Consider the “fiscal cliff” negotiations from the White House’s perspective.
The specifics of the McConnell-Biden deal were fluid, but the bottom line seemed to be this: It raises taxes by $600 billion over 10 years, secures important Democratic priorities such as unemployment insurance and the stimulus tax credits, and doesn’t include any spending cuts of note.
Here are the details, as sources close to the talks have described them: The top tax rate rises to 39.6 percent for people making more than $400,000 and families making more than $450,000. Capital gains and dividends will be taxed at 20 percent with the same income thresholds. The personal-exemption phaseout is set at $250,000, and the itemized-deduction limitation kicks in at $300,000. The AMT is patched permanently. Estates up to $5 million would be exempt and taxed at 40 percent above that.
The various business tax credits — R&D, wind, etc. — would be extended through 2013, as would unemployment insurance. The stimulus tax credits — namely, the expansions of the earned-income tax credit, the child tax credit and the college credit — would be extended for five years, which is hugely important to the White House. The scheduled pay cuts for doctors in Medicare would be averted for a year through spending offsets. The treatment of the sequester is still up in the air, because the president is refusing to offset it unless revenue is part of the mix.
White House officials aren’t thrilled with this package. But it looks pretty good to them. As they see it, it sets up a three-part deficit-reduction process. Part one came in 2011, when they agreed to the Budget Control Act, which included more than a trillion dollars in discretionary spending cuts. Part two will be this deal, which is $600 billion — and maybe a bit more — in revenue. And part three is still to come, but any entitlement cuts that Republicans want will have to be matched by revenue generated through tax reform. If Republicans want $700 billion in further spending cuts and the White House insists on $700 billion in tax reform, it will end up with more revenue than in Obama’s final offer to House Speaker John Boehner.
The White House laughs off the GOP’s theory that it can use the debt ceiling to extract big spending cuts without further tax increases. For one thing, Boehner wouldn’t know how to achieve his “dollar-for-dollar” rule if you gave him total control of the budget. Raising the debt ceiling will cost around $1.5 trillion through 2014. Boehner has never named $1.5 trillion in spending cuts. In fact, he hasn’t named many entitlement cuts at all.
“You either cut Medicare or we default the country?” says one top Democrat, describing the fight the GOP is setting up. “And we don’t have the guts to put out our Medicare cuts so you need to put them out for us? And now you need to round up the Democratic votes to help us blackmail you? That’s the plan?”
One problem the White House is having is that its congressional allies don’t see it the way it does. “The direction they’re headed is just absolutely the wrong direction for our country,” Sen. Tom Harkin, D-Iowa, said on the Senate floor Monday. A top Democratic Senate staffer e-mailed a similar sentiment. He’d heard the McConnell-Biden deal was in the range of $660 billion. That’s “$940b below the President’s initial position, $340b below Boehner’s last offer, and $140b below the $800b the President told Boehner he gets for free,” he griped.
Nor is there much confidence that the White House will be able to stick to a dollar-to-dollar match in the next round of negotiations. “Politics-wise, this was the moment of maximum leverage, not the debt ceiling talks,” the staffer said.
White House officials argue that Senate Democrats are one reason they don’t have as much leverage on taxes. The bill that Senate Democrats passed to let the Bush tax cuts lapse for income over $250,000 was to last a year. And even if it had been a 10-year bill, it would have raised only $700 billion. As the White House sees it, it is getting 85 or 90 percent of the revenue from that bill plus jobless insurance plus the stimulus tax credits plus the business extenders. Their bill is permanent, and it might be able to pass the House.
Assuming the details of this deal are close to what I’ve outlined, the question of whether the White House outfoxed the Republicans or capitulated too early won’t be clear until we see the outlines of the next deal. If the White House is able to pocket this revenue and extract a 1-to-1 match, or something close, for any further spending cuts, it’s liable to end up looking smart. But if, as Republicans believe and some Democrats fear, the White House folds when confronted with the debt ceiling and agrees to big entitlement cuts in return for little or no revenue, this deal will be the moment when the White House blinked and traded away the guaranteed revenue of the fiscal cliff for a lowball GOP offer.
