Divided House Passes Tax Deal in End to Latest Fiscal Standoff

NY TIMES

 Ending a climactic fiscal showdown in the final hours of the 112th Congress, the House late Tuesday passed and sent to President Obama legislation to avert big income tax increases on most Americans and prevent large cuts in spending for the Pentagon and other government programs.

The measure, brought to the House floor less than 24 hours after its passage in the Senate, was approved 257 to 167, with 85 Republicans joining 172 Democrats in voting to allow income taxes to rise for the first time in two decades, in this case for the highest-earning Americans. Voting no were 151 Republicans and 16 Democrats.

The decision by Republican leaders to allow the vote came despite widespread scorn among House Republicans for the bill, passed overwhelmingly by the Senate in the early hours of New Year’s Day. They were unhappy that it did not include significant spending cuts in health and other social programs, which they say are essential to any long-term solution to the nation’s debt.

Not a single leader among House Republicans came to the floor to speak in favor of the bill, though Speaker John A. Boehner, who rarely takes part in roll calls, voted in favor. Representative Eric Cantor of Virginia, the majority leader, and Representative Kevin McCarthy of California, the No. 3 Republican, voted no. Representative Paul D. Ryan, the budget chairman who was the Republican vice-presidential candidate, supported the bill.

Adding to the pressure on the House, the fiscal agreement was reached by Senator Mitch McConnell of Kentucky, the Senate Republican leader, and had deep Republican support in the Senate, isolating the House Republicans in their opposition. Some of the Senate Republicans who backed the bill are staunch conservatives, like Senators Patrick J. Toomey of Pennsylvania and Tom Coburn of Oklahoma, with deep credibility among House Republicans

An up-or-down House vote on the Senate measure presented many Republicans with a nearly impossible choice: to prolong the standoff that most Americans wished to see cease, or to vote to allow taxes to go up on wealthy Americans without any of the changes to spending and benefit programs they had fought for vigorously for the better part of two years.

But with their options shrinking just two days before the beginning of a new Congress, the House leadership made one of the biggest concessions of their rebellious two years and let the measure move forward to avoid being seen as the chief obstacle to legislation that Mr. Obama and a bipartisan Senate majority said was necessary to prevent the nation from slipping back into a recession.

The measure, while less reflective of Mr. Obama’s fiscal agenda than Senate Democrats had wished, still provided fewer concessions than the president initially offered in a, tentative agreement with Mr. Boehner last month, and it was a far cry from what was on the table in 2011 when negotiators tried to reach a so-called grand bargain

OBAMA PRESSES PLAN FOR TAX INCREASES FOR THOSE WITH INCOMES OVER $250,000

NY TIMES      By JACKIE CALMES and JONATHAN WEISMAN

Though it has been 45 days since voters emphatically reaffirmed their faith in Mr. Obama, the time since then has shown the president’s power to be severely constrained by a Republican opposition that is bitter about its losses, unmoved by Mr. Obama’s victory and unwilling to compromise on social policy, economics or foreign affairs.

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President Obama, conceding that a “grand bargain” for deficit reduction with Speaker John A. Boehner is unlikely, called Friday for Congress to approve a stripped-down measure by year’s end to prevent a tax increase for all but the richest taxpayers and to extend aid for two million unemployed Americans. “That’s an achievable goal; that can get done in 10 days,” Mr. Obama said....

By Friday, both the House and the Senate had closed for the Christmas break, and soon after his statement Mr. Obama left with his family for their annual holiday trip to Hawaii, his native state. His return date is dependent on events, aides said.But as he and Democrats in Congress envision the coming days, the Senate would reconvene on Thursday to pass a compromise bill with commitments of cooperation from both Mr. Boehner and Senator Mitch McConnell of Kentucky, the Republican minority leader, to keep the process moving.

Facing the Dec. 31 deadline for the expiration of all Bush-era tax cuts, Mr. McConnell would need to promise not to filibuster and Mr. Boehner would have to agree to a House vote on the Senate-passed bill.

