Thread: Economics The Fiscal Cliff Approacheth
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Old 12-20-2012, 02:03 PM   #617
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http://www.politico.com/story/2012/1...int-85342.html

Fiscal cliff: The lowest point
By CARRIE BUDOFF BROWN, JAKE SHERMAN and JOHN BRESNAHAN
12/19/12 8:50 PM EST

President Barack Obama and House Speaker John Boehner opened their negotiations last month by pledging to work constructively to avert the fiscal cliff.

But on Wednesday, the two men at the center of the talks traded blame, not counteroffers.

Obama and Boehner hit their lowest point yet during a day of sharp words and legislative confusion — and the outlook significantly darkened for reaching a deficit-reduction deal before the new year. The talks are stalled, and Boehner is scrambling to muscle his own bill through the House — a proposal the president has already promised to veto.

With 12 days to go until the deadline, the president faulted Boehner for wasting time on a bill that will never reach the Oval Office. Senior administration officials accused the speaker of incompetence by pursuing a short-sighted tactic that makes it harder to reach a deal and brings the country closer to the cliff.


Boehner responded with a curt statement from the Capitol, where he told the president to “get serious soon,” or else Obama “can be responsible for the largest tax increase in American history.” Boehner then turned and walked out.

The dueling public statements signaled that little has fundamentally changed between Obama and Boehner, who have been here before. They got close to a grand bargain on the debt and deficit in 2011 only to see it crumble amid partisan pressures. Both felt burned.

On Wednesday, it looked like history had a good shot at repeating itself, as the tenuous progress they made over the past week seemed to unravel.

Obama, betraying some of those bruised feelings, said Republicans just need to “take the deal.”

“They keep on finding ways to say ‘no’ as opposed to finding ways to say ‘yes,’” Obama said. “And I don’t know how much of that just has to do with, you know, it is very hard for them to say yes to me. But, you know, at some point, you know, they’ve got to take me out of it and think about their voters and think about what’s best for the country.”

Boehner’s Plan B bill is going nowhere, Obama added.

He’s likely to get an assist on that point from congressional Democratic leaders.

Senate Democrats haven’t settled on a final strategy, but the most likely option is they don’t even take the House bill up — if it passes — and pound the speaker for refusing to cut a deal with Obama. And House Minority Leader Nancy Pelosi (D-Calif.) believes she may not lose any of her members, making Boehner’s job more difficult.

“I haven’t seen her work a vote this hard since health care” in 2010, said one top Democratic aide.

The distance between Obama and Boehner on Wednesday was particularly striking on Capitol Hill, where the speaker spent Wednesday working to pass his fallback plan to raise tax rates on income above $1 million.

Boehner took his pitch to Majority Whip Kevin McCarthy’s (R-Calif.) office, where he spoke to a meeting of deputy whips — the small group of lawmakers tasked with taking stock of how Republicans are voting and with trying to convince them to support leadership priorities.

It was a rare appearance in front of this group — several lawmakers said Boehner has attended fewer than five times before, including once during the 2011 debt limit showdown — and underscored his concern about avoiding a defeat on his own bill. The Republican vote-counting team was predicting a razor-thin margin.


Boehner told the lawmakers that it’s imperative his fallback plan gets passed. But he also told them he had no idea what Senate Majority Leader Harry Reid (D-Nev.) would do with the bill if it reaches the Senate. Although such little time remains for reaching a deal, Senate and House leaders aren’t even speaking.

Boehner, according to sources, warned that if the House fails to pass a bill, the Senate could force the lower chamber to vote on a bill that extends tax cuts for income under $250,000 — a far cry from the $1 million-and-below threshold Boehner’s allies are seeking.

With the stakes so high, Boehner made a personal plea to his colleagues. The Ohio Republican worked pockets of lawmakers, touting the support his bill has received from conservative stalwarts such the anti-tax lobbyist Grover Norquist and FreedomWorks. But two other key groups — the Heritage Action for America and the Club for Growth — came out against it.

Concerned about opposition to the bill among Republicans, Boehner reworked his approach.

In a bid to win over defense hawks, Boehner will also push a second vote on a bill from House Budget Committee Chairman Paul Ryan (R-Wis.) that replaces part of the across-the-board spending cuts known as the sequester. The Ryan bill, passed by the House in May with no Democratic votes, would replace Pentagon cuts with spending reductions for domestic agencies. It is aimed at addressing concerns that Boehner’s bill does nothing to stop the sequester from taking effect.

House Majority Leader Eric Cantor (R-Va.) will manage the “sequestration replacement” bill, his office said. “This bill replaces the sequester for one year with responsible spending cuts, that protect our national security, and provides an additional $200 billion in savings over ten years,” said Rory Cooper, Cantor’s spokesman. “This is yet another step House Republicans have taken this year to address the real fiscal problem in Washington, which is spending.”

Boehner also dropped a vote on a bill that would extend tax rates for income $250,000 and below — a Democratic proposal that passed the Senate in July. With the vote tally on his own proposal so close, Boehner and other top Republicans hoped to keep their strategy and message simple.

But even if his bill passes the House, Boehner’s position with the White House has been significantly weakened by Senate Republicans, many of whom question his strategy.

“I’m still looking forward to a plan that would seriously reduce entitlement programs, and I’m hopeful the speaker and the president can still come up with one,” said Sen. Lamar Alexander (R-Tenn.) when asked whether he backed the Plan B.

Conservatives are already lining up against Boehner’s plan.

“We’re forgetting the government doesn’t need any more money, we have a spending problem,” said Sen. Jim DeMint (R-S.C.). “The question is do we just cave to political pressure and do the wrong thing for America? I don’t think Republicans are going to do that.”

Despite the angry rhetoric, both sides said they hold out hope that talks will resume — and they’ll be able to get a deal before the new year.

But time really is short.

Congress isn’t expected to stay in session through Christmas. Senate Majority Leader Harry Reid (D-Nev.) is planning to travel to Hawaii for the funeral Sunday of the late Sen. Daniel Inouye. The House could adjourn after taking up Boehner’s plan.

If nothing happens until after the new year and the markets tank, some Republican lawmakers privately concede that they will have to settle for smaller tax cuts. Others lawmakers now say that it might take a January shock to jolt Obama and Boehner into an agreement.

It just might take, these lawmakers say, higher tax rates, lower take-home pay and shrinking savings accounts for the president and lawmakers to get something done.

“That’s a bad scenario, but obviously one that looks more and more likely that it’s going to happen,” said Rep. Patrick Tiberi, an Ohio Republican close to Boehner. “I don’t think anything good comes of that.”
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