Action. In this role, DeMint’s power is likely to grow alongside that of Heritage and the other conservative outside groups.
Before Thursday’s caucus meeting, DeMint helped put pressure on House Republicans. “I haven’t talked to DeMint in a week,” said Needham, the Heritage Action spokesman. “But I know he’s been privately talking to people about the vote.”
Keller said many GOP House members were grateful to have outside entities standing up to House leadership.
“We got a lot of calls from members tonight after the [informal] vote, and they were very gratified that this went down,” Keller said. “We didn’t talk to leadership ahead of it, but rank-and-file members should be proud of what they accomplished.
John Boehner’s animal House
Thursday night’s rebellion, by shifting responsibility to the White House and the Senate, actually increases the likelihood of tax hikes, but the rampaging Republicans weren’t contrite on Friday morning. “The speaker has been talking about tax increases — that’s all he’s been talking about,” Rep. Tim Huelskamp (R-Kan.) said on MSNBC. “That’s been the frustration.”
As if to demonstrate just how unreasonable he could be, Huelskamp added a gratuitous opinion that those seeking stricter gun control after the Newtown shooting are “politicizing the issue.” This drew a rebuke from the host, former Republican congressman Joe Scarborough.
Fiscal Cliff: Ugh, Recession is Now More Likely
“Fiscal cliff” efforts in disarray as U.S. lawmakers flee
By David Lawder and Mark Felsenthal
WASHINGTON | Fri Dec 21, 2012 6:50pm EST
(Reuters) – Efforts to avoid the looming U.S. “fiscal cliff” were thrown into disarray on Friday with finger-pointing lawmakers fleeing Washington for Christmas vacations even as the year-end deadline for action edged ever closer.
No new negotiations were scheduled between Republicans, congressional Democrats and the White House to reach a deal to prevent a fiscal calamity in 10 days. The White House said President Barack Obama will make a statement at 5 p.m. EST (2200 GMT) on Friday on the “fiscal cliff” stand-off.
“How we get there, God only knows,” House of Representatives Speaker John Boehner, the top Republican in Congress, told reporters on Friday when asked about a possible comprehensive “fiscal cliff” solution.
Boehner’s own “Plan B” option dramatically collapsed in a heap on Thursday night when he failed to rally the support of his fellow House Republicans.
If there is no agreement, taxes would go up on all Americans and hundreds of billions of dollars in automatic government spending cuts would kick in next month – actions that could plunge the U.S. economy back into recession.
In the eye of the storm was Boehner, who reluctantly agreed to a demand by Obama thattaxes go up on the wealthiest Americans, only to find he could not bring along anti-tax conservatives in his own party.
After protracted negotiations, Boehner had extracted a compromise from Obama to raise taxes on those Americans making more than $400,000 a year, instead of the president’s preference of those with income of $250,000 a year.
But with talks stalled on the level of spending cuts to which Obama would agree, Boehner attempted a backup plan to raise taxes only on those making more than $1 million a year – amounting to just 0.18 percent of Americans.
That failed because conservative House Republicans refused to support tax increases on anyone. Now Boehner’s leadership is in question as both parties engaged in a round of blaming as they began closing down business until after the Christmas holiday next week.
It emerged on Friday that Boehner’s defeat in the House was worse than first thought. A key Republican lawmaker said Boehner scrapped the vote when he realized that between 40 and 50 of the 241 Republicans in the House would not back him.
Obama and his fellow Democrats in Congress are insisting that the wealthiest Americans pay more in taxes in order to help reduce federal budget deficits and avoid deep spending cuts. Republicans control the House and Democrats control the Senate.
It was not clear whether Obama would go ahead with plans to spend Christmas in Hawaii with his family or stay in Washington to try to breathe some life back into the talks.
Stocks dropped sharply on fears that the United States could go fall back into recession if politicians do not prevent it.
Major indexes lost about 1 percent, though investors still held out hope that an agreement will be brokered in Washington.
“I think if you get into mid-January and (the talks) keep going like this, you get worried, but I don’t think we’re going to get there,” said Mark Lehmann, president of JMP Securities, in San Francisco.
Boehner, joined by his No. 2, Eric Cantor, at a Capitol Hill news conference, said the ultimate fault rests with Obama for refusing to agree to more spending reductions that would bring down America’s $1 trillion annual deficit and rising $16 trillion debt.
“What the president has proposed so far simply won’t do anything to solve our spending problem. He wants more spending and more tax hikes that will hurt our economy,” Boehner said.
Democrats responded with incredulity.
“I like John Boehner, but gee whiz,” said an incredulous Senate Majority Leader Harry Reid, the top Democrat in Congress. He decried what he called the “brinkmanship and silliness” in the House.
House members, heading to their home states for the holidays, were instructed to be available on 48 hours notice if necessary.
“They went from ‘Plan B’ to ‘plan see-you-later,’” Obama adviser David Axelrod said on MSNBC on Friday morning.
The crumbling of Boehner’s plan highlights his struggle to lead some House Republicans who flatly reject any deal that would increase taxes on anyone.
Boehner’s bill was pulled after his team concluded that they were “40 to 50″ votes short of the 217 needed in the chamber for passage, said Representative Tom Cole, who helps the House Republican leadership round up votes.
“If we were within four or five votes,” Cole said, he and other Republican leaders along with Boehner would have kept trying to rally support. “But there was too much distance between where we were at and what we needed.”
Republican Representative Tim Huelskamp criticized Boehner’s handling of the negotiations, saying the speaker had “caved” to Obama opening the door to tax hikes. Huelskamp, a dissident first-term congressman, said he was not willing to compromise on taxes even if they are coupled with cuts to government spending sought by conservatives.
Fiscal conservatives “are so frustrated that the leader in the House right now, the speaker, has been talking about tax increases. That’s all he’s been talking about,” Huelskamp said on MSNBC on Friday morning.
Democrats are now stepping up efforts to gather some Republican votes for a Democratic bill passed by the Senate months ago that would extend the expiring tax cuts to all but the wealthiest Americans.
“What we’ll have to do is figure out where that line is that gives us those 218 votes” needed to garner a majority of the House behind legislation, Republican Representative Michael Burgess said on CNBC on Friday.
Senate Republican Leader Mitch McConnell, who has experience helping to forge deals when House Republicans are in disarray, is likely to play a larger role now in attempting to rescue the situation along with other Senate Republicans, who have been more receptive to compromising.
