One day left, and Washington’s key players still can’t come to terms. What’s the holdup? Abby Haglage peeks at the fiscal-cliff wish lists of Obama, Pelosi, Boehner, and more.
If you’re just now entering the "fiscal cliff" conversation—the name given to automatic tax increases and spending cuts set to take effect Jan. 1, a leftover from 2011's dismal debt-ceiling debate—count yourself lucky. For the unfortunate few entrenched in the scramble to keep us from tumbling over, it’s been a taxing (no pun intended) ride. As midnight Monday approaches, here’s a look at the key players, what they want, and why their dissenting desires have brought us to the brink.
1. President Obama
Wish list: Higher taxes on the wealthy, stimulus spending, limited cuts to entitlements
Worries of a “fiscal cliff” got a whole lot more real after the Nov. 6 election, which promised the return of divided government. Acutely aware of this, the newly re-elected president began publicly advocating the need for higher taxes on the wealthy as a cornerstone of any deal, offering his first official proposal to House Speaker John Boehner on Nov. 29th. His package called for $1.6 trillion in new tax revenue over 10 years by continuing Bush-era rates for all but the wealthiest Americans; a $50 billion stimulus program; and new executive power to raise the federal debt limit without congressional approval. It was swiftly denied. Epitomizing the budget talks, his next offer was received with equal contempt. That time, the proposal was a compromise for the Democratic president—an agreement to raise the income threshold on higher rates to $400,000 (up from $250,000).
2. House Speaker John Boehner
Wish list: Limited tax increases; keeping his job
As House Speaker, the fiscal-cliff crisis is in many ways John Boehner’s cross to bear. And bear it he has. Pleasing a fractious Republican caucus, the majority of whom signed Grover Norquist’s “no new taxes” pledge, is no easy feat, especially if Boehner wants to keep his leadership position in the new Congress. After staunchly rejecting Obama’s initial offer in late November, Boehner presented one of his own on Dec. 3rd. That package called for $800 billion in new tax revenue over 10 years, to be generated through unspecified changes to the tax code (about half of what Obama proposed), and $600 billion in cuts to health-care programs, including Medicare. The White House quickly rejected the offer, claiming that it did not “meet the test of balance." After a few days of talking and finger-pointing in mid-December, Boehner came back with what many considered a triumphant compromise:“Plan B.” That proposal presented tax-rate increases only on those making over $1 million per year, protecting the other current tax rates. But in a turn of events that ultimately exposed his own vulnerability as speaker, Boehner was unable to garner enough votes from his tax-weary party to pass the compromise. Embarrassingly, he had to yank the bill from the House floor at the last minute.
3. Senate Majority Leader Harry Reid
Wish list: Extending Bush-era tax cuts for households making less than $250,000
After Obama and Boehner’s efforts ended in stalemate, an exasperated president called on the two leaders of the Senate to create a bipartisan package that, with any luck, will help the nation successfully avert the fiscal cliff. At the least, Obama said, he deserved an up-or-down vote on something. That something, if Reid, the Senate’s top Democrat, gets his wish, will be simple, clean, and look very much like what Obama himself would have drawn. Reid’s bill would most definitely extend the Bush-era tax cuts for households making less than $250,000 a year, and would likely include spending cuts to offset the change. Last week, an openly pessimistic Reid proclaimed this the “only viable escape route” to avoid tumbling over the cliff. But with many of his fellow Democrats looking to be reelected in 2014 (and many in red states), Reid has another agenda as well: keeping everyone happy.
4. Senate Minority Leader Mitch McConnell
Wish list: Read his lips: no new taxes
In the eleventh hour, Mitch McConnell—the top Senate Republican—has a crucial role in the crisis. Luckily, McConnell is no stranger to desperate times—he was instrumental in helping Vice President Joe Biden extend the Bush tax cuts in 2010. But McConnell knows what he wants, and it's in stark contrast to his counterpart, Sen. Reid. A key member of the conservative establishment, it is extremely unlikely that he will be willing to raise tax dollars on...well, anyone. A Kentucky native closely aligned with the Tea Party, he is all too aware of the scrutiny he will face should he throw the “no new taxes” pledge to the wind. But if he does get brave up and agree to raise taxes on the wealthy—essentially saving the GOP from themselves—it may mean playing the martyr, sacrificing his own ticket in 2014.
5. House Minority Leader Nancy Pelosi
Wants: Tax hikes on the wealthy (and basically, whatever Obama wants)
Beyond just Washington D.C.
