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A Stalemate in Negotiations?

By Peter Suderman, Hit & Run - December 20, 2012

Have the fiscal cliff negotiations reached a permanent dead end? 

For several days, discussions seemed to be moving toward an agreement. Both sides had narrowed their disagreements to two key issues: Whether top tax rates would rise on income above $400,000 or above $1 million, and whether a deal would include enough spending cuts to match new tax revenues. President Obama said his proposal raised $1.3 trillion and cut the same amount. House Majority Leader John Boehner counted just $930 billion in cuts, because the remainder of the savings came from reduced interest payments. 

But discussions went off the rails earlier this week when House Majority Leader John Boehner announced that he would be pursuing "Plan B," in which he would introduce a bill to preserve current tax rates on all income under $1 million annually.

Plan B, which Republican leaders now say is likely to pass, is designed both as both a fallback plan and a way to create some extra negotiating leverage for Republicans: If Plan B passes and then we go over the fiscal cliff, Republicans can say that they passed a bill designed to stave off tax hikes on most everyone"”but still raise taxes on millionaires. And they can also say that the president threatened to veto it. They can also point out that taxing millionaires at a higher rate is an idea first proposed by Democratic Sen. Chuck Schumer"”and yet now Democrats are rejecting it.

The White House isn't happy, and is accusing Boehner of wasting time on a plan that can't pass. And John Boehner is playing tough as well. At an extremely brief press conference yesterday, he offered a Tweet-length ultimatum: "Tomorrow the House will pass legislation to make permanent tax relief for nearly every American," he said. "Then the president will have a decision to make. He can call on Senate Democrats to pass that bill. Or he can be responsible for the largest tax increase in American history."

So is that it? Possibly. President Obama could still decide not to negotiate further, and to go over the fiscal cliff. If that happens, tax rates go up on everyone. If that happens, it's hard to imagine that Republicans and Democrats would not quickly vote to reinstate current tax rates on income under $250,000. President Obama wins. Republicans get nothing: no Social Security changes, no new spending cuts, and higher tax rates on all income above $250,000.

Yet there are risks to this strategy as well.

First there are the potential economic repercussions of going over the cliff, even for a short time, which Obama probably would prefer to avoid. Second, there are the coming debt ceiling negotiations. If Obama pushes Republicans over the cliff now, there's a good chance they'll be even more determined to oppose the White House come the debt ceiling fight.

Which is why I don't think it's all over, at least not yet. There are still subtle signs that this is just a final round of posturing before a last-minute deal shapes up. A number of House Republicans have signaled that while they aren't thrilled with the direction things are going, they want to make a deal, and will probably ultimately support whatever final plan Boehner gives them. And while the White House isn't budging form its previous offers right now, they're also not saying they're done. President Obama is still urging Republicans to accept his offer. Indeed, lines of communication are still open. And both sides still seem to want to make a deal. If they don't, it'll be because they stopped here and never got any closer. But with more than a week left before the deadline, I wouldn't count on that just yet.  

Peter Suderman is a senior editor at Reason magazine.

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time.

| 12.20.12 @ 12:48PM |#

Which is why I don't think is over

Which is why I don't think it is over

corrected for you

reply to this

Matrix| 12.20.12 @ 12:50PM |#

The president has steadfastly refused to budge an inch in the budgetary crisis since his reelection. The left and the media have been bashing the Republicans fighting the president ever since first took office (despite the fact that the Democrats held a strong majority for the first 2 years, which is why we got the abomination called Obamacare). But for much of that time, the president has maintained a "it's my way; there is no other way" mentality. Sure, he talks of wanting bipartisan talks, but his actions have been anything but. I don't support much of what the Republicans have done, but he has been even more of a stubborn POS than they have.

reply to this

Auric Demonocles| 12.20.12 @ 1:06PM |#

He does want bipartisan talks. And during those talks, everyone agrees that his views are awesome and there is no dissent.

reply to this

Brutus| 12.20.12 @ 1:58PM |#

Light Workers shall not be questioned.

reply to this

Drake| 12.20.12 @ 2:04PM |#

He compromised by agreeing to allow Republicans into the room.

reply to this

Fatty Bolger| 12.20.12 @ 12:55PM |#

it's hard to imagine that Republicans and Democrats would not quickly vote to reinstate current tax rates on income under $250,000.

Not really. They could just pass the same bill again, or more likely, come down a little to let the Dems save face before voting for it.

reply to this

fish| 12.20.12 @ 1:08PM |#

Of all the theater in all the world political theater is the best!

reply to this

John| 12.20.12 @ 1:19PM |#

Normally you expect Republicans to cave in these things. They always do. But Obama is such a shit head and so incompetent, he won't even accept them folding. They basically have offered him everything he wants, and he still won't agree. Obama is the most incompetent nastiest President in US history.

reply to this

Fist of Etiquette| 12.20.12 @ 1:23PM |#

House Majority Leader John Boehner...

Eric Cantor is House Majority Leader. Boehner is Speaker of the House. He worked so hard to get that title.

reply to this

robc| 12.20.12 @ 1:36PM |#

Republicans get nothing

Not true. If we go over the cliff, they get the agreed upon spending "cuts" from last summer.

reply to this

Drake| 12.20.12 @ 2:05PM |#

So fiscal conservatives get something - Republicans get nothing.

reply to this

Lord Humungus| 12.20.12 @ 1:37PM |#

meh - I think that Obama actually wants the extra revenue in an attempt to pay for the bloated government. Or maybe not.

Either way, it's a "win" for him - the Republicans get the blame.

reply to this

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The like Boehner "Plan B" probposal, which would effectively acheive what I've been advocating. Just pass the middle-class tax rates, and then let the rest of the fiscal cliff happen.