Sean West, a Eurasia Group analyst, told Reuters: “Boehner didn’t have a ton of good moves, and has even fewer now.” He said he thought Boehner was “either headed back to the White House for a big deal or he’s accepting whatever bipartisan fallback is crafted by Senate leaders. Hard to see him coming back with another partisan gambit.”
Obama calls on Congress to craft at least a minimal ‘fiscal cliff’ deal
As the nation peers over the edge of the fiscal cliff, President Obama (center) kicked off his Christmas vacation in Hawaii today by playing a round of golf with friends – including his longtime pal Bobby Titcomb (pictured with the President right in 2010), who was arrested last year on suspicion of soliciting a prostitute.
Conservatives say no to tax-increase deal to avoid fiscal cliff
As it does with Lincoln, Washington now reveres Lyndon Johnson….Johnson left the Senate with a gaggle of friends and the experience to change history. Obama served in the Senate too. He just came and went.
Obama and Boehner are co-pilots steering us toward the fiscal cliff. Their respective jobs are beyond them. One talks over the head of Congress, the other called for a vote he couldn’t win. The thing’s on automatic pilot — automatic spending cuts, automatic tax increases: automatic debacle. The stock market fell. Next, jobs will be lost. Boehner went home to Ohio, and the president went to Hawaii for a vacation. . .from what ? Only the ghost of Casey Stengel remains in town: “Can’t anybody here play this game?”
Beyond the soothing titles, some legislative debacles
By Walter Pincus, Published: December 24
What politicians would think a way to stop the oncoming sequester in defense spending — across-the-board reductions of $500 billion over the next 10 years — could be done by a last-minute cutting of funds for Obamacare, the Dodd-Frank law and approval of a controversial medical tort reform bill?
The answer is Speaker John A. Boehner (R-Ohio) and his House Republican leadership team. They actually tried to do just that as part of last Thursday’s legislative debacle in the House over Boehner’s so-called Plan B, which was to prevent an increase in income taxes for all but those with $1 million incomes.
Like all pieces of legislation these days, Plan B had a soothing title: Permanent Tax Relief for Families and Small Businesses Act of 2012. Last Thursday, it never made it to the House floor.
But Boehner’s legislative move began the night before with another bizarre, hastily-put-together plan designed to buy conservative Republican votes for Plan B.
This so-called Plan C was labeled the Spending Reduction Act of 2012. It was a 69-page cats-and-dogs collection of social program budget reductions mixed with a handful of earlier passed House measures that never had a chance to make it through the Democratic-controlled Senate or become law.
It was after 8 p.m. last Wednesday night that the Spending Reduction Act of 2012 was distributed to members of the House Rules Committee that had been already been meeting for almost two hours to set rules for House debate the next day that was to include the fiscal 2013 Defense Authorization Bill and Boehner’s Plan B.
Rules Committee Chairman David Dreier (R-Calif.) tried to reassure Democrats on the panel that the new measure was only a revised version of the Sequester Replacement Reconciliation Act of 2012 that had been approved by the House in May.
At that time, Republican House members provided all 218 votes in favor of the measure, while 183 Democrats and 16 Republicans opposed it.
The White House had promised that President Obama would veto it should it ever pass Congress, saying, “This approach sharply undermines critical domestic priorities, such as efforts to prevent hunger and support low-income families and communities; to expand health care access and implement the Affordable Care Act; to protect consumers and implement the Wall Street Reform Act; and to support homeowners struggling to stay in their homes.”
One other section was wonderfully titled the Help Efficient, Accessible, Low-cost, Timely Healthcare (HEALTH) Act of 2012. The Congressional Budget Office (CBO) projected that the measure could save the government some $45 billion over the next 10 years by imposing “limits on medical malpractice litigation in state and federal courts by capping awards and attorney fees, modifying the statute of limitations, and eliminating joint and several liability.” It also would, however, repeal the provisions of the Affordable Care Act that established the Independent Payment Advisory Board, according to the CBO.
In one of those frank and angry outbursts that occasionally takes place when a member of Congress is frustrated by what he or she considers a misuse of the democratic process, Rep. Louise Slaughter (D-N.Y.), ranking minority member of the Rules Committee, let loose Wednesday night, saying: “When I say this is a hoax, I’m not even sure that is even strong enough . . .
“You’ve got yourself in a hole. . . . You don’t have enough votes so you are going to throw in here all this crazy stuff that people voted for in May . . . and we’re playing this stupid charade. You are going to stick the country with this dog [meaning the Spending Reduction Act]. . . . You don’t want to take up this [House] bill. Well, tough, I mean, this is the way you run the House of Representatives?”
During floor debate Thursday, Rep. Paul Ryan (R-Wis.) said the Spending Reduction Act “cuts $236 billion over the next 10 years in net spending cuts to pay for one year of the sequester,” thus setting aside for one year “the sequester on defense and nondefense discretionary spending.”
Ryan, Boehner and other Republican leaders knew this was a charade as Slaughter had claimed. And although the Spending Reduction Act passed the House on Thursday by a 215-to-209 vote with only Republican support, it did not get Boehner the help he needed.
Plan B died because it was a highly partisan measure and Boehner would not bring to the House floor such a bill that did not have enough Republican votes for final passage. Since there are 241 GOP members and 218 votes are needed for passage, if 24 Republicans oppose a measure, particularly one involving spending or increased revenue, the general practice has been that the Republican leadership will not bring it to the floor.
Unless that practice changes, this country will surely go over the “fiscal cliff” at the end of this month. The nation will face an even tougher new year if House Republicans continue only to allow controversial measures to reach the floor that have Republican votes for passage because in the next Congress only 17 GOP defecting members can deny a Republican speaker that majority floor vote. That all but guarantees, for example, there will be a need for Democratic votes to pass an increase in the debt limit next February.
On a different note, I want to thank Sen. Barbara Boxer (D-Calif.) for a pre-Christmas present. During the Dec. 20 Senate Foreign Relations Committee meeting on the Benghazi, Libya, raid, Boxer noted that funds for diplomatic security for 2012 were $200 million short because of congressional cuts. She then noted, “I love military bands; as a matter of fact I always go to [their] concerts.”
But, she added, a House amendment to cut $200 million from military bands failed, leaving spending for them at $388 million.
The senator’s point, and mine in raising military bands again, is “we need to get our priorities straight.”
Fiscal cliff reality check: what’s really the worst thing that could happen?