Ezra Klein is a columnist at the Washington Post. His work focuses on domestic and economic policymaking, as well as the political system.
Oshama’s winning of the election has increased his arrogance tremendously, but let him go down that path, it will be entertaining.
That would be ” Mr President” to you … HE has the backing of the majority of the American people and is doing THEIR bidding .”Arrogant”? Hardly. Unlike Congress he is doing the job he was PAID and elected to do —serve the American people!!!!
So you think he’s uppity?
No mention of the Federal Reserve and its fiscal policy influence. But the fact that Barack and the democrats want to make the the republicans look weak or vulnerable is truly representive of what is wrong in Washington. Meanwhile the taxpayer that did not vote for this is left holding the bill. The economy will continue to spit, hiccup and sputter along until these guys leave office. Happy Newe Year!
…and you think the Republicans did not want to make the Democrats look weak or vulnerable, in particular the antics of Mitch McConnell over the last four years? I agree with you. It is what is wrong with Washington, but you can’t lay all the blame on the Democrats. I do not see this changing.
You are both very accurate in your observations. Truth is , career politicians cause most of the problems we face today. The ultimate blame is our ( the American voter, their employers ) lack of willingness to boot them all out , force term limits of one term , ban lobbiests , special interest groups and political action committees and remind them just who they serve.
That day is coming and they know it…Which brings us back to the gun issue…Connect the dots folks…
Isn’t the answer obvious? Obama’s outrageous failures are ignored while his destructive socialist pipedreams are wreaking havoc, all while the lib meida applauds. The examples are too numerous to list, but among the most recent is the Benghazi debacle.
The media, including this lib rag, is the problem.
Can you come up with anything more original than Glen Beck verbal sewage? Go ahead and make up a label for something so you easily decide to not like so you don’t have to spend time finding out the facts.
You want sewage, look to those on your side of the aisle.
Fact: this country’s biggest problem is that it has allowed its political leadership to spend our money with abandon, all in an effort to acheive and retain power.
What is it about a $16 trillion deficit you fail to understand, $5 trillion of which was added needlessly by your Obamessiah? That is $16 million million dollars. And that is just the start of it. When one tallies the unfunded mandates such as Social Security and pensions, the amount is well over $100 trillion.
Wake up and smell the Arabica beans, will you?
Obama gave pay raises to VP and Congress last Thurs. When is the last pay raise for most other Americans./ Reminder, the elected are not the elite.
No he didn’t. They gave themselves raises.
Huffington Post, Dec. 28, ” Obama give Biden and Congress Pay Raises.’ Do YOUR homework………………..
Dems. don’t mind spending money….as long as it’s someone else money. Obama been really good at it. With the hole getting deeper he won’t stop digging.
Obama and his liberal party are sickening.
You can apologize for being wrong. The fiscal cliff deal cancels the raise.
Tell that to LePage’s family on the taxpayer payroll.
Part of the deal cancels that pay raise. Don’t comment if you don’t know the facts.
Huffington Post Dec. 28/ “Obama give Biden and Congress Pay Raises.” think on that and check it out.
Buddy, the deal passed in the AM this morning. That’s after December 28, obviously. The deal cancels the raise. Think on that and then you can correct your initial incorrect post.
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My initial post was indeed, correct. make time to check Dec.28 Huffington Post. there is no apology due.
The headline illustrates well what is wrong with our government. IT ISN’T ABOUT WHO WINS! It should be about what is best for the American people. I realize if we get away from “who won” or “who lost” it would give Fox News or MSNBC less to talk about, but oh well.
Thumbs up like. However, when you have a recalcitrant obstructionist minority of the people’s Representatives shirking their elected duty to govern and acting like a Parliamentary Wing but cloaked in the mantle of the GOP, that is subversive. We rebelled against such governance and united under a Democratic Republic.
They think they are winning because they know stupid people will support whatever they do and they are right.