Guess this will brighten up Starbucks cups after the holiday-themed ones are gone. Starbucks has officially joined the president in asking lawmakers to compromise on the economy to avoid going over the fiscal cliff. After the company urged workers in its 120 Washington, D.C., stores to write “come together” on each customer’s cup, the effort gained so much steam over the week that a spokesman announced on Friday that Starbucks stores all over the country would be invited to join in. Although some have reported that it hasn’t been quite so successful ...
Wow, President Obama must really want to talk the fiscal cliff. NBC announced Saturday that President Obama will appear on its heavy-hitting political talk show Meet the Press on Sunday. The president has not appeared on the show in three years. He will be interviewed by the show's moderator, David Gregory, who had been on vacation following an investigation by Washington, D.C., police. Even more nail-biting? The interview is set to air just hours before the fiscal-cliff deadline.
House Republicans are unlikely to make a fiscal-cliff deal until they start hearing from CEOs and investors. And that’s not happening yet.
So of course the pro forma meeting between President Obama and congressional leaders ended Friday without a deal, or even a new proposal. And why should it have? Obama, the Senate, and the House Republicans have made their positions abundantly clear. With about 78 hours left to go before Jan. 1, 2013, it seems that both sides prefer going over the cliff to compromising further (in the Democrats’ case) or compromising at all (in the Republicans’ case.) (In the Senate, Majority Leader Harry Reid and Minority Leader Mitch McConnell are continuing to discuss a potential deal.)
U.S. President Barack Obama speaks on ongoing "fiscal cliff" negotiations during press conference in Washington, DC, Dec. 19, 2012 . (Win McNamee / Getty)
When news broke in the late afternoon that the White House was not going to make an offer for a small, cliff-avoiding deal, the Dow Jones Industrial Average, which had been trading down about 50 points all day, dropped an additional 100 points. The movement raises serious questions about the intelligence of people trading based on what they think will happen at these meetings. But the reaction—down about 1 percent—was also quite muted and lame. And that’s part of the reason there hasn’t been a deal yet. If people are hoping the markets and the private sector will push the public sector into a deal to avoid the economically damaging cliff, they’re going to have to wait a few more weeks. Too many entities in the private sector are either in denial about the situation, or are not yet feeling the pain.
Let’s start with denial. Earlier this week, I argued that Starbucks’ initiative to encourage bipartisanship by having baristas scrawl the words “come together” on coffee cups was likely to fail. Friday afternoon, I received an email from Marriott International CEO Arne Sorensen. “Leaders need to reach a balanced deal now, before we go off the fiscal cliff at year end, and without creating a new set of future conditions that recreate a new fiscal cliff in the future,” he noted.
Of course, there are a host of balanced plans out there. The White House keeps proposing them. The Senate has passed one. The two parties agreed on spending cuts of $1.5 trillion in 2011. But the House Republicans aren’t interested in a balanced plan because they believe taxes are already high enough. When House Speaker John Boehner presented them with the possibility of voting on a wildly unbalanced plan—one that preserved Bush tax cuts for everyone making $1 million or less—the rank and file told him to forget it.
Instead of distributing emails to journalists or making blog posts, CEOs who are really interested in a deal should get on the phone to Republican elected officials and ask, order, and beg them to make a deal that will effectively raise taxes on the CEOs. And CEOs are not nearly at that point of desperation.
Instead of one day with the Dow down 150 points, we will need several days in a row where the Dow is down several hundred points. That will cause CEOs’ net worth to fall sharply, making options worthless, and render corporations incapable of issuing new debt or stock, striking alliances, or doing deals. When traders walk into work feeling nauseous because futures are down so low, and when Grand Central Station at 4:30 p.m. looks like a casting call for one of those zombie television shows— half-dead creatures staggering around, their hair a mess, clothes ripped—that’s when private-sector pressure for a deal will really start to mount.
As time runs out before the fiscal cliff deadline, President Obama told the press Friday he is still determined to 'get this done.'
After budget talks end in no deal, again.
In the world of fiscal cliff debates, hope springs intermittently. The highly-anticipated meeting between President Obama and congressional leaders Friday afternoon ended disappointingly, with sources close to the talks claiming “no new offer” was made. Speaking to the press shortly after, a visibly-frustrated President Obama quipped that he had “deja vu,” after the lackluster discussion, but still remains “modestly optimistic” that a deal will be reached. “The hour for immediate action is here,” he said, adding that if the Senate cannot reach deal, he will ask for vote on his fiscal cliff plan. The president will also be appearing exclusively on Meet the Press this Sunday.
Leaders exploring scaled-back proposal.