In the interest of lending some context to the nearing fiscal cliff deadline, a look at some of the benchmarks for disaster
US Treasury warns of ‘extraordinary measures’ amid fiscal cliff deadlock
Barack Obama cuts short holiday to tackle budget crisis as country faces breaching its $16.4tn debt limit
Fiscal cliff deal increasingly unlikely
By MANU RAJU and JAKE SHERMAN | 12/26/12 7:50 PM EST
Nearly all the major players in the fiscal cliff negotiations are starting to agree on one thing: A deal is virtually impossible before the New Year.
Unlike the bank bailout in 2008, the tax deal in 2010 and the debt ceiling in 2011, the Senate almost certainly won’t swoop in and help sidestep a potential economic calamity, senior officials in both parties predicted on Wednesday.
With the country teetering on this fiscal cliff of deep spending cuts and sharp tax hikes, the philosophical differences, the shortened timetable and the political dynamics appear to be insurmountable hurdles for a bipartisan deal by New Year’s Day.
Hopes of a grand-bargain — to shave trillions of dollars off the deficit by cutting entitlement programs and raising revenue — are shattered. House Republicans already failed to pass their “Plan B” proposal. And now aides and senators say the White House’s smaller, fall-back plan floated last week is a non-starter among Republicans in Senate — much less the House.
On top of that, the Treasury Department announced Wednesday that the nation would hit the debt limit on Dec. 31, and would then have to take “extraordinary measures” to avoid exhausting the government’s borrowing limit in the New Year.
Senate Democrats are drafting a fallback bill to resolve the crisis, but they have little optimism that Republicans will accept their proposals. The White House, a senior administration official said, is in close coordination with Senate Democrats. Late Wednesday, Reid’s office pushed Republicans to pass a bill to extend tax rates for income below $250,000.
The House sidestepped a decision Wednesday to bring the chamber back into session, putting the burden squarely on the Senate, where the stars will need to align for swift action in the next few days. Speaker John Boehner’s leadership team said bluntly: the “Senate first must act” before the House will consider additional legislation to avoid the cliff. So that they’re all on the same page, House Republicans will have a members only conference call Thursday.
For Senate Majority Leader Harry Reid to bring up a new bill, he’ll need assurances from Senate Minority Leader Mitch McConnell not to filibuster it — and not to pressure his members to block it. And Reid will need Boehner’s word that any Senate-passed bill would be scheduled for a vote and could pass with support largely from Democrats, even if it lacks a majority of Republican support.
That scenario seems unlikely right now.
From McConnell’s perspective, the White House will have to pare back its demands for tax increases if Republicans will concede the fight and risk the wrath from the right. And then President Barack Obama will need to give far more on cuts to entitlement programs like Medicare and Social Security in order to get some GOP cooperation on tax rate hikes, Republican officials say.
published Thursday, December 27th, 2012
Cliff looms: Kicking the can, Washington-style
by Associated Press
WASHINGTON — When it comes to the nation’s budget challenges, congressional leaders are fond of saying dismissively they don’t want to kick the can down the road.
But now, a deadline hard ahead, even derided half-measures are uncertain as President Barack Obama and lawmakers struggle to avert across-the-board tax increases and spending cuts that comprise an economy-threatening fiscal cliff.
Congressional officials said Wednesday they knew of no significant strides toward a compromise over a long Christmas weekend, and no negotiations have been set.
After conferring on a conference call, the House Republican leadership said they remain ready for talks, but gave no hint they intend to call lawmakers back into session unless the Senate first passes legislation.
“The lines of communication remain open, and we will continue to work with our colleagues to avert the largest tax hike in American history, and to address the underlying problem, which is spending,” the leadership said in a statement.
The Senate is due in session Thursday, although the immediate agenda includes legislation setting the rules for government surveillance of suspected spies and terrorists abroad, including Americans, as well as a measure providing $60 billion for victims of Superstorm Sandy.
Obama decided to cut short his Hawaii vacation for an overnight flight expected to get him back to the White House on Thursday.
Apart from the cliff, other financial challenges loom for divided government, where political brinkmanship has become the norm. The Treasury disclosed during the day it would take accounting measures to avoid reaching the government’s borrowing limit of $16.4 trillion by year’s end. The changes will provide about two months of additional leeway.
Separately, spending authority for much of the government will expire on March 27, 2013.
After weeks of negotiations, the president urged lawmakers late last week to scale back their ambitions for avoiding the fiscal cliff and send him legislation preventing tax cuts on all but the highest-earning Americans and extending unemployment benefits for the long-term jobless. Longer, term, he said he still supports deficit cuts that were key to the earlier talks.
“Everybody’s got to give a little bit in a sensible way,” he said at the White House.
The House has no plans to convene, following last week’s rebellion in which conservatives torpedoed Speaker John Boehner’s legislation to prevent scheduled tax increases on most, while letting them take effect on million-dollar wage earners.
“How we get there, God only knows,” the Ohio Republican said of efforts to protect the economy — and taxpayers — from the tax increases and spending cuts.
“Now is the time to show leadership, not kick the can down the road,” Senate Majority Leader Harry Reid, D-Nev., said a little over a week ago after Boehner announced he would shift his own focus from bipartisan talks to the approach that eventually was torpedoed by his own rank and file.< /p>
It’s a phrase that political leaders use when they want to suggest others want to avoid tackling major problems, and one that Boehner, House Majority Leader Eric Cantor of Virginia and even Obama as well as Reid have used.
“We have a spending problem. We have to address it, And we’re not going to address it by kicking the can down the road,” the speaker said at a news conference late last week when he was asked about setting a vote on a plan that Democrats find acceptable.
Cantor recently used the same approach in challenging Obama to agree to savings from Medicare and other benefit programs. “This has to be a part of this agreement or else we just continue to dig the hole deeper, asking folks to allow us to kick the can down the road further and that we don’t want to do,” he said on Nov. 28.
In fact, it’s a phrase that has been in use for over a year as Obama and Republicans jockey for position on pocketbook issues.
In July 2011, when he was struggling with Republicans over the threat of a first-ever government default, Obama said he had “heard reports that there may be some in Congress who want to do just enough to make sure that America avoids defaulting on our debt in the short term. But then wants to kick the can down the road when it comes to solving the larger problem, our deficit.”
A few months later, an extension of a payroll tax cut was the issue, and Boehner was insisting on a year-long renewal rather than the temporary plan that passed the Senate with votes from lawmakers in both parties.
