Fiscal cliff update Dec. 7: Obama calls own plan “not serious”
It’s Pearl Harbor Day, and with a little less than three weeks left before the federal budget is hit with a combination of tax increases and reductions in baseline spending, the biggest news is that President Obama can’t even get his fiscal cliff proposal past his own party in the Senate.
The president’s press secretary shot back at Sen. Mitch McConnell (R-Kentucky) yesterday for proposing that the Senate vote on the president’s own fiscal cliff plan, conceding that even the Democratic majority won’t vote for Obama’s combination of tax hikes and deferred reductions in spending increases:
“We don’t have 60 votes in the Senate,” White House press secretary Jay Carney said, adding the White House was “very confident” that Democrats support the principles outlined in Obama’s plan, which has met with derision among Republicans.
Carney called McConnell’s Wednesday challenge “the kind of political games that aren’t serious.”
Ian Schwartz at RealClearPolitics finds Kentucky’s junior Senator, Republican Rand Paul, addressing Carney’s concerns in an interview with Larry Kudlow:
I have yet another thought on how we can fix this. Why don’t we let the Democrats pass whatever they want? If they are the party of higher taxes, all the Republicans vote present and let the Democrats raise taxes as high as they want to raise them, let Democrats in the Senate raise taxes, let the president sign it and then make them own the tax increase. And when the economy stalls, when the economy sputters, when people lose their jobs, they know which party to blame, the party of high taxes. Let’s don’t be the party of just almost as high taxes.
In the Washington Post, economist Robert Samuelson fingers a particularly sad fact about the fiscal cliff negotiations: that they seem to be taking place in a vacuum where the 1980s never occurred. Rather than drawing on decades of data and research about dynamic tax policies, Samuelson points out, the president is using a Carter-era assumption that tax collections come in at whatever rate the government sets:
President Obama insists not only that the rich pay more in taxes (a legitimate demand) but also that their tax rates go up (questionable). This turns traditional tax “reform” on its head. Boehner says the added revenues should come through closing loopholes. The two also disagree on the amount of tax increases: Boehner has offered $800 billion over a decade, about half of what Obama wants. But this difference is amendable to negotiation; the rates-versus-loopholes dispute is less so.
For Obama, the obsession with raising top rates (from today’s 33 percent and 35 percent to 36 percent and 39.6 percent) seems an exercise in political symbolism. He wants to be seen as vanquishing the rich — and Republicans. Otherwise, why not accept Boehner’s means (loophole closing) to achieve his policy ends (higher taxes on the rich)?
The White House claims that loophole closing can’t raise enough revenues. This is bogus. The nonpartisan Tax Policy Center has estimated that capping all itemized deductions at $17,000 for couples and $8,500 for singles would produce $1.7 trillion in added taxes over a decade. To be sure, there would be practical problems;some tax increases would fall on households under Obama’s income thresholds of $250,000 for couples and $200,000 for singles. But these could be managed with adequate political will.
The Washington Post’s Rosalind S. Helderman notes that for all the talk of the fiscal cliff — a combination of expiring tax rates passed early in the last decade and a “sequestration” of increases in baseline spending under the 2011 Budget Control Act — the real issue is the ever-expanding ceiling on federal debt, which now stands at $16.9 trillion (total debt is currently $16.3 trillion):
Without an increase in the debt ceiling, the government would default on its obligations. Republican lawmakers, sensing that this gives them bargaining power in the budget talks, are resisting any increase in the limit unless the White House makes concessions, such as agreeing to deep spending cuts.”
Human Events’ Neil McCabe noted yesterday that Republicans led by Ohio Sen. Rob Portman are pushing back against the president’s plan to move constitutional borrowing power from the legislative to the executive branch.
The Post also has some good news on fiscal cliff talks. The Amazing Kreskin, a 1970s-vintage mentalist famed for bending spoons with his mind, has a plan to avert the crisis:
All it would take is an hour in a room with President Obama and House Speaker John A. Boehner (R-Ohio), or their proxies.
“If I can, through mental suggestion and mental conditioning, bring both to a state of mind where I’ve lifted all the pressure, all the threats, all the money being offered and all the fears of the next election, I can bring them together to their unconscious level and they will start to think in terms of compromising,” Kreskin said in an interview.
