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.
White House close to an agreement with Boehner.
There may finally be an end in sight. President Obama made a counteroffer to avert the fiscal cliff Monday, introducing a proposal that could mean the White House and House Speaker John Boehner are close to reaching a deal. Obama’s new offer now proposes raising tax rates on incomes above $400,000, up from $250,000 in earlier offers. The $2.4 trillion proposal is equally split between revenue and spending cuts, and meets “a dollar-to-dollar demand that Boehner has placed on the scope of the final package,” sources tell Politico. Boehner and Obama reportedly met Monday at the White House, in their third conversation in the past five days to discuss the looming fiscal cliff.
Boehner, McConnell, and other key Republicans are signaling they’ll agree to make the top 2 percent pay more. Many GOP House members still aren’t on board, but they need to realize the war over higher taxes on the rich is over, says Daniel Gross.
Fiscal cliff hostage situation, day 40. It’s taken six weeks, but President Obama has finally got the Republican House leader to make the case for a more progressive tax system. In an effort to resolve the fiscal cliff impasse, John Boehner reportedly has offered to raise income-tax rates on people who make more than $1 million a year—but if, and only if, Obama agrees to entitlement cuts. In addition, The Washington Post reported, Boehner also has offered to take the toxic debt-ceiling debate off the table for a year.
House Speaker John Boehner (center) walks to a news conference last week in Washington, D.C. (Andrew Harrer/Bloomberg via Getty Images )
Like those Japanese soldiers holed up in caves on Pacific islands in 1945, the House Republicans don’t seem to grasp that the war over higher taxes on the rich is effectively over. This war ended, of course, with the election. Because it meant there would be no President Romney to demand the continuation of low tax rates. And because the Republicans, failing to take back the Senate, had no way to move legislation on their own preserving the Bush tax cut. And because the Republicans instantly lost hope of repealing Obamacare, which levies higher payroll and investment taxes on the wealthy. And because for the second straight time, the nation’s voters elected to office a president who had campaigned on the explicit promise to raise taxes on those making $250,000 or more.
And yet, it took several weeks for the reality to set in. The initial Republican orthodoxy seemed to be that Obama’s reward for winning a second term should be to capitulate to Republicans on taxes and propose deeply unpopular entitlement cuts. But as the fiscal cliff hostage situation has dragged on, and as the Obama administration has developed an effective stiff arm, the Republican mood has shifted from denial to acceptance—especially in the Senate.
Several Senate Republicans have come out and said the best course might simply be to cut a deal with Obama to preserve the low tax rates for the overwhelming majority of taxpayers and to let the top 2 percent who earn more than $250,000 in taxable income per year shell out a little more. Even Minority Leader Mitch McConnell, the most hardened partisan warrior in the Senate, seems to be backing this plan. And that’s a pretty major concession.
But the House Republicans—a very conservative bunch who generally hail from safe districts—aren’t quite on board. And Speaker Boehner is reluctant to get out too far ahead of his caucus in advance of an impending intraparty election early next year. So his proposal to soak the very rich, while welcome, doesn’t really advance the ball much. Sure, this marks a step toward Obama’s position. But keep in mind, the president gets much larger tax increases on a broader swath of the very rich without entitlement cuts come Jan. 1.
The Republicans want Obama to own the unpopular cuts to Social Security and Medicare they have long wanted to impose. In exchange for agreeing to the higher tax rates on the seven-figure crowd, Boehner wants, according to Politico, “to use a new method of calculating benefits for entitlement programs known as ‘chained CPI,’ which would slow the growth of Medicare and other federal health programs and save hundreds of billions over the next decade.” Unlike Paul Ryan’s proposals, which would protect those over 55—the core Republican constituency—from any significant changes, this suggestion would affect people who currently rely on the program. The Republicans, of course, want Obama to own those changes. (I wouldn’t put it past them to then run against Democrats in coming election for making benefits more stingy.)
For his part, Obama doesn’t mind owning the higher tax rates on the wealthy. He ran on them twice. But he does want Republicans to own them, too. Obama isn’t simply waiting for his interlocutors to concede the inevitability of higher taxes on the rich; he’d prefer for them to make the case for a more progressive tax system. And not just through some vague promises of future reform and the closing of loopholes and the capping of deductions that can’t be named. No, he wants Republicans to throw the rich under the bus.