“How can you do tax policy for two months?” he asked on Dec. 18, 2011. “I believe that two months is just kicking the can down the road.
“The American people are tired of that.”
At issue now is series of tax increases and spending cuts scheduled to kick in with the new year that economists caution could send the economy into a recession.
On ‘fiscal cliff,’ Obama and senators returning to Washington for one last attempt at deal
By Lori Montgomery and Paul Kane, Published: December 26
With historic tax increases set to hit virtually every American in five days, President Obama and members of the Senate are headed back to Washington on Thursday to take one last shot at a deal to protect taxpayers and the gathering economic recovery.
If anything, hope for success appeared to have dimmed over the Christmas holiday. The Republican-controlled House last week abdicated responsibility for resolving the crisis, leaving all eyes on the Senate. But senior aides in both parties said Majority Leader Harry M. Reid (D-Nev.) and Minority Leader Mitch McConnell (R-Ky.) have not met or even spoken since leaving town for the weekend.
One small sign of progress came from House GOP leaders, who vowed Wednesday to call the House into session and stage a vote on anything the Democratic-controlled Senate approved.
But Speaker John A. Boehner (Ohio) and other top Republicans also demanded that Senate leaders take up a bill approved by the House months ago that would preserve expiring tax cuts for the wealthy as well as the middle class.
After failing to persuade their fellow Republicans last week to let taxes rise on income over $1 million, GOP leaders offered no guidance on the shape of a package the House could ultimately accept. “The House will take . . . action on whatever the Senate can pass, but the Senate first must act,” the leaders said in a joint statement.
The White House, meanwhile, was working with Reid on an alternative package that would keep Obama’s vow to let taxes rise on income over $250,000. Top Senate aides said their approach also would protect millions of middle-class Americans from having to pay the costly alternative minimum tax for the first time and would keep benefits flowing to 2 million unemployed workers who otherwise would be cut off in January.
The measure also could delay deep spending cuts set to strike at the Pentagon and other federal agencies next month. But aides said the scope of the package depends on negotiations with Senate Republicans, and the talks had yet to get off the ground.
With no sign of urgency, aides in both parties predicted that failure was not just a possibility — it was rapidly becoming the most likely outcome. No significant movement was expected Thursday: Obama was scheduled to be in the air traveling back from his Hawaiian holiday for a good portion of the day, and the Senate wasn’t set to convene for votes until the evening.
Unless the House and the Senate can agree on a way to avoid the “fiscal cliff,” more than $500 billion in tax increases and spending cuts will take effect next year, potentially sparking a new recession.
In a sign of mounting anxiety over Washington gridlock, Starbucks is asking employees in its D.C. area stores to write the words “Come Together” on cups provided to customers Thursday and Friday. The aim is to send a message to lawmakers that they must settle their differences and resolve the fiscal crisis, Starbucks chief executive Howard Schultz said in a letter posted online.
Financial markets, already unsettled by the prospect of dramatic tax increases and spending reductions, may also face a new battle over the limit on federal borrowing. Treasury Secretary Timothy F. Geithner announced Wednesday that the debt will hit the $16.4 trillion cap on Dec. 31, leaving roughly two months for Congress to raise it or default on the nation’s obligations.
Some lawmakers are looking ahead to the debt-ceiling fight as the moment when party leaders will finally agree on a plan to get rampant government borrowing under control.
“I think we’re going to fall out of the fiscal tree,” Sen. Lindsey O. Graham (R-S.C.) said Sunday on NBC’s “Meet the Press.” “The big chance for a big deal is at the debt ceiling. That’s when we will have leverage to turn the country around, prevent it from becoming Greece, and save Social Security and Medicare.”
Until last week, much of Washington had hoped that a broad deal would come together by New Year’s Eve. Obama and Boehner had been talking since the November election about a compromise that would meet the president’s demand for higher taxes on the wealthy and the speaker’s demand for significant changes to the health and retirement programs, such as Medicare and Social Security, that are the federal government’s biggest expenses.
The two leaders appeared to come close. In his last offer, Obama proposed to cut $400 billion from federal health programs through 2022 and to slow cost-of-living increases for Social Security benefits. All told, he proposed net spending cuts of about $850 billion in exchange for about $1.3 trillion in new revenue.
Boehner offered to raise $1trillion in fresh revenue, and he wanted spending cuts of equal size. By that measure, Obama’s tax offer was $300 billion too high and his cuts $150 billion too low, for a net difference between the two men of about $450 billion — less than 1 percent of projected federal spending over the next decade.
In the end, however, the gap proved to be much wider politically than it was numerically. Triumphant Democrats, who gained seats in the House and the Senate in addition to holding the White House in November, were unwilling to push the tax number any lower. And they adamantly opposed additional health savings that might reduce benefits for the elderly, such as raising the eligibility age for Medicare from 65 to 67, or jeopardize the 2014 launch of Obama’s health-care initiative.
Boehner, meanwhile, might have been able to accept a higher tax target, Republicans said. But he needed parity in spending cuts, and the president did not provide it.
Democrats argue that the speaker couldn’t have sold any deal to his anti-tax caucus, pointing to the failure last week of his “Plan B,” which would have raised taxes on millionaires, after he broke off talks with Obama. Doubts about the House are now clouding the prospects for action in the Senate.
The most likely way forward, aides in both parties said, is for Reid to take up the House bill and amend it to let taxes rise for the wealthy, to extend federal benefits for the long-term unemployed and to make other urgent changes. At this late date, aides said, such a bill would be extremely unlikely to include significant spending cuts or to raise the debt limit, but it would avert the worst economic effects of the fiscal cliff.
Nearly a dozen Senate Republicans have expressed support for such an approach, including Sen. John Cornyn (Tex.), the incoming No. 2 Republican leader.
“One of the beauties of that bill is it wouldn’t require a vote to raise anybody’s taxes, and I think that is a major advantage,” Cornyn said Friday, noting that an “aye” vote would extend expiring tax cuts for most households, letting taxes rise on the rich by default.
But Senate Democrats say they would not advance such a bill until they secured McConnell’s commitment not to block it and Boehner’s pledge to let it pass the House with Democratic votes.< /p>
“House Republicans pushed middle class families closer to the cliff by wasting an entire week with their incompetent ‘Plan B’ stunt,” Reid spokesman Adam Jentleson said in a statement. “The Senate has already rejected House Republicans’ Tea Party bills, and no further legislation can move through the Senate until Republicans drop their knee-jerk obstruction.”
