Report: Fiscal cliff deal emerging — including one-year debt-ceiling increase; Update: Obama concedes on new, higher income threshold for tax hikes

posted at 5:51 pm on December 17, 2012 by Allahpundit

I didn’t believe this when I saw it at WaPo yesterday, then I started to wonder when I read Ed’s post this morning, and now Ezra Klein claims Democrats are telling him the same thing. I thought the GOP’s big Plan B alternative to a grand bargain was to extend the Bush tax cuts for the middle class, let them lapse for the rich, and then go home so that they can fight another day when it’s time to raise the debt ceiling again in the spring. The automatic tax hikes on January 1 have deprived them of leverage in this negotiation, but they’ll have more once that’s over with and the debt ceiling is all that’s left on the table.

Change of plans: Now the GOP’s going to agree to raise the ceiling for another year, right up front. Wait, what?

Boehner offered to let tax rates rise for income over $1 million. The White House wanted to let tax rates rise for income over $250,000. The compromise will likely be somewhere in between. More revenue will come from limiting deductions, likely using some variant of the White House’s oft-proposed, oft-rejected idea for limiting itemized deductions to 28 percent. The total revenue raised by the two policies will likely be a bit north of $1 trillion. Congress will get instructions to use this new baseline to embark on tax reform next year. Importantly, if tax reform never happens, the revenue will already be locked in.

On the spending side, the Democrats’ headline concession will be accepting chained-CPI, which is to say, accepting a cut to Social Security benefits. Beyond that, the negotiators will agree to targets for spending cuts. Expect the final number here, too, to be in the neighborhood of $1 trillion, but also expect it to lack many specifics. Whether the cuts come from Medicare or Medicaid, whether they include raising the Medicare age, and many of the other contentious issues in the talks will be left up to Congress…

As for the debt ceiling, that will likely be lifted for a year, at least. In contrast to a week or so ago, when the White House was very intent on finishing the debt ceiling fight now, they’re sounding considerably less committed to securing a long-term increase in these negotiations. The argument winning converts, I’m told, is that since the White House won’t negotiate on the debt ceiling now and won’t negotiate on it later, there’s little reason to make it the sine qua non of a deal.

So in exchange for a tweak to Social Security’s benefit formula, Boehner’s agreeing to tax hikes on the rich and limits on deductions and a mere promise of future spending cuts and a debt-ceiling increase that would formally abandon the live-to-fight-another-day strategy? Note the “at least” part, too. Matt Yglesias is entirely right about this:

If you’re a House Republican, you’re much more apt to drive a hard bargain next spring than you are in early 2014, when election day will be less than a year away. In fact, if the economy starts to pick up and revenue increases next year, then the next debt-ceiling might be delayed by months — which could mean a showdown right before the midterms. No Republican facing reelection in a purplish district will go to the mat under those circumstances and Boehner knows it, so I assume the one-year deal will quickly become a two-year deal. Will, er, House conservatives — who are already irritated at Boehner’s offer on tax hikes — go along with that? Or is Boehner now prepared to write them off and govern with a coalition of Democrats plus a small group of moderate Republicans? If I’m Pelosi and JB comes back to the House with the sort of deal described above, I’d instruct my troops to vote no (at least on the first pass) just to watch Boehner be humiliated as waves of conservatives vote no too and the bill fails.

But maybe this is just a trial balloon. Here’s what his spokesman said about raising the debt ceiling:

Boehner’s offer signals that he expects a big deal with sufficient savings to meet his demand that any debt limit increase be paired dollar for dollar with spending cuts. That would permit him to keep a key vow to his party — and head off a potentially nasty debt-limit fight — at least until the end of next year.

“Our position has not changed,” Boehner spokesman Michael Steel said Sunday. “Any debt limit increase would require cuts and reforms of a greater amount.”