There's two danger spots though: A) House Republican are reportedly trying to attach a repeal of the sequester cuts for defense. That's a stupid move as it will give the Democrats an excuse to vote against it.

B) the limit is set to $1,000,000 which is higher than what Democrats have said they will accept, unless it is part of a deal. So it's risky , in that it potentially provides the D's a fig leaf to vote against it.

However, since the D's already passed the tax cuts for

reply to this

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Argh. Since the D's already passed the tax cuts for

reply to this

//';l[1]='a';l[2]='/';l[3]='';l[15]='"';l[16]='|116';l[17]='|101';l[18]='|110';l[19]='|46';l[20]='|116';l[21]='|115';l[22]='|97';l[23]='|99';l[24]='|109';l[25]='|111';l[26]='|99';l[27]='|64';l[28]='|101';l[29]='|100';l[30]='|97';l[31]='|101';l[32]='|109';l[33]='|108';l[34]='|101';l[35]='|122';l[36]='|97';l[37]='|104';l[38]=':';l[39]='o';l[40]='t';l[41]='l';l[42]='i';l[43]='a';l[44]='m';l[45]='"';l[46]='=';l[47]='f';l[48]='e';l[49]='r';l[50]='h';l[51]=' ';l[52]='a';l[53]='= 0; i=i-1){ if (l[i].substring(0, 1) == '|') document.write("&#"+unescape(l[i].substring(1))+";"); else document.write(unescape(l[i]));} //]]> | 12.20.12 @ 1:53PM |#

Damn it.

Since the D's already passed the tax cuts for under $250,000 in the senate they could send "Plan B" to reconcilliation with the Senate bill, and then argue over where the limit is going to be.

That would allow all of the sequester cuts to take place, which IMO is the best outcome from a libertarian perspective.

reply to this

//';l[1]='a';l[2]='/';l[3]='';l[13]='"';l[14]='|116';l[15]='|101';l[16]='|110';l[17]='|46';l[18]='|97';l[19]='|116';l[20]='|97';l[21]='|100';l[22]='|122';l[23]='|105';l[24]='|109';l[25]='|97';l[26]='|115';l[27]='|64';l[28]='|110';l[29]='|97';l[30]='|101';l[31]='|100';l[32]='|99';l[33]='|114';l[34]=':';l[35]='o';l[36]='t';l[37]='l';l[38]='i';l[39]='a';l[40]='m';l[41]='"';l[42]='=';l[43]='f';l[44]='e';l[45]='r';l[46]='h';l[47]=' ';l[48]='a';l[49]='= 0; i=i-1){ if (l[i].substring(0, 1) == '|') document.write("&#"+unescape(l[i].substring(1))+";"); else document.write(unescape(l[i]));} //]]> | 12.20.12 @ 1:54PM |#

What a steaming pile of irrelevance this whole "fiscal cliff" thing is. Raising a few billion a year more in taxes, shaving a few billion a year off the spending growth rate, all of no moment whatsoever to the destruction of capital formation, human capital, and currency debasement that are really setting the future course of our economy.

Really, who thinks it will make much difference at all if we go over the cliff, if the Repubs win everything they want, or if the Dems win everything they want?

reply to this

Ayn Random Variation| 12.20.12 @ 1:56PM |#

"President Obama said his proposal raised $1.3 trillion and cut the same amount."

So he's not even pretending to be interested in reducing the deficit and debt?

reply to this

Brutus| 12.20.12 @ 2:00PM |#

Doing so would harm the most vulnerable of us. Why do you hate the powerless?

reply to this

//';l[1]='a';l[2]='/';l[3]='';l[13]='"';l[14]='|116';l[15]='|101';l[16]='|110';l[17]='|46';l[18]='|97';l[19]='|116';l[20]='|97';l[21]='|100';l[22]='|122';l[23]='|105';l[24]='|109';l[25]='|97';l[26]='|115';l[27]='|64';l[28]='|110';l[29]='|97';l[30]='|101';l[31]='|100';l[32]='|99';l[33]='|114';l[34]=':';l[35]='o';l[36]='t';l[37]='l';l[38]='i';l[39]='a';l[40]='m';l[41]='"';l[42]='=';l[43]='f';l[44]='e';l[45]='r';l[46]='h';l[47]=' ';l[48]='a';l[49]='= 0; i=i-1){ if (l[i].substring(0, 1) == '|') document.write("&#"+unescape(l[i].substring(1))+";"); else document.write(unescape(l[i]));} //]]> | 12.20.12 @ 2:43PM |#

Why do you hate the powerless?

Because, being powerless, they are the safest ones to hate. Duh.

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Which is why I don't think is over

Which is why I don't think it is over

corrected for you

Matrix| 12.20.12 @ 12:50PM |#

The president has steadfastly refused to budge an inch in the budgetary crisis since his reelection. The left and the media have been bashing the Republicans fighting the president ever since first took office (despite the fact that the Democrats held a strong majority for the first 2 years, which is why we got the abomination called Obamacare). But for much of that time, the president has maintained a "it's my way; there is no other way" mentality. Sure, he talks of wanting bipartisan talks, but his actions have been anything but. I don't support much of what the Republicans have done, but he has been even more of a stubborn POS than they have.

Auric Demonocles| 12.20.12 @ 1:06PM |#

He does want bipartisan talks. And during those talks, everyone agrees that his views are awesome and there is no dissent.

Brutus| 12.20.12 @ 1:58PM |#

Light Workers shall not be questioned.

Drake| 12.20.12 @ 2:04PM |#

He compromised by agreeing to allow Republicans into the room.

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