Boehner walks away from $1 trillion in tax increases; Update: WH “upped the ante on taxes,” backed off entitlement reform

posted at 10:30 am on July 10, 2011 by Ed Morrissey

Well, at least we now know what Barack Obama meant by going big, and so does John Boehner.  After Obama insisted on a trillion dollars in tax hikes to accompany the $4 trillion in cuts over the next decade that even Obama has insisted is necessary to solve the debt and deficit crisis, Boehner walked away from the deal.  James Pethokoukis published an e-mail he received from Capitol Hill describing the offer as “beyond bizarre”:

Their fierce insistence on higher taxes is beyond bizarre. After months of demanding ‘clean’ increase to avert economic calamity (default), WH threatens economic calamity (default) unless they get economic calamity (trillions in tax hikes). No wonder these guys are governing over an economic calamity (9.2% & growth malaise), w/ an economic calamity on the horizon (debt explosion as mapped out in president’s budget). The bipartisan consensus on tax reform (broader base & lower rates) was championed by President’s fiscal commission, and yet now is being rebuked by the President. Lowering top rates that would help make America more competitive was too large a leap for a true class warrior.

The Hill reports the stumbling block to the big deal and the direction Boehner now wants to take:

Boehner had initially backed an effort to pursue a comprehensive agreement said to include more than $4 trillion in budget savings over 10 to 12 years. His top lieutenant, Majority Leader Eric Cantor (R-Va.), had opposed the plan because, an aide said, it would include more than $1 trillion in tax increases that Republicans have ruled out.

The smaller deal that leaders will likely now pursue would reduce the deficit by about $2.5 trillion through spending cuts and limited additional revenues, officials said. It is based on the discussions led by Vice President Biden, which ended after Cantor walked over what he said was the continued insistence by Democrats on tax increases.

Pethokoukis compares Boehner to Ronald Reagan at Reykjavik in staring down an opponent that needs a deal much more than he does:

Or maybe Boehner also realized he was becoming a role player in an Obama-directed drama whose dramatic focus was securing a second-term for Obama. Either Obama got his big tax-hike deal and a) created a tea party revolt in the GOP, b) looked like a statesmen and c) partially deprived Republicans of a valuable line of attack in 2012 … or there was no deal, and Obama could hammer the GOP until Election Day for caring more about tax cuts for the rich than fiscal responsibility.

Boehner apparently will take his chances with door #2 and push for a roughly $2.4 trillion deal (with a debt ceiling hike, too) based on spending cuts already agreed to and some non-tax revenue raisers. Deeper spending cuts and structural entitlement reform would be better, but that is going to have to be a 2013 thing. Indeed, what entitlement reforms Obama was agreeing to were insufficient to Republicans.

Indeed, there were arms control agreements after Reykjavik, just as there will assuredly be more debt deals in the future.

Tellingly, the White House rushed to assure people that the grand compromise wasn’t dead yet:

The White House released a statement Saturday night indicated Obama was not giving up on a large deal. “Both parties have made real progress thus far, and to back off now will not only fail to solve our fiscal challenge, it will confirm the cynicism people have about politics in Washington,” said the statement from communications director Dan Pfeiffer. “The president believes that now is the moment to rise above that cynicism and show the American people that we can still do big things. And so tomorrow, he will make the case to congressional leaders that we must reject the politics of least resistance and take on this critical challenge.”

First, the White House clearly didn’t take Round 1 seriously.  The $1 trillion in tax hikes would be more than the supposed value of repealing the Bush-era top rate schedule, which was valued (through static tax analysis) at $700 billion over a decade. Democrats now want an additional $300 billion of new tax hikes on top of that, even though they signed onto a two-year extension of those rates less than eight months ago. With job creation stumbling, the last thing this economy needs is more diversion of capital to the federal government on top of the regulatory adventurism that has investors unable to calculate risk.  Obama isn’t even offering, from these reports, the fig leaf of major tax reform, but instead wants to gimmick the code even further to attack the bêtes noirs of the Left.

The rapid response at the White House shows the weakness of Obama’s position.  Boehner’s desire to go small and deal with just the debt ceiling and accompanying cuts will leave the issue of both debt and exploding federal spending on the table in 2012.  Other than jobs, that’s the most toxic issue facing Obama in his re-election campaign. Boehner’s approach would solve the immediate debt-ceiling crisis but leave Obama in exactly the same position as at the midterms and since.  Obama needs a win that takes the debt and deficit issues off the table for longer than just a year or eighteen months, but he won’t get it as long as he insists on instituting massive tax hikes in what appears to be the start of another recession.