 

Presumably, the sort of fallback measure that Mr. Obama seeks could pass in the House only with strong support from Democrats, since conservative Republicans, by their revolt against Mr. Boehner this week, have signaled that they would not approve even legislation that raises tax rates for fewer than 1 percent of Americans.

 

While many in both parties believe that Mr. Boehner will permit the vote on a compromise under the intense pressure, with public opinion on the newly re-elected president’s side, doing so could threaten his already weakened speakership among conservatives.

 

Mr. Obama, backed by Congressional Democrats, is proposing as he has for four years that the Bush tax rates be extended permanently for all income below $250,000 a year. In negotiations with Mr. Boehner he had tentatively agreed to raise that threshold to $400,000, and Congressional Democrats on Friday said they would go as high as $500,000 if it would seal a deal with Republicans.

 

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While the strategy that Mr. Obama and Mr. Reid are now pursuing requires the acquiescence of both Republican leaders, Mr. McConnell has given no public indication whether he would give it. Asked at the Capitol before Mr. Obama’s statement whether he would agree not to filibuster the stripped-down bill, he stepped onto an elevator and said “Merry Christmas.”

 

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As Democrats on Capitol Hill described the possible fallback plan, it would be similar to legislation already passed by the Senate to extend the Bush-era tax rates for income below $250,000, increase to 20 percent from 15 percent the tax rate for capital gains and dividend income, and extend some other tax breaks.

 

The new bill, they said, would also delay the so-called sequester in January — across-the-board spending cuts in military and domestic programs that Mr. Obama and Congress scheduled in mid-2011 as an incentive for the two sides to approve an alternative, more deliberate deficit-reduction compromise. And it would extend federal unemployment benefits for the estimated two million Americans who have been out of a job for long enough to exhaust their initial state aid.

 

While Mr. Obama said the bill also should provide “the groundwork” for Congress to achieve additional deficit reduction next year through overhauls of the tax code and spending for fast-growing entitlement programs, chiefly Medicare, Congressional Democrats said the likely measure by itself would do nothing to put such efforts in motion.

 

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By his resort to the stripped-down legislative option, Mr. Obama demonstrated that his and his party’s priority is to prevent the Bush tax cuts from expiring for most Americans. But he might be forfeiting some leverage in the coming fiscal battles early next year over extending the debt limit.

Many Republicans are threatening to withhold support for increasing that limit, as they did in 2011, without Mr. Obama’s agreement to deep reductions in spending for Medicare and Social Security. By both sides’ reckoning, Mr. Obama would have a strong hand in the debt limit debate if it remained tied to the tax issue, given Republicans’ zeal to avoid tax increases.

 

 

 

OBAMA SAVED BUT BOEHNER MAY NOT BE IN REBOOBLICAN IMPLOSION

With his customary shrug and a grin, Mr. Boehner plainly acknowledged what the world already knew — he had failed to get enough Republicans to sign off on a deal to avoid automatic tax increases and spending cuts, and his members once again had left him standing nearly alone, like a man without a date to his own wedding, and at the crossroads of his career....Mr. Boehner risked his speakership with the vote this week, something he professed to be unconcerned with.


PAUL KRUGMAN, NY TIMES   12/20/12

A few years back, there was a boom in poker television — shows in which you got to watch the betting and bluffing of expert card players. Since then, however, viewers seem to have lost interest. But I have a suggestion: Instead of featuring poker experts, why not have a show featuring poker incompetents — people who fold when they have a strong hand or don’t know how to quit while they’re ahead?

 

On second thought, that show already exists. It’s called budget negotiations, and it’s now in its second episode.

 

The first episode ran in 2011, as President Obama made his first attempt to cut a long-run fiscal deal — a so-called Grand Bargain — with John Boehner, the speaker of the House. Mr. Obama was holding a fairly weak hand, after a midterm election in which Democrats took a beating. Nonetheless, the concessions he offered were breathtaking: He was willing to accept huge spending cuts, not to mention a rise in the Medicare eligibility age, in return for a vague promise of higher revenue without any increase in tax rates.

