Chestnuts roasting. Sleigh bells ringing. Falling off a fiscal cliff. It’s just another holiday season on Capitol Hill. David Freedlander on what’s in store for us in the new year.
On Thursday night, Congress grabbed America by the hand, walked right up to the edge of a cliff overlooking a massive fiscal freefall, and closed its eyes. And the nation inched ever closer to heading into the abyss.
House Majority Leader Eric Cantor, R-Va., left, and Speaker of the House John Boehner, R-Ohio, hold their news conference to speak about the fiscal cliff and the failed Plan B on Friday, Dec. 21, 2012. (Bill Clark/CQ Roll Call)
The fiscal cliff—a series of automatic tax hikes and spending cuts that are scheduled to kick in after the first of the year unless Congress and President Obama come up with an alternative—is an imperfect metaphor. Americans won’t immediately be forking over substantially more of their annual income, and the spending cuts will take a bit before the effects will fully be felt.
Still, a cliff by another name still ain’t great, and making matters even more frustrating to those of us who are being dragged to the edge is the knowledge that the coming crisis is an entirely invented, and thus, avoidable one. The cliff was constructed, recall, after Republicans and Democrats couldn’t agree on a deficit reduction plan last year; in exchange for raising the nation’s debt ceiling, Republicans demanded this pound of flesh, hoping that the threat of falling would be enough to concentrate the mind of budgeteers.
So with the holidays upon us, we thought we’d take a look at a few possible scenarios that might greet us in the new year:
1. Over the Cliff We Go
This is an idea that is growing in popularity among the outer edges of both the Democratic and Republican Parties. From the Democratic perspective, going over the cliff would result in the federal government finally being flush with revenue for the first time in a decade. Some nasty, politically distasteful military spending cuts would kick in, of the kind that would never be permitted to occur otherwise. Sure, there will be a world of pain in social programs—closed national parks, fewer food safety inspectors and the like—but Democrats think they will eventually get restored. What else to do, after all, with all that tax money now coming in? Plus, sacred entitlement programs will largely be spared. Hard-core Republicans have come around to this idea, too, since it will simultaneously provide them with a long sought after goal (cutting spending) and provide them with a way to avoid violating what they consider to be a sacred pledge (to never raise taxes.) This option is viewed with favor by members of Congress in both parties, since it allows them to do what they do best—nothing.
2. Going Over, Then Clambering Back
Says he is not worried about speakership.
Without the world ending, it must be time to take back up that fiscal-cliff compromise. House Speaker John Boehner said Friday that the failure of the so-called Plan B fiscal-cliff deal was “the will of the House.” The “real issue,” Boehner said in a press conference, was that many GOP members did not want to be perceived as having to raise taxes. “It’s God’s will,” Boehner said. As for his future as the most powerful man on the Hill, Boehner said he is not worried. “If you do the right things every day for the right reasons, the right things will happen,” Boehner said. A deal must be reached by Jan. 1 to avoid the fiscal cliff, the name given for when a series of draconian spending cuts will automatically go into place and the Bush tax cuts will expire.
Let's get something straight from the start. Plan B wasn't going to lead to any deal anyway. Suppose it had gotten 218 votes last night, instead of being the epic failure that it was. Okay. That would have left Republicans at $1,000,000 on tax rates, with Obama at $400,000. That's still an extremely wide gulf, and if the GOP had to fight that hard to get to 218 on $1 million, what on earth would make anyone think there'd be votes in the GOP caucus for a compromise-on-the-compromise figure like $500,000 or $600,000? No chance.
And that's just tax rates. Plan B also included draconian, not to say outright cruel, cuts to the safety net--ending the child tax credit (Merry Christmas, kids?), permitting the lapsing of certain tax credits that alleviate the tax burden of the working poor. Finally, Plan B lifted the sequester, the across-the-board mandated spending cuts, on the Pentagon only (Merry Christmas, Lockheed Martin!).
In other words, Plan B was a fully baked conservative cake--penalties for poor people, goodies for defense contractors. Then over top of it Boehner tried to apply this icing of a tax increase on two-tenths of one percent of the population, so that the gullible and ever-hopeful establishment press would write that Republicans raised some taxes and see, there's hope.
