The Fiscal Cliff is Coming

Dems, GOP stake out negotiating positions on looming fiscal cliff

AP Images
November 15, 2012

Democrats and Republicans staked out negotiating positions this week over the so-called fiscal cliff as Congress prepared to adjourn for the Thanksgiving recess.

More than $600 billion of automatic spending cuts and tax increases as negotiated in the August 2011 agreement to raise the federal debt ceiling will take place if lawmakers fail to reach a deal before the end of the year.

President Barack Obama on Wednesday reiterated his demand for higher taxes on wealthy families, individuals, and small businesses. The White House is asking for $1.6 trillion in new taxes over the next decade, which is roughly twice the amount discussed in previous deficit talks with Republican leaders.

Obama declined to draw a "red line" with respect to tax hikes despite previously indicating he would not support any compromise that does not increase tax rates on the top two percent of earners.

"I’m less concerned about red lines per se," Obama told reporters during his first solo press conference since March. "What I’m concerned about is not finding ourselves in a situation where the wealthy aren't paying more or aren't paying as much as they should."

He did not indicate how much he thought the wealthy should be paying.

Sen. Chuck Schumer (D., N.Y.) insisted that any deficit deal must include higher tax rates on top earners hours before Obama’s press conference.

Republican leaders have signaled a willingness to accept new revenue as part of a potential deal as long as that revenue is raised through tax reform as opposed to higher tax rates.

GOP vice presidential candidate and House Budget Committee Chairman Paul Ryan (R., Wis.) reiterated his party’s opposition to higher tax rates in an interview with ABC’s Jonathan Karl.

"Raising tax rates hurts economic growth and of all things we need right now, to prevent a fiscal cliff, prevent a recession, prevent a debt crisis, is we need people to go back to work," he said Tuesday. "There are other ways of getting more revenue into our government without damaging the economy, and that's the kind of thing we hope to achieve."

Republicans cite a recent Ernst & Young study projecting that upper-income tax hikes of the kind the president is proposing would cost about 700,000 jobs. This job loss would sap some $200 billion out of the economy and reduce wages by nearly two percent.

The president mentioned the struggling economy two years ago when he signed a temporary extension of all income tax rates, arguing that raising taxes would harm economic growth. However, he suggested Wednesday that the economy had improved sufficiently to the point where raising taxes was acceptable.

Grover Norquist, president of Americans for Tax Reform, said Obama’s remarks were "kind of an expression of contempt for the 10 million Americans that don’t have jobs because of his policies."

House Speaker John Boehner (R., Ohio) last week dismissed the notion that Obama’s reelection gave him a "mandate for raising tax rates," citing his party’s successful effort to maintain its House majority.

GOP leaders have also argued that new revenue through tax reform should be coupled with meaningful changes to federal entitlement programs rapidly approaching insolvency.

"Republicans like me have said for more than a year now that we’re open to new revenue in exchange for meaningful reforms to the entitlement programs that are the primary drivers of our debt, so that we can reduce the deficit, protect these programs for today’s seniors, and strengthen them for future generations," Senate Minority Leader Mitch McConnell (R., Ky.) said Tuesday.

Top Democrats have suggested a willingness to reform entitlement programs as part of a broad deficit agreement.

"I believe that we have to continue to take a serious look at how we reform our entitlements because health care costs continue to be the biggest driver of our deficits," the president said Wednesday.

Rep. Chris Van Hollen (D., Md.), ranking Democrat on the House Budget Committee, also said he was open to entitlement reform "as part of an overall plan."

Congressional leaders from both parties are scheduled to meet with the president at the White House on Friday.

Obama convened a summit of left-wing interest groups followed by a meeting with the CEOs of several major corporations earlier this week to discuss the fiscal cliff. He did not meet with representatives of small businesses.

"As I've said before, I'm open to compromise and new ideas," the president said Wednesday. "I believe this is solvable."

"I don't expect the Republicans simply to adopt my budget," he added. "That's not realistic."

Republicans are not alone in their opposition to the president’s budgetary plans. Obama’s most recent budget proposal has received a total of zero votes from Democratic lawmakers over the past two years.

Norquist said that while speculation over the substance and outcome of the fiscal cliff negotiations was "fun," Republicans should begin with two basic demands.

Norquist said they should first televise the talks on C-SPAN, as the president promised to do four years ago with healthcare negotiations.

Then Republicans should insist that any agreement be scored by the Congressional Budget Office and posted online at least seven days before it is voted on in Congress.

"If Republicans are being unreasonable the whole world will see it; if Obama’s being unreasonable the whole world will see it," he said. "Let’s have an actual honest, transparent discussion, and not have to wait a year for Bob Woodward to write a book about it."