Wall Street traders, meanwhile, began bracing their clients for disaster.
“The blame game could reach full swing by the weekend,” the Washington Research Group, an arm of Guggenheim Partners, wrote Wednesday in its daily message to investors. “We . . . continue to believe there is a 70 percent chance that we go over some form of the cliff at the end of the year.”
‘Fiscal cliff’: Finger-pointing furiously, Congress slouches toward deadline
Speaker Boehner, who called the House back into session Sunday evening, said Thursday it was up to the Senate to act, while majority leader Reid spoke on the Senate floor of a ‘dysfunctional’ GOP caucus.
…the leadership of both houses of Congress engaged in a flurry of finger-pointing Thursday, with each saying the other was to blame for the likelihood of the deadline being missed to avoid the fiscal cliff of tax hikes and spending cuts.
On Wall Street, realization is sinking in over the elusiveness of ‘fiscal cliff’ deal
Wall Street is finally waking up to the troubling prospect that lawmakers may not reach a deal to avert the “fiscal cliff” before the new year, with stocks swinging dramatically Thursday in response to news from Capitol Hill.
Financial markets had been climbing in recent weeks on the expectation that President Obama and the Congress would reach an agreement, adding further momentum to an economy that has been gaining strength.
Stalemate in Washington Is Eroding Confidence of Consumers
By NELSON D. SCHWARTZ
Published: December 27, 2012
For months, consumers have powered spending, while businesses pulled back ahead of the looming fiscal impasse in Washington. Now, as doubts grow about whether the president and Congress can reach a compromise before a year-end deadline, evidence has emerged that consumers, too, are becoming more pessimistic about the economy.
Consumer confidence in the first half of December took a sharper-than-expected dip, falling to its lowest level since August, according to a newsurvey released Thursday by the Conference Board. Wall Street also registered its frustration with the stalemate in Washington on Thursday, sending stocks sharply lower before recovering late in the day.
The gloom comes despite signs the economy has been holding up recently during the rising worries — other data released Thursday showed a healthy gain in new-home sales and a slight drop in new jobless claims. Indeed, the Conference Board’s data show consumer anxiety is centered on the outlook ahead for the economy, rather than on current conditions.
“People are realizing that we may not get a compromise and they’re getting nervous,” said Guy Berger, United States economist with RBS Securities. “It’s a precarious situation. So far consumers are worried about the future. Once they start worrying about the present, we’re in trouble.”
If Congress and President Obama cannot agree on a deal to cut the deficit by Jan. 1, more than $500 billion in tax increases and spending cuts are set to take effect.
Taxes have been the main sticking point — while the president favors eliminating Bush-era tax cuts on incomes over $250,000 and preserving current rates for lower incomes, many Republicans have been wary of supporting any tax increase. Republicans have been pushing for deeper spending cuts, something many Democrats have resisted.
Both sides remained dug in, and at midday Thursday Senator Harry Reid of Nevada, the Democratic majority leader, said he thought it was unlikely a compromise would be reached before Jan. 1.
With Wall Street tracking every turn of negotiations in Washington, shares tumbled after Mr. Reid’s remarks but recovered later in the day after reports the House would reconvene Sunday and take up the issue. The Standard & Poor’s 500-stock index fell 1.73 points, to 1,418.10, while the Dow Jones industrial average sank 18.28 points, to 13,096.31
While an eventual deal that blunts part of the effect is expected in the coming weeks, some fallout from missing the Tuesday deadline will be felt right away — including a two percentage point increase in payroll taxes as well as the end of unemployment benefits for more than two million Americans. All that has increased the uncertainty for individuals, who until recently had shrugged off the fiscal standoff in Washington.
“Expectations have certainly shifted and it seems like consumer attitudes have caught up with business confidence,” said Michael Griffin, executive director at Corporate Executive Board, a member-based advisory firm. Surveys by the group have shown business sentiment weakening for three consecutive quarters, he said.
Consumers have had reasons to be more optimistic lately. After a deep decline caused by the housing bubble, home prices have begun to recover in many parts of the country. And the job market has been showing signs of improvement, with unemployment hitting a four-year low of 7.7 percent in November.
On Thursday, the Labor Department reported that initial claims last week for state unemployment benefits fell by 12,000, to a seasonally adjusted level of 350,000. Figures for jobless claims have been volatile since Hurricane Sandy, but the four-week moving average for new unemployment claims now stands at its lowest point in nearly five years. Sales of new single-family homes in November rose 4.4 percent, to a seasonally adjusted annual rate of 377,000, according to the Commerce Department.
By contrast, the Conference Board’s consumer confidence index fell to 65.1 in December from 71.5 in November. That was much sharper than the 1.5 point drop economists had been expecting. The board’s expectations index was off more sharply, sinking to 66.5 from 80.9 in November.
Several economists said the current situation recalls the standoff over raising the federal debt ceiling in the summer of 2011. In that case, too, consumer confidence eroded as both sides in Washington refused to blink until the last moment, but experts added the consequences were likely to be longer-lasting this time because the changes in tax policy affect individuals directly.
“In a lot of ways, this is a replay of the summer of 2011,” Mr. Berger said. “But it’s more serious this time.”
The longer the stalemate continues, the deeper the damage, economists said.
“It takes a while for consumer confidence to go up but it takes just a short while for consumer confidence to go down,” said Chris G. Christopher Jr., senior principal economist at IHS Global Insight. “The fiscal cliff has put a damper on things, and retailers are going to feel it in December.”
“As we get closer to Jan. 1, and the political rhetoric gets ramped up, people get worried,” he said.
Fiscal cliff clouds otherwise improving climate
To cover all bases: it’s possible, I suppose, that Obama and Boehner have been negotiating in secret and struck a fair and equitable deal that can pass the House and the Senate and be enacted into law, and we’ll learn about it sometime in the next few days.
But my money is on the “look good until Wednesday when the real negotiating begins” possibility.
Obama to Congress: It’s time for a deal
By MANU RAJU | 12/28/12 12:20 PM EST Updated: 12/28/12 10:32 PM EST
President Barack Obama called on Senate leaders to hammer out a last-minute deal to prevent taxes from rising on Americans across every income group, warning that he otherwise would push Congress to allow an up-or-down vote on an emergency fiscal package just before the new year’s deadline.