But even if they'd passed it, the chasm between Obama and the Republicans would still have been vast, and Boehner's unyielding caucus would have signaled that they weren't budging one inch further. I shook my head ruefully yesterday as I listened to some of the credulous reporting on NPR about how Americans should keep hope alive (host Robert Siegel sounded, in fairness, like he knew better).
So step back and think of last night in this context: Plan B was a conservative plan with one little tiny dash of compromise, one small and mostly symbolic feather step outside the safe zone of hard-right ideology and toward...not even the center, but the far-right fringe of the center. And the Republicans could not vote even for that.
As Andrew Sullivan wrote yesterday, a word I re-used on television last night, they are vandals. They aren't legislators. They have nothing to contribute to the polity at all. All they want to do is destroy--the federal government; Barack Obama; the national economy as long as Obama is president might gain from good economic news. That is an agenda of destruction; of vandalism quite literally. This should be manifestly clear this morning even to the most monastic heirs of David Broder.
Obama was offering around $1.2 trillion each in taxes and cuts. He moved dramatically on the debt ceiling. He put a Social Security cut on the table that is bitter medicine indeed for a lot of his base. He came to the table. Boehner, for whom my sympathy is limited, lied about the president in every one of these particulars. Obama tried. The Republicans said clearly: sorry, we don't compromise. On anything.
What now? Obama should hold a press conference, I think, or even give a quick Oval Office speech and tell the American people all the above, tell them exactly where things stand, exactly what this alleged "political party" is doing in the name of 47 percent of them. He's been patient and more than fair. Besides which, he should not just assume that Americans will blame the GOP if we go over the cliff. He needs to do something to make sure they blame the GOP.
John Boehner had to scuttle his fiscal-cliff deal when he couldn’t win over the Republican hard-core. The speaker may bow to his own crazies, but the president shouldn’t.
John Boehner’s Plan B is pure BS. It couldn’t even pass the House. It would have no chance in the Senate. And it would be vetoed by the president. Talk about a trifecta of futility.
House Speaker John Boehner, a Republican from Ohio, speaks during a news conference in Washington, D.C., U.S., on Tuesday, Dec. 18, 2012. Boehner said he will push a budget "plan B" measure that would include tax increases on income of more than $1 million, while continuing to negotiate with President Barack Obama. (Andrew Harrer/Bloomberg via Getty Images )
The speaker was reduced to begging for votes from Republicans who can’t abide even a perverse version of social justice: protecting those who make $999,999 a year from paying a higher tax rate. Thursday night, the House GOP wouldn’t go along, even though the bill was ultimately going nowhere. It was a transparent fig leaf—one that that can’t cover up Boehner’s pathetic impotence in making and keeping a deal; Plan B was and is nothing more than a porous prophylactic that couldn’t safeguard Republicans from a free-fall of blame if they push the country off the fiscal cliff.
Boehner himself isn’t crazy. He’s weak. He leaves his tanning bed for a meeting with his caucus only to find himself in a Tea Party tank of crazed ideologues. His latest complaint about Barack Obama sounds like a Freudian slip into a rare moment of self-consciousness: the speaker whose words can’t be trusted is the one who “can’t stand up to his own party”—because he dreads being kicked out of the leadership as he summarily was in the 1990s. His “obsession,” says a White House adviser, is never again to be reduced to the status of just another back-benching golfer from Ohio.
His predecessor, Nancy Pelosi, courageously risked her majority and her speakership to prevail in the landmark battle for health care as a right and not a privilege in America. For that, she did sacrifice her majority, but she will hold a high place in history. Boehner, in contrast, bows to the demands of the far right at the first sign of resistance in his ranks—even now, at a moment that could crash markets, cause a recession, and drive unemployment above 9 percent. Boehner makes Mitt Romney look like a guy with a backbone.
The president, too, is suddenly being reproached by dissident progressive activists for daring to offer a “betrayal” not a “compromise”—to start the top rate of income tax at $400,000 instead of $250,000 and to modify the cost-of-living formula for Social Security. I’m almost always on the progressive side, but the criticism here is wrong on the policy and the politics.