 

This deal, if implemented, would have been a huge victory for Republicans, deeply damaging both programs dear to Democrats and the Democratic political brand. But it never happened. Why?

 

Because Mr. Boehner and members of his party couldn’t bring themselves to accept even a modest rise in taxes. And their intransigence saved Mr. Obama from himself.

 

Now the game is on again — but with Mr. Obama holding a far stronger hand. He and his party won a solid victory in this year’s election. And the legislative clock is very much in their favor, too. All the Bush tax cuts are scheduled to expire at the end of the month.

 

A brief digression: I’ve become aware of a new effort by the G.O.P. to bully reporters into referring only to the “Bush-era” tax cuts, probably in the hope of dissociating those cuts, which they want to preserve, from a president voters now regard with disdain. But George W. Bush and his administration devised those cuts and rammed them through Congress, and it’s deceptive to suggest otherwise.

 

Back to the poker game: The president doesn’t hold all the cards — there are some things he and fellow Democrats want, like extended unemployment benefits and infrastructure spending, that they can’t get without some Republican cooperation. But he is in a very strong position.

 

Yet earlier this week progressives suddenly had the sinking feeling that it was 2011 all over again, as the Obama administration made a budget offer that, while far better than the disastrous deal it was willing to make the last time around, still involved giving way on issues where it had promised to hold the line — perpetuating a substantial portion of the high-income Bush tax cuts, effectively cutting Social Security benefits by changing the inflation adjustment.

 

And this was an offer, not a deal. Are we about to see another round of the president negotiating with himself, snatching policy and political defeat from the jaws of victory? Well, probably not. Once again, the Republican crazies — the people who can’t accept the idea of ever voting to raise taxes on the wealthy, never mind either fiscal or economic reality — have saved the day.

 

We don’t know exactly why Mr. Boehner didn’t respond to the president’s offer with a real counteroffer and instead offered something ludicrous — a “Plan B” that, according to the nonpartisan Tax Policy Center, would actually raise taxes for a number of lower- and middle-income families, while cutting taxes for almost half of those in the top 1 percent. The effect, however, has to have been to disabuse the Obama team of any illusions that they were engaged in good-faith negotiations.

 

Mr. Boehner had evident problems getting his caucus to support Plan B, and he took the plan off the table Thursday night; it would have modestly raised taxes on the really wealthy, the top 0.1 percent, and even that was too much for many Republicans. This means that any real deal with Mr. Obama would be met with mass G.O.P. defections; so any such deal would require overwhelming Democratic support, a fact that empowers progressives ready to bolt if they think the president is giving away too much.

 

As in 2011, then, the Republican crazies are doing Mr. Obama a favor, heading off any temptation he may have felt to give away the store in pursuit of bipartisan dreams.

 

And there’s a broader lesson here. This is no time for a Grand Bargain, because the Republican Party, as now constituted, is just not an entity with which the president can make a serious deal. If we’re going to get a grip on our nation’s problems — of which the budget deficit is a minor part — the power of the G.O.P.’s extremists, and their willingness to hold the economy hostage if they don’t get their way, needs to be broken. And somehow I don’t think that’s going to happen in the next few days.

HOW OBAMA'S WIN KEEPS ON GIVING

WASH. POST MORNING FIX

Whether or not a majority of Americans — or Members of Congress — believe that President Obama’s victory amounted to a mandate, it’s clear that the incumbent’s hand has been significantly strengthened by what happened on Nov. 6.

In the new Washington Post-ABC News poll, President Obama is at 54 percent approval — the highest he has been in almost two years. (Obama was briefly at 56 percent approval in the immediate aftermath of the killing of Osama bin Laden.) And Obama’s approval rating when it comes to handling the economy is at 50 percent for the first time since June 2010. As importantly, Obama’s victory has strongly consolidated Democrats behind him while the defeat of Mitt Romney has left Republicans without any obvious foil, leaving the job of countering Obama to the decidedly unpopular congressional wing of the party.

