Fiscal cliffhanger as Republicans reject Obama’s plan
So much for those post-election hopes that the parties would reach a deal to avoid the looming fiscal cliff. Leading Republicans have trashed Obama’s plan as “totally inadequate” and a “non-starter”.
The clock is ticking. It is just weeks before that end of year deadline, when unless Republicans and Democrats manage to agree a package of tax hikes and spending cuts, some 90 per cent of Americans will find themselves paying more.
Not only that, but the hefty spending cuts that will also be automatically imposed could well trigger a new recession. Welcome to the fiscal cliff. It is cold and windy up there.
On Thursday night Treasury Secretary Timothy Geithner was dispatched to Capitol Hill bearing the latest offer from the White House: tax increases worth $1.6tr on households earning more than $250,000 a year, along with an increase in estate taxes back to 2009 levels of some 45 per cent.
There was not much in the way of concessions for the GOP, especially on the tax issue: Obama is adamant that the country’s top earners must pay more, and the Democrats believe they won the election on the back of that promise.
No mood for compromise
But that kind of stance is not going down well with Republicans, despite the protracted negotiations between Obama and house speaker John Boehner. His communications chief Kevin Smith was adamant: “We have no intention of increasing tax rates. Doing so will hurt small businesses and destroy jobs.”
And there was even tougher news from the White House: more spending. Another $50bn in infrastructure spending to boost the economy next year, an extension of the payroll tax cut or a similar measure to help working families, and additional benefits for the unemployed.
If that does not leave a lot of scope for a deal, then another one of Obama’s proposals has gone down even more badly. The administration, anxious to avoid a repeat of last year’s damaging fight over the debt ceiling, wants to remove congressional authority over setting the limit altogether.
But the Republicans insist that any suggestion of an increase in the debt limit must be matched, or exceeded, by spending cuts. This latest offer does include some reductions in federal spending, chiefly $400bn in new cuts to entitlement programmes, most of it from the Medicare budget.
Going off the fiscal cliff is serious business. And I’m here seriously trying to resolve it. John Boehner, House speaker
For Boehner, however, the last two weeks of talks are simply going nowhere. “Going over the fiscal cliff is serious business,” he told reporters, after a 28-minute phone call with the president on Wednesday. “And I’m here seriously trying to resolve it.”
But in terms of public attitudes, there is bad news for his party. A poll by the Pew Research Center found 53 per cent of those who responded thought the Republicans would be more to blame if the country went over the fiscal cliff, while just 29 per cent would blame Obama.
Making the rich pay more
Although Obama has indidcated he remains open to new ideas, one thing that is not up for negotiation is making the richest pay more. No amount of tinkering with loopholes or limits on tax deductions will do.
White House Deputy Press Secretary Josh Earnest made it clear. “We remain willing to do tough things to compromise, and it’s time for Republicans in Washington to join the chorus of other voices… who support a balanced approach that asks more from the wealthiest Americans.”
The president took his case out on the road on Friday, with a speech at a toy factory in Pennsylvania, the kind of company which he says would be hard hit if the Republicans had their way.
He told workers if the Republicans refused to extend those tax cuts for 98 per cent of Americans, there would be a “Scrooge” Christmas to come. After touring the Rodon Manufacturing Group plant, he urged Congress to get it done.
“Let’s go ahead and take the fear out for the vast majority of American families so they don’t have to worry about $2,000 coming out of their pockets next year”, he said.
Still in election-mode, the GOP instantly put out a video showing a rival small business owner down the road, which they said would be hurt by Obama’s plan to increase taxes on higher earners.
In this game, no-one is blinking first.
There are now just a few weeks left, though, to make a deal. And given the popular mood, it looks as if it will be up to the Republicans to make some movement on tax, or take the blame if it all goes wrong. A tough job for Boehner, to sell that one to his party.
Felicity Spector writes about US politics for Channel 4 News