A Boehner aide told CNN the same thing — no debt-ceiling hike without an equivalent amount of cuts. Now that they’ve drawn that line publicly, they can’t cave without Boehner losing whatever remaining credibility he has with the House. So maybe this is just a tactic to pressure Obama on cuts by wringing a little positive PR from the negotiations for the GOP, with Boehner angling to come off as the responsible, compromise-minded side of the table who’s willing to give O what he wants in exchange for a little fiscal responsibility in return. If I were Obama, though, I’d call his bluff. Given how the polling worked out for the GOP after the last debt-ceiling standoff, Boehner will have tremendous difficulty holding the caucus together if/when there’s a new standoff in the spring. Why would O give him the cuts he wants now when he could try to split the House by forcing another debt-ceiling showdown a few months from now?

Update: I wonder what this concession bought from Boehner:

President Barack Obama has proposed a deficit-reduction package to House Speaker John Boehner (BAY’-nur) that would increase the top tax rates on taxpayers earning more than $400,000, cut more spending from health care programs and add $200 billion more in spending cuts over 10 years to his earlier offer.

Boehner had proposed an earnings threshold of $1 million for higher rates. Obama dropped his demand that individuals making more than $200,000 pay higher rates.

A higher threshold for the top bracket means less revenue raised once the new rate goes into effect, which in turn means less deficit reduction. But the tax part about this has never been about deficit reduction. If Obama cared about that, he’d have a serious entitlement reform plan on the table. This is about “fairness,” in all its arbitrary glory. The new threshold for what’s “fair”: More taxes from people who makes $400,000 or more.


Related Posts:

Breaking on Hot Air

Blowback

Note from Hot Air management: This section is for comments from Hot Air's community of registered readers. Please don't assume that Hot Air management agrees with or otherwise endorses any particular comment just because we let it stand. A reminder: Anyone who fails to comply with our terms of use may lose their posting privilege.

Trackbacks/Pings

Trackback URL

Comments

Comment pages: 1 2

I’m surprised Obama has conceded anything. The new $400K limit must be tied to a debt limit increase covering 2 years or more.

changer1701 on December 17, 2012 at 8:26 PM

I’m surprised Obama has conceded anything. The new $400K limit must be tied to a debt limit increase covering 2 years or more.

changer1701 on December 17, 2012 at 8:26 PM

That’s a solid guess. I cannot believe the GOP got this good of a deal otherwise. They should be thrilled if this is what goes down.

Chuck Schick on December 17, 2012 at 8:36 PM

Please, please, please, House of Representatives, get rid of Boehner and get someone in there that appreciates the position he has, the responsibility he has, and the leverage he has. John Boehner understands none of that.

The art of negotiation requires that you first of all have a set of principles, Boehner has none (if this deal is true). The reductions he’s talking about and the money on the table is chump change and, by signing off on the debt level, the Democrats will successfully increase spending once again. He’s allowed them to do this since he took over as Speaker, and he should have required a budget from the Senate, which he could do if he just stands pat and lets them take the heat.

bflat879 on December 17, 2012 at 8:45 PM

Now it’s $400k…?
 
Umm…ok
 
Bishop on December 17, 2012 at 8:20 PM

 
$250k = millionaires.
 
$400k = billionaires.
 
Keep up, racist.

rogerb on December 17, 2012 at 8:48 PM

I wonder what this concession bought from Boehner:

Acceptance of a 100% marriage penalty for “the rich”? An early handover of the Speaker’s gavel?

Steve Eggleston on December 17, 2012 at 8:53 PM

more than 400K! take it dude, i’m safe:)

renalin on December 17, 2012 at 8:53 PM

Ironically, the office of President of the United States has a salary of $400,000 per year.

Steve Eggleston on December 17, 2012 at 8:54 PM

Impeach each and everyone of them for their unconstitutional behaviour. No budget in how many years, criminal.

Wipe the slate clean and we’ll start over. New amendments to the constitutions;

Literacy test given in english only for voting rights with majority of questions based on civics knowledge, the rest can be economics.

Term limits as follows; Prezzy – 2 four yr terms, Senate 2 six yr terms. House 3 two yr terms. And while we’re at it lets turn the Senate back over to the States where it belongs.

Next?