Update: Just how bad was that White House deal?  Jen Rubin explains:

The White House dished out the spin that suddenly the Tea Party crowd had nixed a deal. In reality, the White House had upped the ante on taxes. A Republican House aide told me that the White House “started to backpedal on entitlement reforms too.” He explained, “They [the White House] had started to go back on some of the Medicare and Medicaid reforms they had previously said they were ok with.” In other words, either the White House never intended to present a viable grand bargain, or, if Obama did, the left got to him.

Sounds like the Democrat deal of 1990 — raise taxes now, and maybe later we’ll actually do something about spending.  How did that work out again?  (via Instapundit)

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I’m with the group that doesn’t trust the GOP not to cave. And now Mitch McConnell even announces it!

CAN YOU HEAR ME NOW GOP? STOP SPENDING. Do not cave to liberals wanting to tax and spend. Stick to the guns of the American people. We are SICK of a two party crooked system stacked against US.

katablog.com on July 10, 2011 at 2:14 PM

Are there any out there that still are disillusioned that they aren’t doing this on purpose? All Marxists have to first destroy what works, make a shambles of what is working and them come in as the savior (messiah to you RINOs and other moderates)

While you’re talking sound econmics and baffled as their ineptness -they’re laughing all the way to the Socialist state they were put in to acheive.

Don’t you get it yet, that a man who wants a civilian army, and openly loathes the constitution as limiting government, ignores judges, sets up an internation scam to get gun control in, wants babies out of the womb to be starved to death, thumbs his nose at congress, runs a shadow government by secret czars, doesn’t want the economy he destroyed to get fixed?

Don L on July 10, 2011 at 2:25 PM

Better not to have a debt-ceiling raise and risk whatever fallout, if any, comes from that, than agree to any new taxes.

GaltBlvnAtty on July 10, 2011 at 2:26 PM

I’ll say it again… and again… and again…

Anything that incorporates the term “over the next ten years” might as well say “over the next ten centuries.”

They need to establish a pattern of cutting spending and meaning it. They can start by cutting a trillion from the very next budget NOW..

..and then cut a trillion every year from the National Debt until it is GONE.

The argument should be, “Elect us, and we will continue to grow down the government while expanding the private sector. Vote for the other guys, and they will take the country in the other direction.”

How hard was that?

itzWicks on July 10, 2011 at 2:30 PM

Remember how the debt limit was raised last time? By ensuring that Scott Brown would not be seated in the Senate after winning the Mass. special election to replace ChappaquiDick Ted until that vote was taken. That’s why his oath was delayed for so long!

honsy on July 10, 2011 at 2:33 PM

CAN YOU HEAR ME NOW GOP? STOP SPENDING. Do not cave to liberals wanting to tax and spend. Stick to the guns of the American people. We are SICK of a two party crooked system stacked against US.

katablog.com on July 10, 2011 at 2:14 PM

resounding ditto

I was clearing up email and found an interesting quote from Joseph Farah of WND dated 05-19-2011. Geithner threatened if the debt ceiling is not raised, Social Security will go broke. Farah states:

“Whether you like Social Security or not, it’s an established fact that it does not operate on borrowed money, it does not contribute a dime to the deficit and the fund has a surplus,” said Farah. “This is sheer political mau-mauing by Geithner – the guy who had trouble filling out his own tax return.”

By law Social Security cannot use borrowed money. It is supported by three sources:

* payroll contributions from employers and employees;

* interest earned on Social Security’s U.S. Treasury bond assets;

* income taxes on the Social Security benefits paid by those with higher incomes.

Last week the Social Security trustees released their Annual Trustees Report for 2011 and it showed a $69.3 billion surplus for this year. Surpluses are projected for the next 25 years.

Now, Farah’s information can be vetted.

IMHO Social Security has been ignored so long it is considered part of the General Fund, money in becomes money out in the general ledger. So, if there is a deficit, they can extrapolate SSA is broke because the SSA payments are so large, and after accounting for all the pork and BS, the ledger has run dry

In other words, they pay Social Security last, in their own greedy minds

This is not the same as saying Social Security is, or will this year go broke. It means the rest of the government has been stealing Social Security on the books for so long, that after they use Social Security to pay for dog runs and California payroll bailouts, homeowner mortgage relief and pensions for Congressmen, they can cry out ‘the old age fund is broke’

Phoney baloney big time rock and roll

I hope Boehner keeps up the fight. Limbaugh is the guy I stand with on the issue of the debt.

entagor on July 10, 2011 at 2:34 PM

Are there any out there that still are disillusioned that they aren’t doing this on purpose? All Marxists have to first destroy what works, make a shambles of what is working and them come in as the savior (messiah to you RINOs and other moderates)

While you’re talking sound econmics and baffled as their ineptness -they’re laughing all the way to the Socialist state they were put in to acheive.

