Monday, December 10, 2012

Ian M. MacIsaac: Freeze, this is a stickup: hostage negotiations in the fiscal cliff crisis

  "We're nowhere."

  That was House Speaker John Boehner's summation of the fiscal cliff negotiations as of this time last week, in an interview on Fox News Sunday.

  Boehner said that plan proposed by President Obama and Treasury Secretary Tim Geithner to avoid the fiscal cliff, which included an end to Congress's control of the debt ceiling limit along with $1.6 trillion in new revenue, was "a non-serious proposal;" particularly because, as Boehner portrayed it, the proposal contained federal spending that outweighed its proposed budget cuts.

  Boehner, meanwhile, still refuses to even publicly acknowledge Obama's longtime proposal of raising taxes on those making $250,000 a year from 35 to 39.6 percent and up by letting the top brackets of the Bush tax cuts lapse. The House Speaker still stands by his proposal of what he says could add up to $800 billion in new revenue by closing deductions and loopholes primarily benefiting millionaires and billionaires.

  "What's it matter where the revenue comes from?" he has frequently rhetorically posed to the president and Democrats. But if the source of the revenue really doesn't matter, they ask Boehner and the Republicans in turn, why not just keep it simple, stupid, and raise the top tax rates?

  Besides, many Democrats doubt that closing those deductions would raise anywhere near $800 billion. A White House estimate of potential revenues brought in by Boehner's deductions-and-loopholes proposal came in at around $450 billion, just over half of the $800 billion the Speaker has bantered about.

  American voters can trust that if the ending of deductions and loopholes could bring $800 billion in new revenue, John Boehner would not touch it with a ten foot pole.

  Boehner's offer on revenue seems suspicious particularly because he has refused to specify any particular deductions and/or loopholes that he would close--much as Mitt Romney refused to do during the presidential campaign, when he likewise opposed Obama's tax increase proposal with a deductions-and-loopholes counterargument, but who, like Boehner, would never list any specific deductions that he would cut.

  There has been frequent Washington chatter in recent days of a possible compromise by President Obama on his original proposal of letting the top two brackets of the Bush tax cuts lapse back to the Clinton-era 39.6 percent on individuals making more than $250,000 per year.

  Perhaps, say pundits and reporters, Obama will agree to raising the tax rate to only, say, 37 percent instead of 39.6, and he will give Boehner his Medicare age eligibility increase from 65 to 67, and all will be peachy. Nancy Pelosi and Joe Biden were in front of reporters this week talking about a "37 percent solution."

  But what is more likely is that Obama will get his 39.6 percent income tax rate, regardless of whatever else happens. Obama is well known to do exactly the opposite of what Joe Biden recommends (see Afghanistan; Libya; bin Laden).

  This would be one in a long line of renegade Obama moves based on a unique vision--and based on the record so far it would likely work out for the president. He feels his stand at 39.6 percent is a matter of principle in a way that the septuagenarian Senate veteran compromiser Biden and the also-septuagenarian House veteran compromiser Pelosi most likely do not.

  Despite his painfully vague chatter on revenues, however, Boehner is still calling unequivocally for more than $4 trillion in very specific budget and spending cuts over the next ten years. While Obama has tentatively agreed with the number in private, he certainly does not agree with Boehner's proposal that as much as possible of that $4 trillion comes out of Medicare and Medicaid, along with related and similar programs.

  Obama, however, is unlikely to agree to such drastic spending and budget cuts if it is not accompanied by major revenue increases as well, along with allowing at least a portion of the $500 billion Defense Department "sequestration" scheduled for January 2013 to go into effect. John Boehner wants $4 trillion in cuts, but you can bet your ass not a dollar of it would come from Defense if he had his way.

  And, as Chris Wallace pointed out when he interviewed Boehner on Fox Sunday, in the almost two years since the Republicans took over the House and Boehner became Speaker in January 2011, Obama and the Democrats have already agreed to--and implemented--more than $1 trillion in budget and spending cuts, without a single dollar of increased revenue. The Democrats, in Wallace's words, have "already given."

  The ultimate likelihood is that both sides cave, but that the Republicans end up caving more. Obama probably will not win the ability to unilaterally raise the debt ceiling without the consent of Congress. Boehner has already publicly proclaimed congressional approval over the debt ceiling to be his "leverage" over the president and the budget.

  Obama has a specific incentive to fight Boehner on this, however: the United States will hit its borrowing limit again in February 2013 after being previously agreed upon in August 2011 after a difficult and uncertain summer of battling and negotiating.

  Recent developments have shown that Obama and congressional Republicans are capable of hashing out often bitter but solid agreements in the midst of crisis: see the Bush tax cuts and unemployment insurance compromise made at the end of 2010, or the last debt ceiling agreement in summer 2011.

  But it remains to be seen if Obama, who has never been a hand-shaker and a social schmoozer a'la Lyndon Johnson, Ronald Reagan, and Bill Clinton--and Boehner, who has never found a compromise worth making and never seen a ridiculously obstructive stand on principle he didn't like--can find common ground before a crisis, as a method of averting it.

  Obama managed once before to avert a crisis before its full impact was felt: in early 2009, just after his inauguration, when he passed the American Recovery and Reinvestment Act, known more commonly as the “stimulus.” But then he had a Democratic majority in the House, as well as the Senate (though he has that today as well). Obama had to negotiate only with Nancy Pelosi, Harry Reid, and a few select Republican senators like Olympia Snowe and Susan Collins.

  Now, with a Republican House of Representatives in the way, Obama's challenge is to find a way to avoid the fiscal cliff and continue to bring down the budget deficit without nuking his relations with Congress.

  It will likely be the hardest thing he has done since health care reform. He is more than capable and more than up to the task. He does not bluff anymore. Republicans in these fiscal cliff negotiations who think they have 2009 Obama on their hands will see very soon just how mistaken they are.

  About the author: Ian M. MacIsaac is a staff writer for the Capital City Free Press. He is a history major at Auburn University, and former co-editor of the AUMnibus, the official Auburn-Montgomery student newspaper.

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