At the New York Times, Jonathan Weisman and Peter Baker report that House Speaker John Boehner (R-Ohio) and Obama have intentionally frozen out prominent Democrats such as House minority leader Nancy Pelosi (California) and Sen. Harry Reid (Nevada), as well as Republican leaders, in order to stovepipe fiscal cliff talks:
White House aides and the speaker’s staff, by mutual agreement, have largely shut down public communication about the talks to avert hundreds of billions of dollars in automatic tax increases and spending cuts set to begin in January if no deal can be reached. Both sides said on Thursday that lines of communication remained open.
For public consumption, Democrats and Republicans are engaging in an increasingly elaborate show of political theater. Mr. Obama on Thursday went to the home of a middle-income family in the Virginia suburbs of Washington to press for an extension of expiring tax cuts for the middle class — and for the expiration of Bush-era tax cuts on incomes over $250,000.
“Just to be clear, I’m not going to sign any package that somehow prevents the top rate from going up for folks at the top 2 percent,” Mr. Obama said. “But I do remain optimistic that we can get something done.”
While many conservatives, including California Republican Rep. Tom McClintock, have noted that going over the fiscal cliff might not be the worst resolution of the impasse, some on the left are also making the case for a cliff plunge as the least-bad option. Jack Shakely, president emeritus of the California Community Foundation, notes that most of the entitlements dear to liberals would not be subject to sequestration:
Because of the deal Congress and the president made last year, letting the current tax rates expire will result in across-the-board budget reductions in many government programs (the dreaded “sequestration”).
Still, there would be no decreases in Social Security, Medicaid and veterans benefits. Medicare could take a 2 percent hit, but it’s unclear that it would affect individuals’ benefits. Defense spending would take a big hit, but because of the wind-down in Afghanistan, some military leaders are actually asking for less than Congress is willing to shell out. Also, reduced military spending does not mean a weakened national defense. In the decade 1990-99, defense spending decreased by 1 percent a year.
In Human Events, Charles Krauthammer makes another case for going over the edge. Because the president’s negotiations have produced nothing but a set of traps for Republicans, Krauthammer writes in an echo of Paul’s comments above, the GOP would be better off letting the budget locks kick in and leave Obama to suffer the consequences:
What should Republicans do? Stop giving stuff away. If Obama remains intransigent, let him be the one to take us over the cliff. And then let the new House, which is sworn in weeks before the president, immediately introduce and pass a full across-the-board restoration of the Bush tax cuts.
Obama will counter with the usual all-but-the-rich tax cut — as the markets gyrate and the economy begins to wobble under his feet.
Result? We’re back to square one, but with a more level playing field. The risk to Obama will be rising and the debt ceiling will be looming. Most important of all, however, Republicans will still be in possession of their unity, their self-respect — and their trousers.
In the Wall Street Journal, Kimberly A. Strassel says the president’s high-profile power plays with Republicans are masking his own vulnerability:
So successful has the White House been in defining this fight, few have stopped to consider how paltry that victory is likely to be. For a short-term win on this ideological issue, President Obama may well cede most everything else.
Let us assume that Mr. Obama is correct in his bet that the GOP will prove more responsible than he is and won’t cliff-dive. The president’s recent baiting of Republicans—his unreasonable offers, his public campaign to belittle them, his refusal to negotiate—has not put them in a generous mood. If Republicans have to fold on the top tax rates, it’s a decent bet they will do only that—and nothing more.
The Washington Examiner’s Byron York expands on Strassel’s point, explaining that Republicans are feeling scorched by Obama’s tactics, and as a result the resolution will be his responsibility:
In private conversation, some in the GOP appear a little sheepish about the fact that they once took the president seriously. Even though he had the upper hand after winning re-election, they thought he genuinely wanted to avoid going over the cliff and would negotiate in good faith. Then Obama sent Treasury Secretary Tim Geithner to Capitol Hill with a thumb-in-the-eye offer, and Republicans got the message.
In subsequent days, Obama has not only flatly rejected a Republican proposal that, unlike Obama’s, made concessions on tax revenue. He has also ratcheted up his demands — he now says there will be no fiscal cliff deal without a deal on the debt ceiling as well, which he has demanded unilateral authority to control. And he has, in public, addressed Republicans as if they were unruly children in need of discipline.
“If Congress in any way suggests that they’re going to tie negotiations to debt ceiling votes … ” Obama told the Business Roundtable on Wednesday, “I will not play that game. Because we’ve got to break that habit before it starts.”