For one year.
As the dreaded fiscal cliff date draws nearer, lawmakers are pushing compromises. On Friday, House Speaker John Boehner offered to push the fight over the federal debt limit off for a year, according to sources familiar with the talks. This is seen as a concession for Republicans, who planned to use the threat of default as leverage for getting more spending cuts out of Obama. Boehner is also proposing to raise taxes for millionaires, but the White House has rejected the offer, saying the amount raised is not significant enough. Either way, progress is progress and we could be inching closer to a deal.
For those making more than $1 million.
Looks like Boehner’s ready to play ball. A source close to the ongoing fiscal cliff negotiations announced Sunday that the House pspeaker’s latest proposal to President Obama would bring the top income tax rate to pre-Bush levels at 39.6 percent. The rate, up from 36 percent, would apply to those earning more than $1 million a year. In return, Boehner is asking for “significant” cuts to entitlements and other spending programs. The Obama administration has not accepted his offer, according to another source. If the two sides can’t come to an agreement, the Bush era tax cuts will expire on Jan. 1 and across-the-board spending cuts will go into effect.
If Obama agrees to entitlement cuts.
Could this be a workable compromise? House Speaker John Boehner has reportedly said he would agree to a hike in tax rates for the wealthiest Americans if President Obama gives in to big entitlement cuts, according to several sources. The proposed deal would raise Bush-era tax rates for top earners, in exchange for a slower-growing Medicare and other health programs. Obama and Boehner spoke via phone on Friday and have been talking regularly, which hints that progress could be advancing in the fiscal cliff negotiations.
But do not reach agreement.
This is starting to get old. President Obama invited House Speaker John Boehner to the White House on Thursday to discuss the looming fiscal cliff, but failed to come to an agreement. The two met for 50 minutes in what aides described as a “frank” meeting, which Treasury Secretary Timothy Geithner also attended. White House spokesman Jay Carney said, “What we have not seen from the Republicans is any movement at all on the fundamental issue. Republicans need to accept the fact that the rates will go up on the top 2 percent.” Earlier on Thursday, Boehner had criticized Obama for putting economic recovery at risk by insisting on tax increases on the top 2 percent.
Says president has not offered serious sending cuts.
Your move, Mr. President. House Speaker John Boehner insisted on Thursday that the White House has not offered any serious spending cuts, causing the current stalemate. Boehner said President Obama wants more in tax increases than spending reductions—although Boehner has yet to offer his own plan to avoid the so-called fiscal cliff. If a compromise is not reached by Jan. 1, draconian spending cuts will automatically go into place while the Bush tax cuts will expire, which many have speculated will cause the economy to nosedive—a series of events known as the fiscal cliff.
As Obama, Boehner trade proposals.
Another day, another stalemate. President Obama telephoned House Speaker John Boehner on Tuesday night to discuss Boehner’s latest proposal on how to avoid the fiscal cliff—but Republican aides themselves admitted the proposal sent to the president is virtually identical to the one the he rejected last week. Majority Leader Harry Reid, meanwhile, said Tuesday that it will be “extremely difficult” to get a deal to avoid the fiscal cliff before Christmas. If a budget deal is not reached before Jan. 1, draconian spending cuts will automatically be put in place while the Bush tax cuts will be repealed, which some have said will cause the economy to nosedive.
Walmart CEO Mike Duke tells the Council on Foreign Relations consumers will curtail spending this holiday season unless a deal is reached to avoid the fiscal cliff, and that he shared the retail giant’s polling data with Obama.
The chief executive of Walmart, the world’s biggest retailer, increased pressure on Congress on Tuesday by warning that millions of U.S. consumers will sharply curtail spending this holiday season unless a deal is reached soon to avoid the so-called fiscal cliff.
During an appearance Tuesday evening at the Council on Foreign Relations in New York, Walmart CEO and President Mike Duke said: “The customer is still fragile. This economic recovery is still very, very, close. We have seen some positive signs with information from consumers, but the positive signs have been very muted. The customers are still working to get by month to month, paycheck to paycheck.”