Is it almost over? Perhaps, top aides to congressional leaders told The New York Times on Friday. A potential compromise is reportedly being explored that would include a scaled-down proposal preventing tax increases on household incomes of $400,000 or below. The agreement is said to be “in the early stages and far from a certainty.” The deal does not stop automatic spending cuts from hitting military and domestic programs beginning Wednesday, nor does it raise the statutory borrowing limit, but those issues will reportedly be resolved in another showdown early next year. White House official deny that the agreement is developing, again echoing its mandate that only income up to $250,000 be protected from tax increases.
As they return to the Hill for fiscal-cliff talks.
Is there anything sadder than working the week between Christmas and New Year’s? The New York Times on Friday chronicled the unhappy senators, forced to trudge back to the Hill this week to tackle the fiscal cliff, while their House counterparts have refused to return and could hypothetically be having all the fun in the world. Senate Majority Leader Harry Reid didn’t mince words, saying members of the House “should be here,” but are instead “are out watching movies and watching their kids play soccer and basketball and all kinds of things.” But there’s one member of Congress happy to be there: the newest member of the Senate, Hawaii’s Brian Schatz, who was appointed Wednesday and has yet to be beaten down by Washington.
Both sides are playing blame-game politics, with no budget deal in sight just days before the year-end deadline. Why Washington lacks the will to avoid the train wreck.
There was a brief burst of optimism after Barack Obama’s reelection that Democrats and Republicans would finally go the grownup route and avert the so-called fiscal cliff.
Hopes brightened again when John Boehner moved off his no-new-taxes-ever stance, agreeing to boost rates on millionaires, and Obama raised the income threshold on those who would be affected to $400,000 from $250,000. At last it seemed that rationality would prevail in Washington.
Instead, we have Harry Reid accusing John Boehner of running a “dictatorship” and the House speaker shooting back that the Democratic majority leader “should talk less and legislate more.”
Welcome back to Washington, the country’s biggest day-care center.
The capital’s politicians seem wedded to acting in their own self-interest, rather than the national interest, even as we barrel toward a fiscal train wreck.
The pundits have long overestimated the willingness of the two sides to get something done, which is why the country is three days from sliding off the much-ballyhooed cliff. As an added bonus, Treasury Secretary Tim Geithner now says the government will bump up against its debt ceiling as well on Dec. 31—an oddly timed announcement that seemed designed to ratchet up pressure on the GOP.
Boehner, Pelosi, Reid, and more will go to White House on Friday.
When even Starbucks baristas can’t agree to get along, things are not looking good on the Hill. President Obama will meet with congressional leaders at the White House on Friday, communications director Dan Pfeiffer said Thursday. Obama will meet with House Speaker John Boehner, Senate Minority Leader Mitch McConnell, Senate Majority Leader Harry Reid, and House Minority Leader Nancy Pelosi. A Reuters/Ipsos poll released Thursday shows that more Americans blame the Republicans for the crisis than the Democrats or the president. Meanwhile, Boehner said the House will return to its session on Sunday, one day before the fiscal-cliff deadline. Get your parachutes ready, folks…
Sure, the fiscal cliff is scary. But what about the debt ceiling? Matthew Zeitlin on what it is, how we got here—and whether you even need to worry about it.
While all of Washington is abuzz about the fiscal cliff—the combination of tax hikes and spending cuts that will go into effect on Jan. 1—there’s another budget deadline waiting for us: the debt ceiling. Although we’re not likely to hit it for more than a month, it’s a looming threat to our economy that will only go into effect if the government does nothing about it. Here’s a guide to what it is and why it matters.
What is the debt ceiling?
The debt ceiling is a limit that Congress places on how much debt the federal government can issue to fund itself. It’s been around since 1917 and has been raised regularly since then. The federal government typically runs a deficit, meaning the difference between how much it makes from taxes and how much it spends. To cover that deficit—which this year is about $1.1 trillion—it issues bonds, which banks, companies and even whole countries (like China) buy up, thus allowing the U.S. to essentially stay in business. Add up each year's deficit, roll in what the government owes to the Social Security Trust Fund, and you get to just over $16 trillion, as of Dec. 24. That puts us right up against the current debt limit of $16.394 trillion.
Are we hitting it soon?
Yes. Yesterday, Treasury Secretary Timothy Geithner wrote a letter to congressional leaders saying that the federal government would hit the $16.394 trillion cap on Dec. 31. This was in line with estimates from a month ago that the federal government would exhaust its borrowing authority by late December.
Isn’t it time to panic?
Not quite yet. The letter also detailed the “extraordinary measures” the federal government could take to buy some time.
What are these “extraordinary measures”?