First, Obama, unlike Boehner, is serious about governing. He sees his office as a place to do his job, not just to cling to its title and trappings. He won the election, but he won’t win every point. And he—and Democrats—are in a much stronger position with the country when he seeks a solution instead of indulging pointless, purist politics at a price that, for example, could leave millions of the jobless without benefits and throw nearly 2 million more workers out of work. Their suffering should count more than liberal psychic satisfaction.
What the president has offered may not be ideal, but it is entirely defensible in terms of the real, the possible, and the fair.
Following a lack of support.
In a fairly stunning turnaround, House Republicans pulled Speaker John Boehner’s back-up tax bill from the floor late Thursday night, admitting that there was not enough support for the plan to pass. “The House did not take up the tax measure today because it did not have sufficient support from our members to pass,” Boehner said in a statement. The bill would have let tax rates rise on the richest Americans, but would have protected other current rates. “Now it is up to the president to work with Senator Reid on legislation to avert the fiscal cliff,” Boehner said.
There should be no surprise that Republicans are incapable of compromising on a fiscal cliff deal. When it comes to taxes, for the GOP it’s a matter of theology—not business.
This is not a business transaction. Those of us in the press who follow both business and politics tend to think there are certain similarities between the two realms. But the fiscal cliff hostage situation, now in its brutal 44th day, is highlighting one of the key differences.
Speaker John Boehner, R-Ohio, conducts his weekly news conference in the Capitol Visitor Center where he fielded questions on the "fiscal cliff" negotiations and gun control laws. (Tom Williams/Getty)
In business, when two sides want to make a deal, or have to make a deal, there’s a certain protocol that is followed. The two sides stake out their positions. They argue, threaten, charm, and cajole. Ultimately, if there is a zone of agreement—an array of outcomes that are acceptable to both sides—then the two parties will cut a deal and meet in the middle. This is what happens when a stock trades, or when people get hired, when companies are sold. I offer 10, you bid nine. We have a deal at $9.50. If there is no mutually acceptable price, the two sides simply walk away.
Politics is often transactional in just this way, especially on issues of spending. But when it comes to issues of taxes, and when Republicans are involved, it’s less business than theology. People don’t tend to compromise on theology. And we don’t expect them to. When a Catholic who believes in the Holy Trinity meets a Jew who believes in Adonai, they don’t shake hands, meet in the middle, and agree that there are two divine figures, a sort of Holy Duo. They agree to disagree, and then coexist.
People in our world too frequently fail to take professionals at their words. The modern Republican Party doesn’t believe in raising taxes. Full stop.
In fact, as a rule, its members believes that taxes are too high. When they get in power, Republicans try to cut taxes, regardless of the economic or fiscal situation. George W. Bush may have had a failed presidency in many ways, but you can’t deny his success at reducing taxes on income, capital gains, dividends, and estates. When they are out of power Republicans agitate to cut taxes and oppose tax increases. When they run for office, they promise to cut taxes and oppose tax increases.
And when confronted with the prospect of massive tax increases that will result from mere inaction, they have proven, thus far, unwilling to take evasive action if it means raising taxes on anybody.
It’s a widely held belief that Grover Norquist and the Club for Growth act as modern-day Komissars, enforcing a rigid anti-tax ideology. But for Republicans in general, and for the Republicans in the House in particular, the overwhelming majority of whom come from safe, conservative districts, their arms don’t need to be twisted.
Because it avoids the fiscal cliff.
They know Plan B brings to mind birth control, right? John Boehner’s new fiscal backup tax plan has one important supporter: the U.S. Chamber of Commerce. The largest business lobby urged members to support the measure Thursday, stressing that it’s right to avoid the fiscal cliff, even if it isn’t perfect. "It does not address our excessive government spending, does not reform our unsustainable entitlement programs, and does not achieve fundamental comprehensive tax reform,” chief lobbyist R. Bruce Josten wrote. The so-called Plan B proposes to only hike tax rates on those making over $1 million per year, and to extend the current tax rates for the rest of Americans.
But he says he’ll keep working with Obama.