In the Post-ABC poll, 90 percent of Democrats approve of the job Obama is doing while just 45 percent of Republicans feel the same way about GOPers in Congress. (Somewhat amazingly, a majority — 51 percent — of self-identified Republicans disapprove of the job their congressional leaders are doing.).

Those numbers bear out just how hard House Speaker John Boehner’s job actually is. Not only does he have to try to combat a president who has clearly benefited in the eyes of the public from winning the election, but he also must cope with the fact that there are a large number of Republicans who simply don’t like what he (or any GOP members of Congress) are doing.

We continue to believe that this political dynamic makes a deal on the fiscal cliff likely, due to the fact that to not make a deal would throw Republicans into a PR fight that they have no reasonable hope of winning. Of course, we have also heard it argued that a deal seen as an abandonment of conservative principles could cost the party a portion of its base and would, therefore, not be worth doing.

Rock, meet hard place. Winning a presidential election has its benefits for a party — most notably that you have a recently-validated leader of your side even as your opponents are scrambling to figure out what went wrong and how to fix it without any clear sense of who’s in charge.
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Boehner’s plan to hold a vote on allowing the Bush tax cuts for income over $1 million to expire and renewing the rest was quickly dismissed by Democrats and also some Republicans....It may seem like a more conservative-friendly alternative to Obama’s offer, which has moved the threshold on allowing tax cuts to expire from $250,000 to now $400,000. But to a lot of Republicans, it would still be voting for an increase in tax rates, which just about all of them have sworn not to do.

Fixbits:

Obama on Wednesday will name Vice President Biden as head of the administration’s working group on gun violence. President Obama said he would submit broad new proposals no later than January and would commit his office to overcoming political opposition in the wake of last week’s killings.

A family acquaintance said Tuesday that Lanza had been estranged from his father and brother for the past two years, despite his father's repeated efforts to repair the relationship.Adam Lanza began refusing to see his father and his brother, 24-year-old Ryan Lanza, at about the same time that his father began seeing another woman in the year after the Lanzas' divorce became final in 2009, he said. Peter Lanza eventually married the woman.

The hard drive to Adam Lanza's computer was completely destroyed by him, and made irretreivable, before he went on his rampage.

Texas Gov. Rick Perry (R) says school districts should have the right to arm their teachers.

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U.S. stocks fell on Wednesday after a brief two-session rally. Stocks began retreating after negotiations between President Obama and House Speaker John Boehner hit another impasse. Obama called GOP actions “puzzling” adding that Republicans find it “very hard” to say yes to him, while a spokesman for Boehner described the White House as “irrational.”

Read it at MarketWatch

December 19, 2012 8:53 PM

THE FISCAL CLIFF AND THE FISCAL MYTH



Grover Norquist

WASH. POST:

Three big-name Republicans broke with Grover Norquist over the holiday weekend, saying they won’t be bound by their Norquist-sponsored pledges to oppose any and all tax increases.

The moves by Sens. Lindsey Graham (S.C.) and Saxby Chambliss (Ga.) and Rep. Peter King (N.Y.) represent the opening steps of a delicate dance for the GOP — and one that could come to define the just-begun talks over the looming “fiscal cliff.” The question from here is whether this represents a simple trial balloon or the beginning of a movement in which a large segment of the GOP embraces a tax increase as an unhappy reality.

If that were to occur, it would both mark a significant shift in party orthodoxy and also threaten to make the tea party primaries of 2010 and 2012 seem tame.Twenty years ago, George H.W. Bush saw his approval ratings plummet and Republicans lost seats in Congress in the 1990 midterms after Bush went back on his anti-tax pledge (“Read my lips: No new taxes”). By the end of 1992, Bush had lost reelection.

