The “fiscal cliff” deadline is four weeks from today, and Republicans are starting to get nervous about what at least some of them recognize as an untenable position–that all tax rates should stay at their current levels. Speaker of the House John Boehner late last week requested time on Fox News Sunday, where he appeared yesterday, saying that he was “flabbergasted” at the Obama administration’s proposal offered to Republicans by Treasury Secretary Timothy Geitner last week. That proposal was the same as the administration’s budget proposal which was released earlier this year, with no additional concessions.
A major sticking point in negotiations is apparently the administration’s insistence that tax rates must go up for those making over $250,000. Republicans have indicated a willingness to negotiate on eliminating “loopholes and deductions,” but have steadfastly refused to consider any increase in top marginal tax rates. If no deal is reached in the fiscal cliff negotiations all tax rates will automatically return to the pre-Bush tax cut levels on January 1.
The Tax Policy Center lays out the administration’s tax proposal in its 2013 budget as follows:
- Tax rates would remain the same on taxable income up to $241,900
- On income between $241,900 and $390,050, the rate would increase from the current 33% to 36%
- Above $390,050 the rate would go from 35% to 39.6%
Republicans continue to insist that raising taxes on upper incomes would hurt job creation and would force many small businesses to pay higher taxes. However, available data does not support that position. The issue that Republicans are not acknowledging is that that some of their well heeled donors are threatening to cut off the cash cow if they agree to tax rate increases, as reported by Alexander Bolton last week in “The Hill.”
Some members of the House GOP caucus have indicated a desire to take the deal that the president is offering to keep middle class taxes from going up in January, most notably Representative Tom Cole of Oklahoma. Cole said last week
I think we ought to take the 98 percent deal right now. It doesn’t mean I agree with raising the top 2. I don’t.
Some people think that’s our leverage in the debate. It’s the Democrats’ leverage in the debate.
Republicans know that, unlike in past negotiations, Democrats currently hold all of the cards. Despite the dire statements made in the media by politicians and commentators, the GOP knows that if no deal is struck by January 1 there will not be a calamity–that problems will develop only if no deal comes about in the medium to longer term. They understand that they are in a position to cause everyone’s taxes to go up by their refusal to move towards the Democrats’ position. But Republicans are also working from knowledge of recent history, where the Obama administration often negotiated with itself before asking the Republicans to move from their initial stance. However, what they seem to have missed is that unlike the debt ceiling negotiations, the president has absolutely nothing to lose by allowing the country to “go over the cliff.” In fact, some prominent Democrats, such as Howard Dean, are arguing that “going over the cliff” is in some ways desirable. Dean told Lawrence O’Donnell last week:
I make the argument that going off the — as you call it the curb, I call it the slope, the press calls it the cliff, is actually the best deal progressive Democrats are going to get. And here’s why. One, we get the Clinton tax rates on everybody. Will it cause a problem? Yes. There will be a short recession, and it will be painful. But two, we get defense cuts. Republicans are never going to agree to that. And three, there are some human services cuts, which we’re not going to like. But it’s the least possible damage.
Now what do we get in exchange? A serious down payment of the deficit. The Wall Street people, who wringing their hands of this, are really full of it because what they’re going to see is a big drop on Wall Street while all the hype comes and then it’s going to be roaring back because finally somebody has done something serious about the deficit.
So, I think the fiscal curb, as you call it, is the best deal that progressive Democrats are going to get. And I think it’s the best deal in the long run, not the short run. (Video here.)
It is clearly not a good time to be in a Republican leadership position. On the one hand, they know that in the past when push comes to shove the Obama administration has eventually given in to their demands. Yet on the other hand the smarter among them know that the entire current situation is wrought by Republican hands (see dailynewsfinder.com “Dealing With the Fiscal Cliff”), and should the entire country wake up to a tax increase and service reductions on January 1, it is they who will get the blame.