It seems the gloves are coming off. House Speaker John Boehner on Thursday blasted President Obama for not standing up to Democrats as both sides of the aisle attempt to reach a deal that that will avert the year-end “fiscal cliff.” Republicans have done more than their fair share to reach an agreement, Boehner said in a press conference, but Obama has failed to stand up his party and it’s slowing talks. Democrats, he said, have “done nothing” to avoid going over the cliff. Still, he pledged to continue talks with the president: “The country faces challenges, and the president and I, in our respective roles, have a responsibility to work together and get them a result.”
With his speakership on the line, John Boehner has given up trying to do what’s best for the country. Michael Tomasky on the consequences of one man’s quest to keep his job.
On Thursday, John Boehner will lead the House Republicans, or enough of them anyway, toward passage of his Plan B bill that will keep tax rates at current levels on all dollars earned up to $1 million. This means that House Republicans, or enough of them anyway, will be supporting a tax increase, no matter what they want to call it—an amusing grace note to which we’ll return. But the main point is that with this vote, Boehner, unless he’s doing something very different behind the scenes, is effectively ending fiscal cliff negotiations. His terse and unyielding remarks to the press Wednesday contrasted very poorly indeed with Obama’s plea for a soupçon of post-Newtown perspective and reason, and his gambit isn’t going to play well if we do go over the cliff. But it may save his job, which I suspect was really the point.
House Speaker John Boehner of Ohio addresses reporters on the fiscal cliff negotiations on Capitol Hill in Washington, Wednesday, Dec. 19, 2012. (Jacquelyn Martin/AP)
It hasn’t been mentioned much in all the fiscal cliff talk, but remember, not long after whatever fiscal votes the House takes, there will come a far more important one as far as Boehner is concerned: the vote for speaker of the 113th Congress. That will happen on Jan. 3. It’s hardly a secret that his restive caucus tilts well to his right, and it’s also widely known that a lot of them would in their hearts prefer to hear Eric Cantor’s voice on the other end of the phone, or possibly Kevin McCarthy’s, when they phone the speaker’s office. Cantor’s Cassius-like designs on the office have been likewise well noted.
At the beginning of the week, Boehner was talking like a fellow who wanted to cut a deal. His offer from last Friday put real revenue on the table for the first time and kicked any debt-limit fights down the road for one year. Obama responded with a concession on Social Security. They were dancing, at least. The establishment press, and the establishment for and to whom they speak, were all getting very excited.
But it would appear that the House Republican caucus wasn’t all that impressed with Boehner’s dance moves. Plan B is a huge step backward, a retreat away from negotiation and onto the safe but counterproductive territory of the ultimatum. After the House passes Plan B, he said Wednesday, “Then the president will have a decision to make. He can call on the Senate Democrats to pass that bill, or he can be responsible for the largest tax increase in American history.”
He knows that the Senate isn’t going to pass the bill, and he knows Obama won’t sign it. If this is where the Republicans stop the dance, then it’s obviously going to be the case that he’ll be right in a sense come Jan. 1, when there is no deal and marginal tax rates from bottom to top revert back to the higher Clinton-era rates.
But is he right that Obama is going to be seen by the American people as being “responsible” for that? Well, let’s take stock. Obama wanted tax increases on dollars earned above $250,000. Around 60 percent of the American people supported this view in poll after poll. Obama won the election campaigning on this position and won it handily.
On top of that, he then came around and proposed cuts to Social Security, indexing benefits to the “chained” consumer price index, to the vast consternation of his base and (undoubtedly) Nancy Pelosi. On top of that, he retreated on the debt limit from a position of taking it off the table forever to taking it off the table for two years. That’s a pretty big difference, forever to two years. On top of that, Obama made a totally ingenuous and common-sense appeal for a little reason and reciprocity in his remarks yesterday about how the events of the past week “should just give us some perspective” on fights that, by Monday afternoon, were really only about a few hundred billion dollars.
John Boehner’s entirely predictable comments on “Plan B” and the fiscal cliff caused markets and analysts to freak out.
