-- An attendee of a White House briefing for liberal activists and union leaders on the state of negotiations with Republicans over looming federal tax increases and spending cuts, talking to Washington Post columnist Greg Sargent.
Is President Obama willing to jump the “fiscal cliff,” as many of his supporters are hoping he will?
It depends on what your definition of “fiscal cliff” is.
The White House takes a limited view of the current budget and tax impasse, casting it as a short-term conflict over the automatic tax increases and spending cuts that are looming at the end of the year.
Defined that way, the president does seem willing to allow the across-the-board tax increases and spending cuts to kick in at the end of the year if House Republicans refuse to allow tax rates to go up for top earners.
Obama is treating the negotiations over tax rates and spending as a continuation of the debt-ceiling fight that created the automatic spending cuts in the first place.
Having won re-election and with current tax rates set to expire, Obama is looking to do a deal limited in scope to those issues. If Republicans would like to avoid automatic, long-term reductions in defense spending, Obama believes that the money should come from higher rates for top earners.
And if Republicans won’t agree, Obama is sending strong signals that he will let the hikes and cuts occur and then resume negotiations amid a deeper crisis.
This view casts Obama and House Speaker John Boehner as two bomb makers trying to diffuse an explosive device of their own creation. And if Boehner won’t agree to change the wiring, Obama seems content to let the thing blow and then cast the blame on the House GOP.
Republicans, though, have a broader view of what’s dangling on the cliff. Rather than just making changes to the previous deals on taxes and spending, Republicans would like to see a larger discussion about the long-term drivers of the debt, entitlement programs like Medicare and Social Security.
Obama, though, is looking for a win on current tax rates, which he doubtless hopes will spur a vicious intra-party fight among his adversaries, and then take up entitlement issues once beyond the blast radius of the year-end crisis.
He wants Republicans to gag on the tax hikes and then negotiate on Medicare, Medicaid and Social Security with the pressure of an economically catastrophic batch of hikes and cuts.
Republicans believe that if they go into the fight over entitlements without the urgency of taxes and cuts driving the discussion, it will be impossible to get Democrats to do anything on the subject of the big three entitlements.
But there is a lot more dangling on Dec. 31 than just current tax rates and the start of the automatic reductions.
The short-term fight also includes other matters, like postponing again long-scheduled cuts in Medicare payments to doctors and hospitals and avoidance of the imposition of a minimum tax rate. Both side generally want to avoid these, which have functioned as annual mini-cliffs for decades.
There’s also the legislation to lift the federal government’s borrowing limit, set to breach its current $16.4 trillion limit sometime around February.
Team Obama would like to see the borrowing hike and the annual delays of the Medicare cuts and minimum tax rolled into one year-end package: rack up some wins on the short-term issues and then deal with entitlements and larger issues on tax reform at a later date.
In essence, he wants Republicans to give him his way now in exchange for consideration of their issues at a later date. Republicans know this would be a very terrible way to negotiate.
Their idea of avoiding the fiscal cliff is one more extension of the status quo – setting a new deadline that would allow negotiators time to hash out a big, multi-trillion-dollar plan early next year.
Both sides know that an across-the-board tax hike would be bad for the economy and it would also be the strongest sign yet that Washington is unable to deal with even small fiscal concerns, let alone reducing the debt or balancing budgets. Or even passing budgets, for that matter.
While Republicans know that they would be punished in the press if they refuse to back a tax hike now, Obama knows that his own party will not accept any deals on rates for top earners.
Plus, Obama means to win the fiscal fight that dominated most of his presidency – his push for higher rates for top earners. He means to win, and as much he knows it would trigger an economic downturn, he is already heading out on the campaign trail to make sure that the Republicans get the blame.
And since the Democratic Senate wouldn’t pass a full extension of current rates, the president knows he would never have to sign the veto that triggered the tax hikes. They would just occur without him doing anything.
Republicans who are talking about their openness to more taxes are talking about them in the context of a trade-off for entitlement reforms. The president seems ever more determined to make higher taxes a stand-alone issue, even if it means putting the car back in the ditch.
Read more: http://www.foxnews.com/politics/2012/11/28/obama-prepares-to-jump-cliff/?intcmp=obnetwork#ixzz2E029fPAx
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