Speaking after an hour-long meeting with congressional leaders, Obama called on Senate Majority Leader Harry Reid and Senate Minority Leader Mitch McConnell to cut a deal before the end of the weekend to prevent $500 billion in tax hikes and spending cuts from taking effect in the new year. Obama said he was “modestly optimistic” a deal could be reached, calling the 11th hour haggling before the fiscal cliff deadline “mind-boggling.”
…The furious, last-minute negotiating and involvement show how both sides fear the political fallout of failure. Obama will need to worry about the ramifications on the economy and having to manage a potential recession in his second term if economists’ predictions ring true. McConnell fears that Republicans will have a much weaker hand next Congress and could suffer a disproportionate amount of blame if no deal is reached.
…According to people briefed on the talks, the developing package would protect nearly 30 million taxpayers from paying the alternative minimum tax for the first time and keep unemployment benefits flowing to 2 million people who otherwise would be cut off in January.
The deal also would likely halt a steep cut in Medicare reimbursements set to hit doctors in January and preserve popular tax breaks for both businesses and individuals, such as those for research and college tuition.
But the two sides were still at odds over a crucial issue: how to define the wealthy. Obama has proposed letting tax rates rise on income over $250,000 a year. Senate Republicans have in recent days expressed interest in a compromise that would lift that threshold to $400,000 a year, an offer Obama made to Boehner before the speaker abruptly broke off negotiations last week.
In addition to its political appeal, the $400,000 threshold has practical benefits, Republican aides said: It would limit tax increases to the very top tax bracket rather than the top two brackets. And it would avoid a quirk of the tax code that would cause rates to rise more dramatically for those earning between $250,000 and $400,000 than for households with much larger incomes.
Senators trade proposals into night to avoid ‘fiscal cliff’
Updated December 29, 2012, 6:04 p.m. ET
Cliff Negotiators Grapple With Tax Issues
By JANET HOOK
WASHINGTON—Senate Republican and Democratic leaders worked Saturday to bridge differences over how to avoid year-end tax increases and possibly spending cuts, and found themselves grappling not only over income tax rates, but also over a thorny side issue of estate taxes.
Aides to Senate Majority Leader Harry Reid (D., Nev.) and Senate Minority Leader Mitch McConnnell (R., Ky.) met in a largely empty Capitol, seeking to lay the groundwork for a compromise that would extend current tax rates for most Americans and at least blunt the impact of the so-called fiscal cliff.
The most intense scrutiny is on the income-tax rates that will expire and be replaced by higher Clinton-era rates if Congress does not act by Jan. 1.
Republicans have conceded that rates will go up for wealthier Americans, and talks are centering on GOP efforts to reduce the number of people in that category. President Barack Obama wants taxes raised on income over $250,000; Republicans have said they want the threshold to be raised to at least $400,000.
The estate tax has emerged one potential sticking point, as key Republicans insist that the levy be kept at current levels rather than rising as Mr. Obama and many Democrats want. The issue also divides Democrats, with some farm-state senators joining the GOP in favoring a lower rate, making the politics of the estate tax particularly tricky.
Democratic officials close to the talks say the president has said he would not give Republicans concessions on both income and estate taxes. If he agreed to move the income tax threshold up from $250,000, Republicans would have to accept an increase in the estate tax, these officials said.
Mr. Obama told the GOP in the Friday meeting with top leaders at the White House that Republicans would have to accept a higher estate tax if they also wanted to raise the income threshold to $400,000.
As senior Senate staff continued negotiating into the evening Saturday, a senior GOP aide said only, “Discussions are under way.” A Democratic official close to the talks also declined specific comment and said, “It’s not clear they will be able to bridge the gap” to craft a bipartisan agreement.
Several other year-end issues—doctors payments under Medicare, unemployment benefits and tax breaks for business—are also on the table and part of the 11th-hour horse-trading.
Mr. Obama deputized Senate leaders to craft a compromise at a Friday meeting designed to dispel widespread gloom about Congress’s deadlock.
“Congress can prevent it from happening, if they act now,” Mr. Obama said Saturday in his weekly radio address. “Leaders in Congress are working on a way to prevent this tax hike on the middle class, and I believe we may be able to reach an agreement that can pass both houses in time.”
Senate Minority Leader Mitch McConnell (R., Ky.) made an unusual Saturday visit to his Capitol office. Asked whether he expected he would reach an agreement with Mr. Reid he said, “I hope so.”
Mr. Reid has said that if they do not reach an agreement, he will have a vote by Monday on legislation that would be a bare-bones effort. It would increase taxes on income over $250,000, extend expiring unemployment benefits and block the expansion of the alternative minimum tax.
Any tentative agreement that is struck between the leaders and their staff will be presented to Senate Republicans and Democrats in separate party meetings Sunday afternoon, when the Senate is set to reconvene.
Senior Republican aides said a key GOP demand is that Mr. Obama move off his insistence that tax rates rise for income over $250,000 in favor of level of $400,000 or $500,000, to reduce the number of people and small businesses that face higher taxes. Mr. Obama has not ruled out that idea. Some Democrats say Republicans must offer a substantial concession in exchange.
Republicans view the extension of unemployment benefits, which expire for many jobless people Dec. 31, as such a concession, especially if its cost is not offset with spending cuts in other programs.
Another major issue for many Republicans is the estate tax, which is slated to jump from 35% to 55% on Jan. 1 on estates worth $1 million or more. Most Republicans and many Democrats in farm states, who think a high estate tax hurts family farms, want to keep the rate at 35%, which applies to inheritances over $5.12 million.
Mr. Obama and many other Democrats want the tax to be set at 45%, applying it to inheritances over $3.5 million. Some liberal Democrats are worried that a deal with Republicans would give too much ground on the estate tax. That could cost support among House Democrats, according to a senior Democratic aide.
Any deal is likely to include a bipartisan measure to block a scheduled expansion of the alternative minimum tax, a levy created in the 1960s to hit only the wealthy that every year threatens to raise taxes on millions of families.
Beyond those must-pass tax issues are other options being debated by negotiators. One senior GOP aide said that the limited time available may make it difficult for the package to be as ambitious as some would like, which means major issues will be left to be addressed after New Year’s.
“We are spending time today thinking about how much they can get in, but this is not a strong horse” to carry a heavy load of other issues, the GOP aide said.
Members of both parties also want to block a scheduled cut in Medicare payments to doctors, but some Republicans want the expense to be offset by spending cuts in other programs.