Duke disclosed that he shared Walmart consumer polling data with President Obama a week after the election, when a dozen top business executives visited the White House to discuss possible solutions to the fiscal stalemate. Duke said he told the president: “The week before the election only 25 percent—one quarter of our core customers—even knew what ‘fiscal cliff’ meant. One week after the election, it was up to 75 percent.”
Now, Duke continued, “These same customers, 15 percent of our customers, are telling us this discussion about ‘fiscal cliff’ will affect what they spend on Christmas.” Already, he said, consumers “downsize” their purchases at the end of the month as they run out of money.
Asked about Obama’s reaction, Duke said: “The president was very interested and engaged in the discussion and wanted more information … As a matter of fact, we started sharing more of our polling information with the administration, and I think it can be extremely helpful on an ongoing basis … I think the sensitivity of input from business has caused there to be more feedback provided for business.”
Walmart has more than 140 million customers a week in the United States alone, and female customers account for more than 70 percent of the buying decisions. Data gleaned from the chain’s massive customer transaction information bank gives Walmart a competitive edge in reading consumers’ views of their economic situation.
“We were doing a lot of polling of ‘Walmart Moms’” before the election, Duke said.
From Joe Scarborough to Bill Kristol to Rush Limbaugh, the post-election recriminations are getting heated on the slow march to the fiscal cliff. Howard Kurtz on why the GOP is at war with itself.
It’s no surprise, after losing a second time to Barack Obama, that the right is engaged in a furious debate over the future of the Republican Party.
Daily Caller columnist Matt Lewis tells Howard Kurtz that the GOP ‘is sort of like a drunk that needs to hit rock bottom.’
But it’s quickly degenerating into a mudfight.
“Conservatism is a racket for a lot of people to get very, very rich,” declares Joe Scarborough on MSNBC. “With no thought of winning elections.”
“It may be that major parts of American conservatism have become such a racket that a kind of refounding of the movement as a cause is necessary,” says William Kristol, editor of The Weekly Standard.
What’s going on here? Is this simply the venting of prominent media folks who are tired of seeing their side taken to the cleaners? Or have they concluded that the talk-show/fundraising culture that powers the GOP has become more interested in feathering its nest than electing Republicans?
Just two years ago, the GOP captured the House, the Tea Party was ascendant, and the rank and file had every reason to believe that Obama would be a one-termer. Now the reelected president, having vanquished Mitt Romney, is all but dictating terms on averting the fiscal cliff. No wonder the right seems to be undergoing a collective nervous breakdown.
Newt Gingrich sounded less than confident on Meet the Press when the talk turned to Hillary Clinton running for president in 2016. “The Republican Party today is incapable of competing at that level,” said the man who proved incapable of beating Romney.
If Obama is really considering hiking the Medicare eligibility age, he's off to a bad start with the base. Michael Tomasky on the potentially colossal blunder.
Sunday afternoon I received an email from Howard Dean. Not a personal one, but nevertheless seeing his name there made me look twice, because I never get emails of any kind from Howard Dean. This one warned me ominously about the looming cuts to Medicare, and while the Deanian digit of outrage was pointed at the Republicans, the email also noted that my voice was needed to ensure that the Democrats stood united against the assault. Translated, this means that liberals are terrified that the White House is about to agree to increase the Medicare eligibility age to 67. I don’t personally feel quite as strongly about this as many others do, for reasons I’ll get into. But my own views aside, I think the White House ought to know that by all existing evidence, if it agrees to such a deal, Barack Obama will lose liberal support far more quickly, more despondently, and more, if I may put it this way, ferociously and furiously than he ever lost it over the public option.
Carolyn Kaster / AP Photo
Here’s the talk that started over the weekend: That the White House was … well, the correct verb is an interesting question here … contemplating? Pushing? Offering? … a deal that quickly was dubbed 67-for-37. The Democrats would agree to raise the Medicare eligibility age to 67 from the current 65, and Republicans would agree to hike the marginal tax rate on taxable dollars earned above $250,000 to 37 percent (down from Obama’s desired 39.6 percent). Both sides give, both sides get. It looks, to your average person, reasonable. It could be done before the New Year. As we say in Appalachia, Bob’s your uncle.