Obama cut short his trip to return to Washington, even though he’s unlikely to get a fiscal-cliff deal from the GOP. Lauren Ashburn on the dangers of presidential vacations.
President Obama packed up and left behind gorgeous sunrises over pristine Hawaii beaches, rolling green golf courses peppered with palm trees, and the bosom of his family, to return—alone—to sleet-covered walks and browning Christmas trees.
President Barack Obama and First Lady Michelle Obama talk with members of the military and their families during a dinner in Anderson Hall at Marine Corps Base Hawaii in Kaneohe Bay, Hawaii, Dec. 25, 2012. (Jim Watson/AFP, via Getty)
It would be one thing if he was cutting his vacation short for actual work, but we know better.
He headed back in town for one reason only: to join in the political posturing.
Never mind that the man can work anywhere, anytime, thanks to all of the gizmos on Air Force One, a sizable entourage, and secure telephone lines. Nope, he has to be seen landing his chopper on the South Lawn, propping his leather loafers on his mahogany desk in the Oval.
As they say in La-La Land, it’s all about optics, baby.
When it comes to the battle of perception, score one for Obama.
The president has learned from problems his predecessors encountered when trying to get some much-needed R&R. Ronald Reagan often was lambasted for spending so much time cutting brush at his ranch in California. He made 43 visits to the ranch as president, totaling just about a year in his home state.
With inspirational message on coffee cups.
Could there be some ulterior motives at play here? Starbucks CEO Howard Schultz wants workers in all of the 102 D.C.-area Starbucks stores to write “Come together” on cups sold Thursday and Friday, in hopes that it will push President Obama and his Republican adversaries to cooperate on economic negotiations before the dreaded spending cuts and tax increases go into effect on Jan. 1. “We’re paying attention, we’re greatly disappointed in what’s going on, and we deserve better,” said Schultz of the campaign.
To avoid fiscal cliff.
If they won't act, he will. In a letter to our mostly absent congressional leaders Wednesday, Treasury Secretary Timothy Geithner told lawmakers the Treasury will “shortly” begin undertaking “extraordinary measures” to avoid the cliff. The Treasury can take action that would give the government another $200 billion in headroom on the budget, delaying the effects of the cliff until February or early March. Geithner also noted that the tax hikes and spending cuts that would go into effect if no action is taken by Jan. 1 would buy the government more time—at least until it’s no longer able to borrow more money.
As fiscal-cliff deadline looms.
The fiscal-cliff clock is ticking, but as the Jan. 1 deadline nears, there hardly appears to be a sense of urgency on Capitol Hill. Few senators have chosen to return to their offices before Thursday, and House Republican leaders have yet to give fellow members the promised 48-hour warning before they anticipate returning. Despite the fact that lawmakers seem to be making the most of their Christmas break, they still insist a deal to avoid sending the U.S. economy over the dreaded fiscal cliff is still possible.
The coffee chain is encouraging Beltway insiders to cut a fiscal-cliff deal by scrawling the phrase “come together” on cups. Daniel Gross on why the gimmick won’t work.
So now Starbucks is trying to solve the fiscal cliff. With just a few days left before taxes rise and spending cuts start to bite, the ubiquitous coffee chain is adding its voice to the calls for a compromise. CEO Howard Schultz noted in a blog post Wednesday morning that for the next few days, baristas in the D.C. area will scrawl the phrase “come together” on cups. “It’s a small gesture, but the power of small gestures is what Starbucks is about!”
This idea is sort of, um, doppio.
Starbucks CEO Howard Schultz wrote in a blog post Wednesday morning that for the next few days baristas in the D.C. area will scrawl the phrase “Come together” on cups to help urge coffee drinkers to solve the fiscal cliff. (Chris Helgren/Reuters, via Landov )
Corporate America is desperate to get fiscal cliff resolved, because it contains a lot of bad news for the economy, and for individual companies: defense contractors, health-care providers, pharmaceutical companies, the financial-services complex, and infrastructure firms. Meanwhile, as I’ve argued, it’s likely that companies that rely on lower-earning Americans—e.g., Walmart—will be the first to suffer when the payroll tax jumps higher and unemployment benefits fade away.
So it’s not surprising that since the conclusion of a divisive election, many companies and their leaders have become involved in pushing for a peaceful resolution of the fiscal-cliff hostage situation. CNBC has been running a “Rise above,” campaign. The organization Fix the Debt has enlisted dozens of CEOs of blue-chip companies to push for a deal. The CEOs of companies like Goldman Sachs, JPMorgan Chase, Aetna, and Honeywell have publicly urged Congress and the White House to come together.