Republican aides say it is unlikely that the year-end deal will postpone or replace the $110 billion in domestic and defense spending cuts set to take effect Jan. 2, despite bipartisan fears about the impact of those cuts on the Pentagon and the weak economy.
If Messrs. McConnell and Reid do not reach an agreement, tax increases could still be averted for most people if Congress passes Mr. Obama’s backup proposal to extend current rates for income up to $250,000. Democrats are confident they could pass the bill through the Senate. A key question is whether the House would approve it if only a handful of Republicans are in favor.
Officials say they see a path to timely approval of a bipartisan bill: If a Reid-McConnell deal could be struck by Sunday morning, it could be presented to Senators in closed-door party caucuses Sunday afternoon, approved by the Senate Sunday night or Monday morning, then sent to the House, which reconvenes Sunday night.
House Republicans, who recently refused a proposal to raise rates on only income over $1 million, are scheduled to meet in a closed-door party meeting Monday morning, when they presumably would review what the Senate has delivered.
One scenario that could ease the political pain for reluctant House Republicans: If they wait until Jan. 2, after the tax increase takes effect, their votes would amount to a vote for a tax cut.
Talks on Fiscal Crisis Face Setback That Threatens Deal< /p>
“…Senator Mitch McConnell, the Republican leader, went to the Senate floor a little after 2 p.m. to say that Republicans had made their last offer at 7:10 the night before and had yet to receive a reply.
“I’m concerned about the lack of urgency. I think we all know we’re running out of time,” Mr. McConnell said.
Senator Harry Reid, the majority leader, responded that “at this stage, we’re not able to make a counter offer.” He said that Mr. McConnell had negotiated in good faith but that “we’re apart on some pretty big issues.”
Mr. McConnell said he had made an emergency call to Vice President Joseph R. Biden Jr. to get the talks started again.
Talks foundered after Republicans dug in in an effort to get the largest deficit reduction deal in the time remaining, according to numerous Republican and Democratic officials familiar with the negotiations. Republicans told Democrats that they were willing to put off scheduled cuts in payments to health care providers who treat Medicare patients but that they wanted spending cuts elsewhere.
But it was the inflation calculation that forced Democrats from the negotiating table. President Obama has said that in a “grand bargain” on deficit reduction, he would go along with the change, which would slow the growth of programs whose outlays rise with consumer prices, and would raise more revenue by pushing people into higher tax brackets.”
The House watches and waits
In the House, it was watch and wait Sunday afternoon. In the Democratic offices of the House Ways and Means Committee, aides said they were eating ice cream as they awaited word of a deal from across the Capitol.
Rep. Sander Levin (D-Mich.), ranking member on the tax-writing panel, said that the new GOP demands to include “chained CPI” as part of a short-term plan was “not a step forward.”
“I think that they need to drop that,” he said of Republicans.
Lieberman: No deal tonight
Asked as he exited a meeting of the Senate Democratic caucus whether a deal would be struck today, Sen. Joseph I. Lieberman (I-Conn.) replied: “No, I’d be shocked. I think the parties are much farther apart than I hoped they’d be by now, and that the country thought they’d be when negotiations started on Friday.”
When will Obama decide to make a deal?
Posted by Jennifer Rubin on December 30, 2012 at 2:53 pm
The president never quite sounds like a man who wants a deal. He instead invariably sounds like a pol seeking advantage over opponents, which is peculiar given that he faces no future election but will face a GOP House majority for at least two more years. He wants the other side to lose more than he wants a substantial deal to improve our fiscal situation.
The Post reports that Senate discussions on a fiscal cliff-avoiding deal have experienced a “major setback.” Presumably, Democrats won’t include any serious spending cuts to accompany revenue hikes. This predictable result suggests the Democrats are following President Obama’s less than constructive example.
On “Meet the Press,” rather than sound a conciliatory note, Obama bashed his opponents, accusing them — pot, meet kettle — of being unserious. He told David Gregory, “They have had trouble saying yes to a number of repeated offers. Yesterday, I had another meeting with the leadership, and I suggested to them if they can’t do a comprehensive package … of smart deficit reductions, let’s at minimum make sure that people’s taxes don’t go up and that 2 million people don’t lose their unemployment insurance.” He falsely suggested that the problem is the GOP’s unwillingness to yield on revenue: “I think it’s been very hard for Speaker Boehner and Republican Leader McConnell to accept the fact that taxes on the wealthiest Americans should go up a little bit — as part of an overall deficit reduction package.”
In fact what is going on here is a repetition of the president’s 2011 performance in which he refused to take on his own party. He has been offered deals with a significant revenue component, but he is the one refusing to move in any meaningful way on spending reduction. He has used the cover of GOP intransigence on taxes for so long he hasn’t noticed, or won’t admit, that it is now the prospect of additional revenue with no meaningful debt reduction from entitlement reform that has the GOP vexed. House Speaker John Boehner (R-Ohio) let the president have it on this score in response to the president’s woe-is-me TV appearance:
In an effort to get the president to agree to cut spending — which is the problem — I put revenues on the table last year, and I put them on the table again last month. Republicans made every effort to reach the ‘balanced’ deficit agreement that the president promised the American people, while the president has continued to insist on a package skewed dramatically in favor of higher taxes that would destroy jobs. We’ve been reasonable and responsible. The president is the one who has never been able to get to ‘yes.’
This suggests that the president seems to think he can get by (and in the short term he is right) by avoiding any serious entitlement reform, while seeking as much revenue as he can via tax hikes on the “rich.” (It will come as a bitter pill to Senate Democrats in deep blue, expensive states if that definition extends to those making $250,000).
Critics of the House Republican leadership say they are getting nothing for relenting on expiration of a portion of the George W. Bush tax cuts. But the tax cuts are expiring on all Americans. House Republicans aren’t giving in “on what was an article of faith — that taxes should not be raised on anybody, poor or rich — in return for essentially nothing.” They don’t have the votes to achieve anything better right now. (A no vote on whatever the Senate comes up with still gets them no spending cuts, plus tax hikes on all taxpayers.) They lost the election, and with that nearly all power to force the president to do what he is loath to do, namely control spending.
Meanwhile the sequestration cuts seem destined to go forward, despite the president’s campaign talk that he’d take care of those “devastating” defense cuts. We will then have perhaps the worst of all worlds: A tax hike, no entitlement reform and “devastating” defense cuts. That, make no mistake, is the president’s preference.
