Monday :: Dec 31, 2012

A New Year's Eve Present for the GOP

by Steve
Image courtesy of the New York Times

A short while ago, the White House held a campaign-toned event, with President Obama backdropped with allegedly middle class Americans to talk up an impending deal on averting a part of the fiscal curb tonight. Yet one wonders if what the president really did was poke the GOP in the eye and dare them to kill a deal in the making.

As described by the president and confirmed in some media outlets, the negotiations between Joe Biden and Mitch McConnell have yielded an agreement on the following:
-The Clinton-era top rate would kick in at incomes above $400K for individuals/$450K for families:
-Estate taxes go to 40%;
-Obama agrees to set capital gains and dividend taxes at 20% rather than 39.6%;
-There would be 5-year extensions of various tax credits, including the Earned Income Tax Credit and college tax credits:
-A permanent fix on the Alternate Minimum Tax;
-A one-year extension for 2 million Americans of unemployment insurance.
The remaining issue to be resolved is how long to hold off the sequestration cuts: Democrats want at least a year whereas the GOP wants only 90 days. As for the package itself, it has the serious flaw of netting only $600 billion in new revenue by the White House's own estimate.

Obama seems willing to go along with the obvious GOP move to separate the tax issues from the spending issues, because he knows he can win the debt ceiling fight as long as the GOP still harbors the death wish of holding the country hostage on the debt ceiling unless they get politically-unpopular Medicare, Social Security, and Medicaid cuts. For his part, Obama made it clear that any spending cuts that are ultimately agreed to in the upcoming GOP hostage taking over the debt ceiling would only be for things that "strengthen" entitlement programs (be very worried about that), and would only be agreed to as part of a remaining tax reform package that dealt with corporate and high-income tax perks and loopholes. Since this part of the package only nets $600 billion, the White House would face the tall order of raising another $600 billion from closing loopholes and offshore havens, and eliminating tax breaks just to get to the $1.2 billion figure Obama came down to in his most recent offer. In that sense, this package is a win for the GOP.

Yet judging by the reaction from McConnell's office ("moving the goal posts again") and John McCain (who clearly loathes the president), Obama is either spiking this negotiation or making it as painful as possible for the GOP to agree to this. McConnell wants the deal to go through, but Obama has seemingly made it as hard as possible for the GOP leaders to get this through their caucuses.

Maybe that's what Obama wants, and perhaps he feels he can explain it all away and deflect all blame elsewhere, but it was a very curiously-toned message at a very tenuous time in the process. The clear takeaway from all this is that Obama doesn't care anymore about pissing off the GOP.

Update #1 (7 PM Pacific 12/31): The deal is done, but with only a two-month extension of the sequestration. Both Reid and Pelosi are going along with it, but the AFL-CIO is against it, signalling problems for the Democratic caucuses in both houses. And there is no agreement from the House GOP on any of it, so if Boehner's gang blows it up, then all bets are off.

Steve :: 11:35 AM :: Comments (0) :: TrackBack (0) :: Digg It!