D-fusit on December 17, 2012 at 8:56 PM

I’m surprised Obama has conceded anything. The new $400K limit must be tied to a debt limit increase covering 2 years or more.

changer1701 on December 17, 2012 at 8:26 PM

The problem is that over $400k is going to generate far less tax revenue. When you hit that income group with higher taxes, you’ll see more income diverted to cap gains which is still taxed at 15%. In other words, it’s hard to see much on the revenue side unless cap gains are increased as well, esp. if the goal is to restore fed tax revenue to its historic level of about 18.5% of GDP.

Under this scenario, it’s also hard to see how the parties will reach an agreement that substantially addresses the deficit. There’s no way the Democrats will allow social security and medicare to bear deep cuts without matching income from higher income earners.

bayam on December 17, 2012 at 9:02 PM

President Barack Obama has proposed a deficit-reduction package to House Speaker John Boehner (BAY’-nur) that would increase the top tax rates on taxpayers earning more than $400,000, cut more spending from health care programs and add $200 billion more in spending cuts over 10 years to his earlier offer.

Nothing. Just thought the pronunciation (BAY’-nur) in Allahpundit’s update quote was funny.

Ladysmith CulchaVulcha on December 17, 2012 at 9:05 PM

AP,

I would urge you to keep in mind that higher rates versus lower rates don’t directly translate into higher or lower revenues. Don’t get mixed up in the liberals word games. And PLEASE don’t tell me you actually believe that.

A higher threshold for the top bracket means less revenue raised once the new rate goes into effect, which in turn means less deficit reduction.

A lower rate for the 200k – 400k bracket doesn’t necessarily less revenue.

mrveritas on December 17, 2012 at 9:05 PM

Ouch that’s gonna sting the folks, combined they make just above 450k or so. But we all have to sacrifice.

libfreeordie on December 17, 2012 at 9:18 PM

But we all have to sacrifice.

libfreeordie on December 17, 2012 at 9:18 PM

Sacrifice for what?
Big screen TVs for grossly overweight ‘poor‘ folks?

sharrukin on December 17, 2012 at 9:22 PM

But we all have to sacrifice.
 
libfreeordie on December 17, 2012 at 9:18 PM

 
We’d have a worthwhile discussion if that were actually the case.

rogerb on December 17, 2012 at 9:24 PM

But we all have to sacrifice.

libfreeordie on December 17, 2012 at 9:18 PM

And, what will you be sacrificing, my dear?

Resist We Much on December 17, 2012 at 9:25 PM

and add $200 billion more in spending cuts over 10 years

 
BTW, that’s hilarious. The federal government spent $7 million each minute in 2011.
 
I doubt that number has gone down.

rogerb on December 17, 2012 at 9:31 PM

And, what will you be sacrificing, my dear?

Resist We Much

She comes here and deals with you. Isn’t that enough?

lostmotherland on December 17, 2012 at 9:33 PM

and all the communist fks whine…

tom daschle concerned on December 17, 2012 at 9:33 PM

dear

lostmotherland on December 17, 2012 at 9:34 PM

She comes here and deals with you. Isn’t that enough?

lostmotherland on December 17, 2012 at 9:33 PM

Evidently, libfreeordie has sacrificed his junk. You’ve turned him into a woman.

And, no, dealing with me is not a sacrifice. It is his choice and my beneficence.

Resist We Much on December 17, 2012 at 9:39 PM

Not a bad deal, actually, all things considered. Boehner got the Democrats to back off the 250K tax increase by nearly double and squeezed some spending cuts out of them. That is about as much as could have been hoped for under the circumstances.

crosspatch on December 17, 2012 at 9:44 PM

I want to negotiate with Boehner for the price of the next car I buy.

I’d be embarrassed if I was still a Republican.

Over50 on December 17, 2012 at 9:45 PM

Ouch that’s gonna sting the folks, combined they make just above 450k or so. But we all have to sacrifice.

libfreeordie on December 17, 2012 at 9:18 PM

Not really. ; ) Hows your work at Morehouse coming along? You get em all straightened out yet?

Bmore on December 17, 2012 at 9:49 PM

But we all have to sacrifice.

libfreeordie

Why? We aren’t all responsible for the problem. If you have to sacrifice some of your food stamps that you didn’t earn, does that mean I should be forced to sacrifice more of my money that I did earn? No need to answer…we all know you embrace that kind of quack pot logic.

