Democrats will vow to stand firm, and then will fold…
When these negotiations began, the White House was unyielding on that point, with the president promising to veto anything that didn’t raise tax rates for income over $250,000. Asked by House Speaker John Boehner what he’d trade for $800 billion in revenue — about the cost of the high-income Bush tax cuts — Obama was firm. “You get nothing,” the president said. “I get that for free.”
To make matters worse for Republicans, the Senate had already passed a bill letting those cuts expire back in July because Minority Leader Mitch McConnell figured it would be too politically damaging to block. If Mitt Romney had won the election, that bill would have died. But after Obama won on a platform that was barely about anything aside from letting those tax cuts expire, it seemed inevitable he’d get it done. It was his due.
To the GOP’s delight, that no longer seems to be the case. In the Obama-Boehner negotiations, the White House offered to raise the threshold from $250,000 to $400,000. McConnell, in his negotiations with Harry Reid and now Joe Biden, has been trying to raise that to $500,000. It’s clear to the Republicans that they will get past the fiscal cliff with a smaller tax increase than they thought. Perhaps much smaller. Huzzah!
That will set up a fight over the debt ceiling. The Republicans plan to say that now that they broke their pledge and voted for a tax increase, they’ll insist on a dollar of spending cuts for every dollar of debt-ceiling increase — the so-called “Boehner rule”. The White House plans to insist that it won’t negotiate over the debt ceiling at all.
Republicans I’ve spoken to laugh at this bluster. Obama is already negotiating over the debt ceiling, they point out. He began the fiscal cliff negotiations by saying he wanted a permanent solution to the debt ceiling. Then it was a two-year increase in the debt limit. Now he’s going to sign off on a mini-deal that doesn’t increase the debt ceiling at all. Does that really sound like someone who’s going to hold firm when faced with global economic chaos? The White House always talks tough at the beginning of negotiations and then always folds at the end. Republicans are confident that the debt ceiling will be no different.
All this raises the tantalizing prospect for Republicans that they could end these negotiations having given up less tax revenue than they ever thought possible — less tax revenue than Boehner offered Obama, even — but still getting their entitlement cuts. Oh, and because there was never a big deal, they won’t have to agree to much stimulus, either. All in all, a pretty big win, and it wouldn’t have been possible without the White House’s baffling inability to stick to a negotiating position.
…and Republicans will refuse to take yes for an answer:
On Sunday evening, after a long, fruitless day of haggling, talks between Harry Reid and Mitch McConnell to avert the fiscal cliff broke down and the Senate adjourned until Monday. Republicans had spent much of Sunday pushing to get Social Security cuts included in the deal, and when that effort fell apart, momentum toward a resolution disappeared.
If Republicans don’t have a change of heart fast, we’ll go over the cliff, and they’ll waste a huge opportunity—even without the Social Security cuts, Democrats are offering them an incredibly good deal.
With the caveat that no reporter is privy to the details of the offers being swapped, here is the deal that seemed to be emerging: Democrats would get an extension of unemployment benefits for 2.1 million people; they’d patch the alternative minimum tax for a year to protect the middle class from sharp tax hikes; and they’d implement a “doc fix” to ensure that Medicare reimbursement rates to doctors don’t fall precipitously and limit patients’ access to medical care. Republicans would get to preserve Bush-era income tax rates for households making up to $400,000 (rather than the $250,000 limit Democrats prefer). They’d also get a lower tax rate and a much higher threshold for inheritance taxes (set to revert to 55 percent on estates of more than $1 million on Tuesday). And significantly, Republicans would hold onto their greatest point of leverage in upcoming negotiations over entitlement cuts, because the deal wouldn’t raise the debt limit.
Here’s what’s important about everything Democrats would get: It’s temporary; everything expires (presumably) within a year. Here’s what’s important about what Republicans would get: it’s permanent. The tax rates won’t expire.
That means Democrats are offering a huge gift to Republicans and getting almost nothing in return because on Jan. 1, if no deal is struck, Democrats will get even more revenue than they’re asking for without conceding a thing. And if, as polls suggest, voters would blame Republicans for going over the cliff, Democrats are also offering to save Republicans from their worst impulses—which, at least for the time being, since they haven’t yet agreed, is to reject this deal.