Except that it isn’t that simple. As clean and balanced as this might look to the unschooled eye, it would actually constitute a huge win for the Republicans—the party at the table, remember, that is presumed to have little to no leverage here. Why would that be? Because it’s a lot easier to change marginal tax rates around than it is to go back in and fiddle with an entitlement rule. Tax rates aren’t easy to change, mind you. But entitlement changes are really, really hard and rare. If the Medicare age got bumped up to 67, I can’t imagine a force in the future that could bump it back down, what with the deficit-obsessed establishment that we have in this town. So Obama would be giving the Republicans something much more likely to remain permanent in exchange for a thing the Republicans can change pretty quickly the next time they have a president and majorities in Congress.
But that’s only the start. It turns out that raising the eligibility age by these two years doesn’t really save any money. The economist Brad DeLong explains that spending in Medicaid and other subsidies would have to be increased to help cover the 65- and 66-year-olds who fall through the cracks.
Michael Tomasky and David Frum on what the looming fiscal cliff means for Medicare.
Neera Tanden, head of the Center for American Progress, made this points and others on Chris Hayes’s MSNBC show over the weekend. Tanden is a powerful figure in Washington progressive circles, and CAP is close to the administration—a formula that usually means that a person in Tanden’s position would be sheepishly imploring viewers to see both sides of this complicated question. That she did not shows, well, that she has backbone (and she worked on Obama’s campaign!), and it reflects just how unhappy Obama’s base, even his establishment base, would be.
Those troublesome 65- and 66-year-olds, of course, raise not merely a fiduciary question, but a moral one. What about the people who fall through the cracks and are stuck without insurance for two years? And that raises the Really Big Issue here, which is what really has liberals climbing a tree: a Democratic president, fresh off a convincing reelection, is going to be the guy to take a huge bite out of the social safety net? You’ve got to be kidding me.
According to sources close to the process.
Maybe the holiday spirit—or a sense of impending doom—is finally getting through to them. Budget talks between House Speaker John Boehner and President Obama have taken a promising turn, sources close to the process tell The Wall Street Journal. Apparently, negotiations between the leaders have become more serious in recent days, as both Boehner and the White House are reportedly beginning to feel increasing pressure over the impending fiscal cliff. Another big change? Both sides have agreed to stop tattling on each other. A strict public moratorium on public commenting is now being followed on both sides—a sign experts say means the bargaining is only just beginning.
The GOP has ideas. If only they could rise above the political din.
The fiscal-cliff negotiations are driven by politics, and not very inspiring politics at that. The reelected president wants to bend congressional Republicans to his will. Republicans don’t wish to be bent. Yet behind the dominant political story there happens to be some actual policy ideas that deserve more of a hearing than they’re getting.
November 16, 2012: President Barack Obama, accompanied by House Speaker John Boehner of Ohio, speaking to reporters in the Roosevelt Room of the White House in Washington, as he hosted a meeting of the bipartisan, bicameral leadership of Congress to discuss the deficit and economy in Washington. (Carolyn Kaster / AP)
Question: if the United States needs to raise more revenue from the federal personal-income tax, how should that revenue be raised? By hiking tax rates or by reducing tax deductions? Democrats prefer higher rates; Republicans prefer reduced deductions. Each side may have its own cynical motives. The Republicans happen to have better arguments.
Almost every economist who studies the issue agrees that higher tax rates harm the economy. The Tax Foundation is the group whose study demolished the Romney tax plan—and was quoted in tens of millions of dollars of pro-Obama advertising in 2012. Here’s its assessment of the effect of higher tax rates: They “discourage work, saving, and entrepreneurship. They also encourage taxpayers to rearrange their tax affairs to receive more of their compensation in less heavily taxed forms and to take greater advantage of the myriad tax preferences in today’s tax code.”
Republicans, on the other hand, have taken aim at tax preferences that are almost uniformly harmful.