And yet the calls go unheeded. The nation can’t rise above, or come together, or fix the debt, for some very good reasons. On issue after issue—global warming, tax cuts, even personal economic feeling—Democrats and Republicans see the world differently. In fact, it often seems as though they represent two different countries. The Republicans, who still command a majority in the House thanks to gerrymandered districts, are shrinking to a rural and Southern core. (There isn’t a single GOP representative east of the Hudson River, save Peter King of Long Island, which is really part of its own universe.) The Democrats dominate the urbanized coasts and the industrial Midwest.
The more the Republicans lose, the more stubborn and obstinate they become. They don’t want to do a deal with President Obama. They don’t want to compromise on taxing. They want to rip up the safety net, except for the portion that covers those who are already receiving benefits. They have said so, over and over again, to the press, to their own leaders, to anybody who will listen. The Democrats, having won two presidential elections in a row, are in no mood to rip up the greatest achievements of generations of Democratic presidents in exchange for smaller tax cuts than would be achieved by going over the fiscal cliff. And it seems unlikely that either side will have a big change of heart in the few remaining working days.
Large companies that put their brands behind a fiscal-cliff solution don’t have a particular solution in mind. Generally, they seem to want a compromise that would raise taxes some in exchange for a larger reduction in entitlements. But they do think that they can use their influence and moral authority to push the two parties to make a deal. In doing so, they’re failing to grasp the political dynamics. When two parties are a few hundred million dollars apart, they tend to meet in the middle. However, as I’ve noted, the fiscal-cliff situation is not a business transaction. When it comes to matters of theology—as the issue of taxation is for Republicans—there is no middle ground in which the two parties can come together.
There’s a broader fallacy at work here. What makes CEOs think that putting their imprimatur on a political movement will increase public pressure on the two parties? Decades of lobbying have made observers suspicious of corporations in the public sphere. Why would they push for a solution unless they are pushing a parochial interest? Besides, while Americans may love their brands, they don’t exactly love big business. A decade of weak stock-market returns, stagnant wages, insane executive compensation, massive tax avoidance, and bailouts have sapped a great deal of the moral authority that large corporations once had in the public sphere. Companies who are known for paying absurdly low corporate income tax are poor messengers for tax reform, and CEOs who enjoy ridiculous pensions and retirement perks are poor messengers for entitlement reform.
Besides, there’s a degree to which companies’ efforts to align their brands with a nonpartisan message can be counterproductive. It’s a simple fact that some companies have partisan identities—thanks to the personal preferences of CEOs, or thanks to the way companies benefit from policies, or thanks to market positioning. Walmart is Republicans, Costco is Democratic. Oil companies like ExxonMobil are Republican. Tesla Motors, the electric carmaker, is Democratic. MSNBC is (largely) Democratic. CNBC is (largely) Republican.
Which brings us back to Starbucks. Like all great American companies, it needs to be perceived as nonpartisan, as a neutral player in the political and culture wars. But come on. The company is based in Seattle. It publicly supported Washington’s gay-marriage referendum. The stereotypical liberal drinks a latte or a cappuccino. This is a company that sells CDs of Bob Dylan and other lefty musicians at its checkout counters. It encourages its well-heeled customers to pay extra for “fair trade” coffee. Its CEO publicly supported Obamacare. I’m sure plenty of Republicans patronize Starbucks. But listen. There are five Starbucks outlets in the Jackson, Miss., area. There are single blocks in Manhattan that have that many Starbucks joints.
Now, this shouldn’t be read as a blanket rejection of Starbucks efforts to promote inside-the-Beltway civility. But if the company really wants to help us get through the fiscal cliff, maybe it could cut prices on its coffee drinks, or sell a triple-shot espresso for the price of a doppio. After all, we reporters are going to be pulling some all-nighters as we wait for a resolution of the fiscal cliff.
After the House approved the Senate's fiscal cliff deal late Tuesday night, President Obama sent a message to the next Congress, arguing for a balanced approach to deficit reduction. And he was clear about his position on the coming debt ceiling debate. 'We can't not pay bills,' he said.
But Howard Kurtz says it could prove a pyrrhic victory that could threaten his second-term agenda.
Abby Haglage peeks at the fiscal-cliff wish lists of Obama, Pelosi, Boehner, and more.
It was an ugly scramble—and leaves us facing yet another fiscal showdown before spring, says John Avlon.
The president’s budget battle is really a fight with 200 years of obstructionism and selfish greed. By Michael Tomasky.
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John Avlon on how our government turned to self-sabotage.
New polls shows that voters are ahead of politicians in understanding the necessity of reforming entitlement programs, writes Eleanor Clift.