The problem is that over $400k is going to generate far less tax revenue. When you hit that income group with higher taxes, you’ll see more income diverted to cap gains which is still taxed at 15%. In other words, it’s hard to see much on the revenue side unless cap gains are increased as well, esp. if the goal is to restore fed tax revenue to its historic level of about 18.5% of GDP.

bayam

The problem is it’s not about the extra “revenue” or the debt at all. 4 straight years of $trillion dollar budget deficits that increased taxes on the rich at any level will do nothing to address.

xblade on December 17, 2012 at 9:49 PM

so now we’re begging Obama to pretty please accept our offer of a a dollar in imaginary, TBD future spending cuts for each dollar of job killing tax hikes now?

We’re now at a 1:1 ratio of taxes to spending cuts and still negotiating from a position of weakness?

I hope to God the House tells Boehner to take his offer and pound sand

And we’ll kindly take that gavel back too, Johnny boy

thurman on December 17, 2012 at 9:55 PM

Ouch that’s gonna sting the folks, combined they make just above 450k or so. But we all have to sacrifice.

libfreeordie on December 17, 2012 at 9:18 PM

Typical communist scum…

The top 1% of the earners make only 18.9% of the total nation income but pay 37.4% of the total income tax. That is very unfair for the top 1% of earners because they are paying almost twice their percent of the total tax than their percent of their total income…

mnjg on December 17, 2012 at 9:57 PM

But we all have to sacrifice.

libfreeordie on December 17, 2012 at 9:18 PM

And, what will you be sacrificing, my dear?

Resist We Much on December 17, 2012 at 9:25 PM

http://25.media.tumblr.com/tumblr_m0ezy3E1nP1ror20jo1_400.jpg

davidk on December 17, 2012 at 9:57 PM

Actually, I just stopped in to say,

L.i.B.

davidk on December 17, 2012 at 9:58 PM

And by the way libfree what is the damn sacrifice of the majority of your damn party who are parasites living on other the producers expenses? Nothing… Your party is the party is low life parasites… damn you all stupid parasites and socialists…

mnjg on December 17, 2012 at 10:00 PM

Just so we’re clear, none of these tax increases will raise revenue. The economy will slow slightly, people will plan around the new rates and revenues will be neutral to down. Then what Obama?

Tater Salad on December 17, 2012 at 10:02 PM

The problem is that over $400k is going to generate far less tax revenue. When you hit that income group with higher taxes, you’ll see more income diverted to cap gains which is still taxed at 15%. In other words, it’s hard to see much on the revenue side unless cap gains are increased as well, esp. if the goal is to restore fed tax revenue to its historic level of about 18.5% of GDP.

bayam

Where did you get that capital gain is staying at 15%? It is going up to 20% and dividends going up to 39.6% for those making above $ 200,000 a year (or may be $ 400,000 if this stupid deal goes through)… Add to that 3.8% Obamacare tax on capital gain tax…

mnjg on December 17, 2012 at 10:02 PM

…suckers.

equanimous on December 17, 2012 at 10:03 PM

**Alert**

Report: Officials say Boehner will present Obama’s new ‘fiscal cliff’ plan to House Republicans Tuesday morning – @nytimes

15 mins ago from http://www.nytimes.com by editor

http://www.nytimes.com/2012/12/18/us/politics/president-delivers-a-new-offer-on-the-fiscal-crisis-to-boehner.html?hp
===================================================

Update: Boehner aide says Obama’s new offer ‘cannot be considered balanced’ but is ‘step in the right direction’ – @Reuters

1 hour ago from http://www.reuters.com by editor

WASHINGTON | Mon Dec 17, 2012 9:03pm EST

(Reuters) – Aides to House of Representatives Speaker John Boehner said on Monday the latest White House offer on resolving the fiscal cliff impasse is flawed but moves negotiations in a positive direction.
(More..)

http://www.reuters.com/article/2012/12/18/us-fiscal-offer-boehner-idUSBRE8BH04A20121218

canopfor on December 17, 2012 at 10:06 PM

Kind of like when the GOP engineered the deal where 300,000 three million illegal aliens gained amnesty in exchange for border security and enforcement of the country’s immigration laws?

bw222

Don’t worry, they’re going to try that again next year. And republicans like crosspatch will claim it’s the right choice, claiming it’s the only option we have.

xblade on December 17, 2012 at 10:11 PM

…so Boner is wearing knees pads and sucking on it again…while your all busy doing the same thing for the troll!

