Fiscal cliff: There’s a third option that could change the negotiation
This doesn’t mean Republicans want to go with option C, or that they like option C. It instead means their negotiator now has the ability to walk away from a really terrible deal with the President, and that he can therefore demand a bit more from the President in exchange for cooperation on a deal. Option C is useful to Republicans even if their strong preference, for non-policy reasons, is to negotiate a deal with the President.
I think option C is S. 3412, a bill passed by the Senate in July. The short description is that this bill “extends the middle class tax relief for one year and allows tax cuts for the rich to expire.” More precisely, here is what the bill does (Joint Tax table is here):
It extends for one year all current income tax rates for incomes <$200K (single) and <$250K (married);
For one year it keeps the capital gains rate at 15% for the same incomes as above;
For one year it (explicitly) raises the capital gains and dividends rates to 20% for incomes >$200K/$250K;
It extends for one year other provisions of current law, important and not-so-important: marriage penalty relief and the child credit, education tax relief, and a handful of smaller provisions; and
It patches the AMT for 2012.
Blowback
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What the heck is their non-policy reason for negotiating a deal with Obama? Ownership of the resultant tax hikes and economic calamity?
besser tot als rot on December 12, 2012 at 1:24 PM
National treasure, always
Schadenfreude on December 12, 2012 at 1:25 PM
This option looks a million times better than anything that Boehner is going to do.
besser tot als rot on December 12, 2012 at 1:25 PM
Rs are the stupidest people in the US.
Schadenfreude on December 12, 2012 at 1:25 PM
I hate the fact that Boehner is getting so much heat. He’s in an impossible spot.
A) If he compromises with Obama and raises taxes, he’s called a sellout, a RINO, and earns ire from conservatives.
B) If he holds fast, and Obama doesn’t present a reasonable deal, then Boehner gets blamed by the left & the media for not negotiating in good faith.
C) If he votes present and lets Obama get his budget, then he gets blamed by the electorate for not stopping the inevitable damage that will occur from Obama’s idiotic proposals.
So the guy’s in a no-win situation. Are we really going to crucify the guy for being a majority leader of 1/3 of the government?
Nethicus on December 12, 2012 at 1:31 PM
Just another gimmick to kick the can down the road..
HotAirian on December 12, 2012 at 1:32 PM
He had many other options for years and kicked the can down the road or caved to Obama time after time.
He is the architect of his own misfortune.
sharrukin on December 12, 2012 at 1:33 PM
In other words: Kick the can down the road exactly one year before arriving at the same spot we are right now.
300 million people to choose from and these halfwits in D.C. are the best we can do? Jeebus…what a joke.
Bishop on December 12, 2012 at 1:34 PM
Income is not wealth… Just thought I’d throw that out there.
Let the whole damn Bush tax cut thingy expire. Spread the “fair share” and misery of having an entitlement state. Afterall…
Call them on it.
Fallon on December 12, 2012 at 1:37 PM
If he’s not up to the job, he can give up the gavel.
besser tot als rot on December 12, 2012 at 1:37 PM
More time to Boehner and crew to find a way not to capitulate. If they’re even looking for one.
besser tot als rot on December 12, 2012 at 1:39 PM
You’re giving the media too much power over the narrative. As Pat Caddell said:
Call them on their lies.
Fallon on December 12, 2012 at 1:43 PM
I made the same argument about S.3412 a couple of weeks ago over at NRO.
If the Republicans brought this to the House floor for a vote, most could likely abstain or vote present, and allow a mostly Democrat vote to pass it.
But they would have to sell it with the message that though they think that raising tax rates is wrong, won’t have much, if any impact on the deficit, and could hurt job creation, it is what President Obama wants.
IMO, it’s highly likely that a raising of tax rates [for some] to “Clinton levels” won’t work as they did in the Clinton years because Clinton had the good luck for the internet bubble to happen just after he raise the rates, and tax receipts benefited from that.
I don’t think that there is another internet bubble on the horizon to cause the huge increase in capital gains taxes that we saw from 1995 to 2001 that greatly helped to bring the budget to surplus (along, of course, with a Republican House that pushed an adaptable Clinton to go along with spending limits).
So when the increased tax rates result in a slower economy and less income than predicted, Republicans can say, “See, I told you so”.
Reno_Dave on December 12, 2012 at 2:05 PM
Pass a bill that extends all of the Bush Tax Cuts for 2 years.
Obama and the Reid Senate supported, passed, and signed such a bill 2 years ago. If they refuse to sign it now, then THEY, the DEMOCRATS, are holding the middle class hostage unless their demands of tax hikes on business owners are met.
It’s really not that hard. The majority leader of 1/3 of the government should pass what his majority was elected to pass. It is the Democrats who now no longer support what they supported 2 years ago. It is the Democrats who have moved away from the moderate center.
And raising tax rates will actually result in LESS revenue, not more.
The 2003 Bush Tax Cuts cut rates for everyone who pays Income Taxes, yet tax revenues went UP in 2004, UP again in 2005, UP again in 2006, and UP again in 2007.
If we do the opposite now (raise tax rates) then we should expect opposite results (i.e., tax revenues will go DOWN).
Do the right thing, Boehner. Extend all of the Bush Tax Cuts, and if the Dems won’t support what they supported 2 years ago, it’s on them, not you.
ITguy on December 12, 2012 at 2:10 PM
Score it, then pass it with “present” votes. It’ll be an all-democrat tax increase, and if Obama vetoes it, it’ll be an Obama cliff dive.
I do think Obama holds all the cards though. If we go over the cliff, Pelosi will introduce the “Obama Tax Cuts for the Middle Class” Bill and Republicans will have to support it.
Fight the debt limit increase instead.
BKeyser on December 12, 2012 at 2:15 PM
Boeher could pass two different bills:
1) Pass a bill, with active Republican votes in the majority, to extend all of the Bush Tax Cuts for 4 years.
2) Also pass S. 3412, with all Republicans voting “present”.
We all know that bill #1 won’t go anywhere with Harry Reid. But this would make it clear that Republicans do not favor raising taxes on anyone, while also stripping Obama of any platform to falsely claim that Republicans are “holding Middle Class Tax Cuts hostage”. If Obama fails to sign that bill, already passed by the Reid Senate and now passed by the Democrats in the House (with Republicans voting “present”), then it is Obama himself holding middle class tax cuts hostage unless his demands are met.
I still don’t like #2, but I realize that getting Reid and Obama to cave on #1 is highly unlikely.
ITguy on December 12, 2012 at 3:07 PM