Today, congressional Republicans have their own pledge and are inching toward breaching it, despite knowing very well that they could pay an electoral price.Republicans in Congress have seen a procession of conservative and tea party candidates upset more moderate establishment candidates (including incumbents) in primaries in recent years. And many of them lost in large part because of one vote — for the 2008 Troubled Asset Relief Program (TARP) bailout.

If you don’t think Republican incumbents fear for their political lives by voting for a tax increase, you don’t know members of Congress. Even as the vast majority of Republicans who supported TARP didn’t face tough primaries in recent years and only a handful lost, the fate of the ones who did will be on the mind of anybody who votes for a tax increase — as will Bush’s demise.

“‘Read my lips’ is still an iconic phrase for breaking your word on taxes,” said GOP strategist Dan Hazelwood. “I suspect it will be widely quoted in 2013-14.”Despite that very real threat, Republicans have been hinting for a while now that they may accept some revenue increases — whether through tax hikes or closing tax loopholes — to avoid the drastic cuts that would be triggered by sequestration.

Whether Republicans vote for tax increases or closing loopholes, if those changes aren’t offset by other tax cuts, the package will be in violation of Norquist’s Americans for Tax Reform pledge.
Norquist, for his part, doesn’t see the GOP deserting his pledge en masse. He noted that Graham has made similar comments before and only said he would abandon the pledge if it was accompanied by big entitlement reforms, which Democrats will be hard-pressed to embrace.

“I don’t think between now and 2014 that either the South Carolina senator or the Georgia senator will vote for a tax increase,” Norquist predicted in an interview with The Fix. “I am pleased at how the modern Republican Party and the members of Congress are hanging together in opposition to being TARPed again.”

What seems to be missing so far is a big public threat from the tea party and groups like Norquist’s to support primary challenges against any member who votes for a tax increase. So far, Norquist and conservative groups haven’t been willing to go there.

Most Republican strategists suggest the Norquists of the world and the tea party groups might be able to stomach a deal that includes tax increases, as long as the rest of the deal is seen as a good one — that is, that it contains real spending cuts and other conservative-friendly reforms.

“Conservatives have seen this movie before where we buy into higher taxes in return for spending cuts, only to have the cuts never materialize and find ourselves years later dealing with higher deficits and debt,” said one GOP strategist, granted anonymity to discuss strategy. “I can’t see us allowing Lucy to pull the football again.”

For the Republican Party, though, it will be very difficult to sell its anti-tax base on even a good deal that includes tax increases.This is a Republican Party, after all, whose presidential candidates all stood on a debate stage last year and said that they would reject a deal that includes $10 in spending cuts for every $1 in tax increases.

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Obama Looks for Support on Taxes

Now if only the 99 percent would show up. White House aides are scrambling to animate Obama voters as the president prepares to square off with congressional Republicans over tax increases for the wealthiest Americans. Supporters are being asked to record YouTube videos of themselves arguing for tax hikes on the most well-off of the well-to-do, and emails explaining the president’s position were sent to activists in the past week. It’s all an attempt to kick the Obama campaign machine into gear—a strategy that mostly did not carry through in the president’s first term.

Read it at The New York Times

November 26, 2012 6:33 AM

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HUFFINGTON POST      Robert Kuttner  Co-founder and co-editor, 'The American Prospect'

The Fiscal Myth

As President Obama gets closer to making his deal with the Republicans on the budget, the most important thing to keep in mind is that the fiscal cliff is an artificially contrived trap. Were it not for the two Bush wars and the two Bush tax cuts and the House Republican games of brinksmanship with the routine extension of the debt ceiling, there would be no "fiscal cliff." Rather, there would be a normal, relatively short-term increase in the deficit resulting from a deep recession and the drop in government revenues that it produces. When the economy recovered, the deficit would return to sustainable levels. In the meantime, these deficits are necessary and useful to maintain public spending as a tonic to the economy.