KOOLAID2 on December 17, 2012 at 10:18 PM

Cuts over 10 years. Recommended targets. What bullshit.

Boehner would have given Hawaii to Japan as part of their unconditional surrender

TexasDan on December 17, 2012 at 10:22 PM

Eff it. Let all the tax rates rise. We have to pay for Utopia.

Fallon on December 17, 2012 at 10:27 PM

The GOP has not principles to speak of, and those who defend the actions of the GOP are, at the very least, content that the political parties stand for no principles whatsoever.

Scott H on December 17, 2012 at 7:41 PM

When you got to choose between evil and stupid, you end up choosing stupid. I agree that both parties feel like a mafia.

antisocial on December 17, 2012 at 10:32 PM

To use a football analogy…

Boehner is like an awful defensive coordinator. You keep hoping for a better performance and some improvement, yet in the end you know the other team is going to score in the 4th quarter and win the game. Obama is already practicing his little touchdown dance.

And like always Obama did not really have to do anything…it really is amazing.

William Eaton on December 17, 2012 at 10:37 PM

Just how is “Obama-phone” Lady sacraficing?

stenwin77 on December 17, 2012 at 10:44 PM

Cuts over 10 years. Recommended targets. What bullshit.

Boehner would have given Hawaii to Japan as part of their unconditional surrender

TexasDan on December 17, 2012 at 10:22 PM

Well in the Japanese defense most of the kind Americans they had contacts with before the war were people like Boehner. You know political hacks, diplomats, Washington folks…

Needless to say they were shocked after Pearl Harbor when they encountered the rest of America. How the hell were they supposed to know? I think this is why the rest of the world is sometimes confused by America.

William Eaton on December 17, 2012 at 10:45 PM

The problem is that over $400k is going to generate far less tax revenue. When you hit that income group with higher taxes, you’ll see more income diverted to cap gains which is still taxed at 15%. In other words, it’s hard to see much on the revenue side unless cap gains are increased as well, esp. if the goal is to restore fed tax revenue to its historic level of about 18.5% of GDP.

bayam

Where did you get that capital gain is staying at 15%? It is going up to 20% and dividends going up to 39.6% for those making above $ 200,000 a year (or may be $ 400,000 if this stupid deal goes through)… Add to that 3.8% Obamacare tax on capital gain tax…

mnjg on December 17, 2012 at 10:02 PM

I believe there’s also a 1% additional Medicare surtax on income above 250K or whatever else crap they baked into Obamacare

Plus Maobama is pushing for limits on various deductions as well as the rate hike

So actually my effective tax rate will be significantly above the Clinton rates, but I wouldn’t expect a socialist who doesn’t understand his daughter’s 8th grade math homework to consider that

This “compromise” is a joke– Obama may be the most pathetically inept negotiator I’ve seen in politics in my lifetime, and yet this is the best kind of deal we can extract?

Just go home and don’t come back until 2013.

thurman on December 17, 2012 at 11:07 PM

This “compromise” is a joke– Obama may be the most pathetically inept negotiator I’ve seen in politics in my lifetime, and yet this is the best kind of deal we can extract?

thurman on December 17, 2012 at 11:07 PM

More than a little frightening, isn’t it?

If the GOP can’t beat a complete moron like Obama like a rented mule, WTF are they good for?

MelonCollie on December 17, 2012 at 11:11 PM

Boehner should add a sarc tag to his promises.

BoxHead1 on December 17, 2012 at 11:18 PM

davidk on December 17, 2012 at 9:57 PM

Love it.

besser tot als rot on December 17, 2012 at 11:47 PM

Look up “Pathetic Loser” in wikipedia and you’ll see Boehner’s picture.