Don’t you get it yet, that a man who wants a civilian army, and openly loathes the constitution as limiting government, ignores judges, sets up an internation scam to get gun control in, wants babies out of the womb to be starved to death, thumbs his nose at congress, runs a shadow government by secret czars, doesn’t want the economy he destroyed to get fixed?

Don L on July 10, 2011 at 2:25 PM

Actually, he probably believes he is fixing it. Chalk it up as a testimony to the effectiveness of Soviet propaganda. They are the ones that designed it to destroy, with the Democrats just carrying it out believing it is the path to the promised land.

Count to 10 on July 10, 2011 at 2:42 PM

rockmom on July 10, 2011 at 12:47 PM

Thanks for saying that.

INC on July 10, 2011 at 2:48 PM

Obama and the Democrats don’t WANT a deal, they never did.

They know their ONLY chance of avoiding a total sweep next year is using the “Mediscare” tactic which has worked in the past. They have nothing else to run on. Nothing.

Of course it is untrue, and if reforms aren’t made very soon then big cuts WILL be required before much long. But truth has never been the modern Democrats’ friend anyway.

I would refuse to EVER meet privately with Obama to “negotiate” anything. FORCE him to present his ideas publicly, so the people can see what this neo-Marxist wants to do. You cannot negotiate in good faith with a dishonest man.

Adjoran on July 10, 2011 at 3:03 PM

Hold the line, Republicans!
We are trying to save our country, our children and grandchildren!
No new taxes!
We want a balanced budget amendment!

Mark7788 on July 10, 2011 at 3:10 PM

Bayam; you keep offering that we have historically low tax rates, as if the marginal tax rate tells the entire story. The percentage of the total amount that I earn that is confiscated in taxes is substantially higher than it was when I entered the workforce, and also much higher than what my Dad paid in taxes when he was the age I am now.

Those of us who don’t want another increase in taxes see that this is true, and that there is a large, and increasing, percentage of the population that’s not paying federal income taxes.

So, when we hear talk of shared sacrifice, and see that not everyone is expected to share in the sacrifice, we say NO!

massrighty on July 10, 2011 at 3:20 PM

Laurence on July 10, 2011 at 11:44 AM

Hey. How about a couple trillion in spending cuts now. This year. Then, how about new taxes in, say five or six years?

Why can’t it work this way?

BigAlSouth on July 10, 2011 at 3:33 PM

I would refuse to EVER meet privately with Obama to “negotiate” anything. FORCE him to present his ideas publicly, so the people can see what this neo-Marxist wants to do. You cannot negotiate in good faith with a dishonest man.

Adjoran on July 10, 2011 at 3:03 PM

Excellent.

GaltBlvnAtty on July 10, 2011 at 3:35 PM

In other words, either the White House never intended to present a viable grand bargain, or, if Obama did, the left got to him.

Barry never intended to go through with entitlement reform. Barry only knows the socialist way.

GarandFan on July 10, 2011 at 3:38 PM

You simply can’t have historically low taxes when the country is fighting wars and on a security spending spree.

bayam

We don’t have historically low taxes, so your point is moot. The only thing that is at historic proportions is spending.

xblade on July 10, 2011 at 3:52 PM

Let’s stop trying to get a grand deal – it’s not going to happen with idiot supreme in the white house.

Instead, let’s try to get a deal with some reasonable cuts now and increase the debt ceiling just enough for 1 year – let’s force Obama and the democrats to have this same debate next year at this time.

Plus, I never trust deals that claim ______ million over 12 years that don’t involve structural reforms. If we are talking about future tax cuts, it doesn’t matter what congress claims today – they will never happen in the future. So some deal that claims 4 trillion in saving over 12 years is almost meaningless.

Monkeytoe on July 10, 2011 at 4:24 PM

You simply can’t have historically low taxes when the country is fighting wars and on a security spending spree.

bayam

If the idiot dems (and to a smaller extent the idiot republicans) would not simply spend increased revenue and grow the size of gov’t, I think most people would be open to some tax increases to reduce the debt.

But, since we know that any new tax increases will simply go to boondoggles and will never go toward debt/deficit reduction, it is a non starter. It’s like the border – people want an amnesty now for promises of enforcement later. Why would any sane person agree to that? same with tax increases.

Monkeytoe on July 10, 2011 at 4:27 PM

I don’t know if this column has been in the headlines, but I saw it on Gateway Pundit today. It’s from the NY Post. My emphasis:

Now for the really bad news: that 18,000 gain announced by the government yesterday isn’t real.