Read Post

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NY TIMES    PAUL KRUGMAN  November 25, 2012

   These are difficult times for the deficit scolds who have dominated policy discussion for almost three years. One could almost feel sorry for them, if it weren’t for their role in diverting attention from the ongoing problem of inadequate recovery, and thereby helping to perpetuate catastrophically high unemployment.

    What has changed? For one thing, the crisis they predicted keeps not happening. Far from fleeing U.S. debt, investors have continued to pile in, driving interest rates to historical lows. Beyond that, suddenly the clear and present danger to the American economy isn’t that we’ll fail to reduce the deficit enough; it is, instead, that we’ll reduce the deficit too much. For that’s what the “fiscal cliff” — better described as the austerity bomb — is all about: the tax hikes and spending cuts scheduled to kick in at the end of this year are precisely not what we want to see happen in a still-depressed economy.

  Given these realities, the deficit-scold movement has lost some of its clout. That movement, by the way, is a hydra-headed beast, comprising many organizations that turn out, on inspection, to be financed and run by more or less the same people; dig down into many of these groups’ back stories and you will, in particular, find Peter Peterson, the private-equity billionaire, playing a key role.

 

But the deficit scolds aren’t giving up. Now yet another organization, Fix the Debt, is campaigning for cuts to Social Security and Medicare, even while making lower tax rates a “core principle.” That last part makes no sense in terms of the group’s ostensible mission, but makes perfect sense if you look at the array of big corporations, from Goldman Sachs to the UnitedHealth Group, that are involved in the effort and would benefit from tax cuts. Hey, sacrifice is for the little people.

 

So should we take this latest push seriously? No — and not just because these people, aside from exhibiting a lot of hypocrisy, have been wrong about everything so far. The truth is that at a fundamental level the crisis story they’re trying to sell doesn’t make sense.

 

You’ve heard the story many times: Supposedly, any day now investors will lose faith in America’s ability to come to grips with its budget failures. When they do, there will be a run on Treasury bonds, interest rates will spike, and the U.S. economy will plunge back into recession.This sounds plausible to many people, because it’s roughly speaking what happened to Greece. But we’re not Greece, and it’s almost impossible to see how this could actually happen to a country in our situation.

 

For we have our own currency — and almost all of our debt, both private and public, is denominated in dollars. So our government, unlike the Greek government, literally can’t run out of money. After all, it can print the stuff. So there’s almost no risk that America will default on its debt — I’d say no risk at all if it weren’t for the possibility that Republicans would once again try to hold the nation hostage over the debt ceiling.

 

But if the U.S. government prints money to pay its bills, won’t that lead to inflation? No, not if the economy is still depressed. Now, it’s true that investors might start to expect higher inflation some years down the road. They might also push down the value of the dollar. Both of these things, however, would actually help rather than hurt the U.S. economy right now: expected inflation would discourage corporations and families from sitting on cash, while a weaker dollar would make our exports more competitive.

 

Still, haven’t crises like the one envisioned by deficit scolds happened in the past? Actually, no. As far as I can tell, every example supposedly illustrating the dangers of debt involves either a country that, like Greece today, lacked its own currency, or a country that, like Asian economies in the 1990s, had large debts in foreign currencies. Countries with large debts in their own currency, like France after World War I, have sometimes experienced big loss-of-confidence drops in the value of their currency — but nothing like the debt-induced recession we’re being told to fear.

 

So let’s step back for a minute, and consider what’s going on here. For years, deficit scolds have held Washington in thrall with warnings of an imminent debt crisis, even though investors, who continue to buy U.S. bonds, clearly believe that such a crisis won’t happen; economic analysis says that such a crisis can’t happen; and the historical record shows no examples bearing any resemblance to our current situation in which such a crisis actually did happen.

 

If you ask me, it’s time for Washington to stop worrying about this phantom menace — and to stop listening to the people who have been peddling this scare story in an attempt to get their way.