What happened? Thirty-six hours ago, a fiscal cliff deal had seemed within reach. President Obama was inching toward the Republicans, offering a plan to shield those making less than $400,000 from higher marginal tax rates and suggesting entitlement cuts that were angering the progressive base. Surely, a deal would be completed soon.
Boehner denies that Congress is ‘quitting’ from solving the fiscal cliff.
And then this afternoon, a quick series of events put harried fiscal-cliff watchers into full panic mode.
House Speaker John Boehner convened one of the shortest press conferences in recent memory. Boehner uttered a 115-word statement, in which he told President Obama to support the House GOP’s Plan B—a proposal to shield everybody making under $1 million in income from higher taxes, with no spending cuts—or to forget it. Like an angry rap artist, he then dropped the mic and stormed off stage. (He’s got 99 problems, but a cliff ain’t one?) As Ben White of Politico, an obsessive fiscal-cliff follower, noted: “This is by far the strangest moment in the #fiscalcliff saga.”
As if on cue, the stock market, which had been placidly treading water for most of the day, partly on expectations that a deal was imminent, fell out of bed. Stocks closed the day down more than 1 percent.
Meanwhile, the VIX index—which is a proxy for how much investors are freaked out at any given moment—spiked by 11 percent. Once again, investors faced the prospect of markets roiled by ultimate and maximalist demands.
Says Boehner's plan "defies logic."
President Obama said on Wednesday that it is “puzzling” that Republicans haven’t accepted his plan to avoid the fiscal cliff, saying he has gone “at least halfway” to meet them. “I’m prepared to get it done, but [Republicans] are going to have to go ahead and make adjustments,” Obama said. But the president insisted that there is “no reason” the country should go over the fiscal cliff, the name given for what will happen on Jan. 1 if no budget compromise is reached, allowing major spending cuts to go into effect and the Bush tax cuts to expire. Obama insisted this is a “self-inflicted crisis” that Republicans are putting the country through, and that House Speaker John Boehner's plan “defies logic.”
After placing huge bets on Mitt Romney and the Republicans in November, the wealthy prepared for a heavy tax blow after the November elections. The emerging contours of a fiscal-cliff deal makes it look like they are going to get off easy.
If the stock market is a barometer on how the wealthy and powerful are feeling about their prospects, then the 1 percent has come down with a healthy dose of the Christmas spirit. In the past few weeks, the S&P 500 has rallied more than 7 percent. And why not? Staring at the fiscal cliff, which would have raised taxes on income, capital gains, dividends, and estates taxes, the wealthy had reason to fear. The moneyed class placed a huge, one-sided bet on their tribune, Mitt Romney, and on the Republicans. And they lost. Big time. In mid-November you could detect, in the precincts of Greenwich and Palm Beach, in Scottsdale and Buckhead, a grim sort of resignation.
The first several weeks of the fiscal-cliff hostage situation gave them more reason to fear. President Obama held steadfastly to the notion that taxes should go up for everybody earning more than $250,000. He continued to deploy the (successful) campaign rhetoric and argue that we shouldn’t protect tax breaks for the wealthy as we go after social programs that benefit the poor. Poll after poll has revealed that letting taxes rise on the rich is popular, even among Republicans. Meanwhile, a failure to act would significantly alter the tax code, and not in favor of the wealthy.
But the developments of this week should cause the posh to take heart. Instead of getting soaked, it looks like the rich will receive a gentle spray of spring water.
Now, any discussion about the resolution of the fiscal cliff should start with a huge caveat. It’s entirely possible that House Speaker John Boehner won’t be able to come to terms with the White House, and that House Republicans will refuse to back any deal that Boehner and Obama strike. That said, it’s looking pretty good for the rich. President Obama over the weekend made an offer to resolve the fiscal cliff. Given his history, not to mention game theory, it’s likely that a final resolution will be somewhere between President Obama’s proposal and Boehner’s proposal. And that’s good news for the 1 percent.
AFirst, Obama has defined wealthy upwards. As I’ve been arguing for years, people who make more than $250,000 a year are rich, regardless of which rarefied ZIP code they live in. That’s five times the median income in this country. But President Obama has proposed leaving the Bush tax rates where they are for everyone earning more than $400,000. That spares a decent chunk of high earners from higher taxes. It also means that people who make, say, $500,000, or $700,000—who, again, are rich by any measure—would see the lion’s share of their income spared from any tax increase.