For one thing, the number of jobs increased in June only because the Labor Department simultaneously revised downward the number of jobs that existed in this country during May. It’s like moving the fences at Citi Field so the Mets players can hit more home runs. It might make Jose Reyes feel better, but it doesn’t actually make him more powerful.

Without the fence-moving operation in the May employment report, the June number — yesterday’s number — would have shown a decline of 26,000 jobs.

He goes on to write:

Look even deeper in the June report and you’ll see something else you really don’t want to know. The more broadly defined U-6 unemployment rate, which includes people who are underemployed, went from 15.8 percent in May to 16.2 percent in June.

These are workers who want full-time jobs but can’t find them. And the U-6 figure doesn’t even include people who’ve given up looking for work because they believe it’s hopeless.

Shadow Government Statistics says it’s worse:

June Unemployment Rates: 9.2% (U.3), 16.2% (U.6), 22.7% (SGS [Shadow Government Statistics])

Those of you on this thread who earlier insisted this isn’t a depression should be grateful you, your family, friends or community have not yet felt it’s impact.

INC on July 10, 2011 at 4:46 PM

Boehner, just say, “Nyet!”

-Aslan’s Girl

Aslans Girl on July 10, 2011 at 5:00 PM

The analogy works in that we have a Republican negotiating with a commie.

GaltBlvnAtty on July 10, 2011 at 9:55 PM

Cloward-Piven, orchestrated economic chaos, chugging along right on schedule.

JustTruth101 on July 10, 2011 at 11:53 PM

Sounds like the Democrat deal of 1990 — raise taxes now, and maybe later we’ll actually do something about spending.

Liberals can’t be trusted. Lying is not as offensive to them “for the greater good” as it is for conservatives. Problem is anything can be considered the greater good according to them. They are almost always the ones to break the agreements or push the envelope on appropriate behavior if they think they can gain an advantage by it.

scotash on July 11, 2011 at 4:32 AM

The deal had best be as short as the debt limit increase. In year two we’ll see a government size increase not a decrease. And we will see a tax increase. Promises are not worth the price of the bits to transmit them on the Internet. An amendment that caps the budget and requires it be balanced is all that can be tolerated.

The House has the most recent mandate from the people. Use it to scalp Obama and Reid.

If the government fails to make its debt service that is an instantly impeachable offense as well as a crime, both of which must be used to take Obama out of office and put him, Geithner, and any others responsible away doing hard time.

He can fail to pay anything else. He’d be wise to make the military payroll and the state department payrolls. Those functions are explicitly mentioned in the Constitution. Everything else, including Social Security (which I don’t think he’d live through) is not mentioned in the Constitution and can be placed on the chopping block.

Then we sell the oil leases we’ve been deferring. We sell public buildings and that are not tenanted. We then start turning off the government.

But do not fail to service our debt. Otherwise there will be a reckoning with he and Geithner holding the short straw.

{^_^}

herself on July 11, 2011 at 4:35 AM

The Republicans need to get this information out to every new media venue they can; Tea Party/citizen activists need to contact every Republican and insert a little verbal backbone; and, all Americans need to pray this is not another Kabuki Theater production, sort of like the last one in which 100 billion in cuts is reduced to less that 40 million in accounting gimmicks.

Mutnodjmet on July 11, 2011 at 10:58 AM

Good for Boehner. Hold and keep the high ground, Dont raise the debt limit, do not raise taxes on ANYONE. train those in congress to live within OUR MEANS. Tell the dems SSS, STOP SPENDING STUPID.

ColdWarrior57 on July 11, 2011 at 11:26 AM

And yes people are lining up to buy iPads. But it’s a very small % of the population. But 1 in 7 people, about 15%, is on food stamps. Think about that. 15% of people do not earn enough money to feed themselves. As I said, you won’t see the people lined up for food like in the 1930s. Today there are no lines. The lines have been replaced by an EBT card that is sent out to these millions of people. But the effect is the same.

angryed on July 10, 2011 at 1:22 PM

I disagree that 15% of people do not earn enough money to feed themselves. Of that 15%, I would estimate that at least 50% do not have the financial discipline to curtail their buying of toys enough to still have food money left over.

I have seen, just in my community, way too many people who use the EBT cards for luxury foods, and, worse, many lazy young folks who scam the system by conniving with unscrupulous merchants to get cash back from the cards, and laugh about it.

Too many people see “food stamps” as “free” money. Bring back the actual “stamps,” and the perceived stigma.

cane_loader on July 11, 2011 at 11:45 AM

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