The Rogue Tomato on December 17, 2012 at 11:47 PM

So. 400K for what? Singles? Married? Both? I guess since successful people are more likely to be married, the government is trying to disincentivize marriage for them so that they can have kids as screwed up as the rest of the populace, or something.

besser tot als rot on December 17, 2012 at 11:51 PM

I’d much rather see no compromise and all the Bush tax rates expire.

The Rogue Tomato on December 18, 2012 at 12:16 AM

Bye GOP Whigs

Oil Can on December 18, 2012 at 12:33 AM

Ahhhh….Just enough to get us by until next year’s “one year” debt ceiling increase.

Does anybody still believe there is a difference between the Democrats and Republicans?

dom89031 on December 18, 2012 at 3:27 AM

If this is the best deal Boehner can get then we will witness the death of the GOP as a viable political party.

redware on December 18, 2012 at 6:31 AM

Can’t see me now, but am bowing to the master tactician Boehner is. Smooth operator and tough negotiator, that son of gun!

HerneTheHunter on December 18, 2012 at 6:58 AM

200 billion in 10 years? 20 days of government spending in 10 years?

gwelf on December 18, 2012 at 7:18 AM

Let’s just default, starve(LET THEM STARVE TO DEATH) the baby bird class, jettison the looters, and rebuild without the weepers.

tom daschle concerned on December 18, 2012 at 8:20 AM

Boehner is an hind end sucking, career, elitist, politician that obviously has his head up where the sun don’t shine. His tenure as weeper of the house has been nothing but a disaster and a continual capitulation to the bullying tactics of the progressive liberals. He gave away the farm a few months ago, and he is giving away our freedoms this time around. He is a traitor to conservatives and we must be rid of him.

ultracon on December 18, 2012 at 8:48 AM

this is about as good a deal as we can expect. About 1T in a debt limit increase next year and 200B in cuts over 10 years. If my math is any good that’s another $980B we’ll borrow again this year…R U KIDDING ME! Let it burn…

RedInMD on December 18, 2012 at 9:06 AM

RedInMD on December 18, 2012 at 9:06 AM

I’m with you. I can’t believe what wimps we get stuck with in the name of the GOP. The GOP wants to know why its not winning? Look to this type of crap. $1 trillion spending, $2 billion on future cuts.

katablog.com on December 18, 2012 at 9:42 AM

a. do you think weepy can get the GOP to go along with it…

b. do you think weepy will keep the gavel ….

conservative tarheel on December 18, 2012 at 12:29 PM

Needless to say they were shocked after Pearl Harbor when they encountered the rest of America. How the hell were they supposed to know? I think this is why the rest of the world is sometimes confused by America.

William Eaton on December 17, 2012 at 10:45 PM

Yamamoto knew EXACTLY what they were getting into ….

conservative tarheel on December 18, 2012 at 4:02 PM

Ahhhh….Just enough to get us by until next year’s “one year” debt ceiling increase.

Does anybody still believe there is a difference between the Democrats and Republicans?

dom89031 on December 18, 2012 at 3:27 AM

There is one key difference. When the Democrats lose elections, they only become more and more emboldened to their hardcore Socialist ideology. When Republicans lose, the leadership and elites at the top fall apart like a wet napkin and try to assimilate with the winners like battered women coming back to an abusive husband/boyfriend.

a. do you think weepy can get the GOP to go along with it…

b. do you think weepy will keep the gavel ….

conservative tarheel on December 18, 2012 at 12:29 PM

Pray to God that A doesn’t take place. Speaker BOHICA obviously wouldn’t be optimistic if he had to pull that ‘litmus test’ garbage to punish those in the conservative faction. They **should** be totally roiled over that alone… and ought to raises holy hell over it and causes the deal to collapse. If that happens, then B will likely not take place.

But even if he retains the position, Speaker BOHICA will have been badly damaged over the whole mess by which he created.

Myron Falwell on December 18, 2012 at 4:32 PM

Comment pages: 1 2