And there’s reason to think this may not be the end. Boehner has proposed setting the new bar for “rich” at $1 million in annual income. If the resolution is somewhere in the middle, or even much closer to Obama’s figure, and the top rate kicks in at $500,000 or $600,000, than many, many rich people won’t see their income taxes go up much at all. (They will be hit, it should be noted, by payroll taxes associated with Obamacare.)
Will hike tax rates on those making more than $1 million per year.
Things are looking worse and worse for that holiday break for Congress. House Speaker John Boehner’s so-called Plan B for avoiding the fiscal cliff is stalled in both houses of Congress on Tuesday—and the White House has already rejected it. Boehner’s plan calls not only to hike tax rates on those making over $1 million per year, but also to extend the current tax rates for the rest of Americans. Boehner’s plan comes amid mounting criticism that Republicans have not offered serious proposals to avoid the looming fiscal cliff, the name given for what will happen should Congress not come up with a deal by Jan. 1 to avoid draconian spending cuts and extend the Bush tax cuts.
Obama and Boehner should close the fiscal-cliff deal they seem to be nearing, and their skittish parties need to climb aboard—and send the message that our country can solve problems by reasoning together, says John Avlon.
In 12 days, our country goes off the fiscal cliff.
Protesters make their voices heard on the fiscal-cliff debate. (Joe Raedle / Getty Images)
That’s why it’s time for Congress to go big and then go home for the holidays.
With House Speaker John Boehner’s “Plan B” basically DOA in the Democratic Senate, skepticism is growing after an encouraging start to the week in Washington.
But put all the congressional Kabuki theater aside and there’s still evidence that real progress is being made toward what could be a historic step toward bipartisan deficit and debt reduction.
President Obama and Speaker Boehner both deserve credit for making significant concessions in recent days, working toward a balanced plan.
On the Republican side, Boehner has offered to raise not just tax revenues, but tax rates—a risky violation of anti-tax theology as well as a concession to reality in the form of the sun-setting Bush tax cuts. The catch, of course, is that Boehner now wants to raise taxes only on families making more than a $1 million. More important for the country, Boehner has offered to take the debt ceiling off the table for two years, allowing for a degree of stability in the coming Congress.
On the Democratic side, Obama backed off his threshold for the top tax-rate of $250,000, which he’d used as a rhetorical red line throughout the campaign. Instead, the president offered to make the return to Clinton-era rates apply only to the money families earn over $400,000. He also agreed to a significant reform of Social Security with the obfuscating name “chained CPI,” which would adjust the benefit formula for inflation. This is a relatively painless form of entitlement reform that could have significant impact on bending the long-term cost curve.
The horror of Newtown has made the budget crisis appear small. Howard Kurtz on why both Democrats and the GOP are suddenly keen to avoid the fiscal cliff.
Maybe it was just a coincidence.
Maybe both sides were just posturing before the inevitable deal-making began.
Boehner has announced that he is moving to a “Plan B” to solve the fiscal-cliff issue. (Alex Wong / Getty Images)
Now that President Obama and House Speaker John Boehner seem to be inching toward a deal, it’s worth examining how the political landscape has been transformed.
The fiscal cliff itself is an entirely manufactured crisis. The Dec. 31 deadline for automatic tax hikes and spending cuts was set by Congress itself to resolve the last artificial crisis, the battle over the debt ceiling. The so-called showdown could have ended at any time with a bit of political compromise.
Suddenly America was confronted with a real crisis, a massacre at a Connecticut elementary school. There was an outpouring of grief, a deep wound to the national psyche, an anguished debate over how we can protect our young children.
Against that backdrop, the spectacle of squabbling politicians unable to resolve basic budget questions even after a presidential election was particularly appalling. Questions of life and death made them look small. And I bet, on some level, both parties realized that.
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.
Impress the relatives with tidbits from our guide on everything from the sequester to the supercommittee.
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.