Whether the Senate is able to reach a deal or not, the GOP should consider carefully its debt ceiling strategy. Then the choice will be simple: Let the president keep spending or insist on significant entitlement reform under threat of government bankruptcy. If liberals think the latter amounts to holding the country hostage, they are right, but it is the only mechanism that seems to get the president to get serious on entitlement reform.
Now he is a man in search of a scapegoat and a tactical advantage. You wonder when a president in search of a historic legacy (with the political guts to make it happen) is going to show up. Based on his recent behavior, the answer might well be: Never.
* President Obama: Obama’s handling of the fiscal cliff talks felt pitch perfect up until his Monday [12/31] event with “middle class” citizens. The rally felt too much like a campaign rally — Obama was repeatedly cheered — and the president himself was in a joking mood that didn’t seem to fit the moment. Will it be overshadow the fact that he got a deal? No. But it was an off-key note from the country’s top communicator.
Obama’s leadership failure
…Whatever one thinks about raising taxes at the top (and I have no objection to it as part of comprehensive budget package), it’s not the crux of the problem. The crux of our problem — the problem being the bipartisan and untenable promises made to most Americans of both high government benefits and low taxes — arises from an aging population and high health costs, which cause rapid increases in spending on Social Security, Medicare and Medicaid. Let me repeat some statistics I’ve often cited. In 2012, Social Security, Medicare and Medicaid accounted for 44 percent of non-interest federal spending. As for taxes, the richest 5 percent paid almost 40 percent of federal taxes in 2009 (and within that, the richest 1 percent paid 22 percent of taxes).
The nonpartisan Congressional Budget Office puts it this way:
“With the population aging and health care costs per person likely to keep growing faster than the economy [gross domestic product], the United States cannot sustain the federal spending programs that are now in place with the federal taxes (as a share of GDP) that it has been accustomed to paying.”
Until Obama conspicuously and consistently acknowledges these realities in straightforward and unmistakable language — something he hasn’t done and shows no signs of doing — he cannot be said to be dealing honestly with the budget or with the American people. The main reason that we keep having these destructive and inconclusive budget confrontations is not simply that many Republicans have been intransigent on taxes. The larger cause is that Obama refuses to concede that Social Security, Medicare and Medicaid are driving future spending and deficits. So when Republicans make concessions on taxes (as they have), they get little in return. Naturally, this poisons the negotiating climate.
Editorial director, Huffington Post
Fiscal Cliffs: Congress Falls To New Normal
Posted: 12/31/2012 5:22 pm
This “fiscal cliff” thing? Get used to it. We now operate in a continuous “crisis” of pending governmental collapse. The cliff we rushed to avoid New Year’s Eve is just the first of many that we will face.
It’s how we roll now. It’s not how the framers envisioned it; not how the old textbooks described it in the chapter on “How a Bill Becomes a Law”; not how Norm Ornstein and Tom Mann wish it would be.
On one level, GBC, or “Government By Crisis,” is just — well, different. In that sense, it is not a big deal, just more neurotic, dramatic and exhausting than the way we’ve conducted business in the past.
But in a deeper sense, it is a gathering disaster that is sapping our economic energy, undermining our leadership role in the world, and disproportionately putting the screws to — you guessed it — the poor, the working stiff and the average American tax-payer.
Money has always ruled Washington and always will. But that tends to be especially true when decisions are made in a hurry and behind closed doors in the name of paying the nation’s creditors.
Take for example the decision to let the payroll tax cut expire, a big blow to the pocketbooks of most Americans. In all the hurly-burly of the fiscal cliff “crisis,” that colossal decision got lost in the discussion. Deliberate discussion? Rounds of contentious hearings? None of that happened. No time. We were in a crisis.
That’s where we are now. And where we will be for the foreseeable future.
Even when we get past this fiscal cliff, others are close at hand. We will soon have to deal with the spending side of the cliff equation, and a “debt limit crisis” is set for the spring.
“Government” has a solid, unchangeable sound to American ears. But we are headed in the direction of Italy, where the idea of government is so operatic and laughably crisis-filled that more than 40 “governments” have fallen since the end of World War II.
One reason is that The Global Big Money and its minions have decided that the nation can’t afford the welfare state it began building almost exactly 80 years ago.
It’s true that the U.S. is headed in the direction of Japan and Europe, in terms of the crushing burden of debt we owe to foreign creditors and our own kids and grandkids. (Bulletin: Ayn Rand is now a popular author on the once-liberal campus of the University of Wisconsin.)
And it is true that, even if they were willing, China alone can’t be expected to lend every one of us all of the money we need to keep the merry-go-round going forever, or even beyond this decade.
So we are facing a revolution of diminishing governmental expectations. But nobody wants to tell voters that the benefits they considered “entitlements” — for that is what Congress called them — are not guaranteed by the Constitution, or God or the Franklin Mint.
Which means that no one has the guts to discuss this calmly and rationally and in the open. Or let’s just say that they are not eager to do so. So we are doing it in secret, in a hurry, and with a sense of urgency that is, in one sense, justified but in another, entirely trumped up.
Another reason for GBC is the Tea Party GOP. No politician likes to raise taxes (or at least they don’t want to be seen as liking to raise taxes). And it is true that tax cuts can stimulate the economy — until they crush it with government borrowing. But the Tea Party has turned this fundamental truism into a fanatical, nihilistic dogma. Which means that the harder they are pressed, the harder they resist, because they think they are channeling Thomas Paine, Patrick Henry, Samuel Adams (the revolutionary, but perhaps also the beer), Ronald Reagan and Jack Kemp all at the same time.
The Tea Partiers are giving checks and balances a bad name, but they can effectively use the Constitution and the rules of the House and Senate to gum up the works, which is another reason why we are now in a permanent state of “crisis” in D.C.
The third reason is the decay of our political parties. They are big but they are no longer tents. They no longer force conflicting ideas and constituencies to get together on a diverse agenda. Controlled by donors, cult-style social media techniques and gerrymandered congressional districts, they focus on purity, not diversity of ideas. They have obliterated the committee system in Congress, which used to allow — indeed, to encourage — powerful committee chairs to moderate and mediate things in the middle.
The committees used to decide spending; now it’s a few people in a room who try to do it: the president and a few key “gang of” would-be leaders.
When today’s parties operate in Congress, they have no idea what language the other party is speaking. And a lack of common language creates … crisis.
Happy New Year.
My grandfather said you go to college to learn how to think…