The biggest tax preference in the individual tax code is the treatment of employer-purchased health-care benefits. An employee who earns $60,000 and receives a health-insurance policy worth $8,000 pays income tax on the $60,000 but not on the $8,000. This exclusion has thrust employers into the role of main buyers of health insurance. It hides the costs of health coverage from employees and thereby makes it easier for health providers to raise fees.
The exclusion is such a bad policy that we should want to get rid of it, even if doing so wouldn’t raise a dime in extra revenue. But as it happens, the exclusion costs the Treasury an estimated $130 billion a year, only a little less than the entire cost of the U.S. Navy. And because low-wage workers often receive no health coverage at all while high-wage workers receive ample benefits, elimination of the exclusion for people earning more than $250,000 would recoup a very big part of that $130 billion.
Another large tax preference is the home-mortgage-interest deduction. This preference is justified by the claim that it promotes homeownership. Yet Canada, which doesn’t have the preference, has roughly the same homeownership rate as the United States: a little over 60 percent.
The stalemate between Democrats and Republicans over the fiscal cliff demands a two-party deal the way the Israel-Palestine impasse requires a two-state solution, Daniel Gross writes from Israel.
There’s a long history of enmity. As the world watches and urges rational talks, the two parties dig in and make maximalist, incendiary statements. Rather than embrace the future, the two sides endlessly litigate the past. Engaged in permanent political campaigns, the leaders play to their bases, threatening unilateral action. The press is fixated on real and imagined snubs. The two protagonists are unwilling to shake hands in public. Each questions the legitimacy of the other to lead, to exist. And each side is riven by sharp internal divisions that make a deal difficult. There are real questions as to whether the two parties can ever coexist side by side in the same narrow turf.
I’m talking, of course, about the fiscal cliff negotiations between the Democrats and the Republicans.
I spent days 33 and 34 of the Fiscal Cliff Hostage Situation in Israel, attending the Israel Business Conference, an annual gathering on business and economics put on by Globes, Israel’s equivalent of the Financial Times. My main responsibility was to moderate a panel on the near-term future of the U.S. economy.
Sitting in a region where missiles were falling a few weeks ago, you quickly realize how absurd it is to make martial analogies to the battle over tax rates. We’re talking about the difference between the government taking a few pennies of every marginal dollar, not life and death. And it makes the pettiness and obstinacy on display in the U.S. over these negotiations all the more unseemly. On Sunday, President Obama and House Speaker John Boehner, who should be negotiating openly and in public, met clandestinely at the White House.
And yet there are some superficial similarities that help describe why it has been so difficult to get a deal done. The view of American politics from abroad is that there’s a broad consensus. Yes, Democrats and Republicans have clashed for decades over important issues. But the disagreement generally takes place within a narrow band of the ideological spectrum. Despite the continual cries of Republicans, there is no real history of socialism in the U.S. And despite the squawks of progressives, far-right movements have never been a force to reckon with on these shores.
President Obama shakes hands with John Boehner during a meeting with a bipartisan group of congressional leaders at the White House on Nov. 16. (Olivier Douliery, Pool / Getty Images)
But the recent stalemates over budget and tax issues have highlighted an important similarity between the U.S. and the Middle East. It has become apparent—and this is something the professional deficit hawks and Sunday-morning chin strokers simply refuse to grasp—that when it comes to fiscal policy, each side regards the other as an existential threat. Not to their physical well-being, but to their most deeply held beliefs and most cherished political accomplishments.
The Democrats and Republicans aren’t arguing over a return of land. But they are arguing over a return of hard-gained political turf. For the Democrats, the terrain is entitlements—Social Security, Medicare, and now Obamacare. The Republicans are insisting, as the price of a deal, that the Democrats partially withdrawal from the “land” that FDR, Lyndon B. Johnson, and President Obama gained. For the Republicans, the holy land is the Bush tax cuts. The legislation lowering the tax rates on income, capital gains, dividends, and estates was the result of a long, long campaign on the part of Republicans. And now Democrats are essentially demanding that Republicans withdraw from this turf. Given this framing, it’s easy to understand why there is an impasse.
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.