The dirty little secret about the current state of play of the fiscal-cliff negotiations is that Democrats and Republicans aren’t very far apart in their proposals.
Let’s take taxes first. Remember taxes? During the presidential campaign, the candidates talked endlessly about the way taxes on families and investments could help or hurt the economy.
Well, right now, the Republicans and Democrats are only $200 billion apart. This boils down to a difference of $20 billion per year—a disagreement that seems so minor it could be solved by any number of revenue gimmicks.
President Obama’s latest offer, delivered to House Speaker John Boehner on Monday, called for $1.2 trillion in revenue, a drop from the White House’s previous calls for $1.6 trillion. Over the weekend, Boehner offered $1 trillion in revenue (up from an original offer of $800 billion). This included a tax increase on household income above $1 million a year, which was seen as a huge breakthrough for the party of “no new taxes.”
On the topline figure, the two parties are closer than they’ve been in weeks—so close that it seemed for a moment on Monday evening that a compromise was possible.
But it’s not just the topline revenue figure that holds promise. The two sides also both support the idea of a fast-track, comprehensive process to overhaul the individual and corporate tax codes, a goodie that the business community and powerful lobbying groups such as the Business Roundtable like. Any revenue that doesn’t come from tax increases will come from closing loopholes and limiting deductions, according to both sides’ proposals. Mitt Romney proposed a version of this idea in the final weeks of his presidential campaign by capping deductions for American taxpayers at a dollar amount somewhere between $17,000 and $50,000. President Obama has long supported the idea of limiting deductions for upper-income people to 28 percent. Broadly, it’s a place that both parties plan to look to for additional revenue to help pay down the deficit.
On the sequestration, the president and speaker agree, too: Nobody likes it; nobody wants the scheduled across-the-board spending cuts to kick in on Jan. 2.
As for the spending reductions, the president and the speaker are also only $200 billion apart in their topline proposals. The president seeks $1.2 trillion in spending cuts, a dollar-for-dollar match with the amount of revenue he has proposed raising. About $400 billion of that would come from cuts to health care programs, most likely Medicare, according to a source close to the White House and familiar with the talks. Under the White House proposal, $200 billion in spending cuts would come from non-health mandatory spending, with another $200 billion in cuts to discretionary spending, half of which would come from the military.
The White House’s biggest concession to the Republicans is its willingness to slow the cost-of-living increases, known as chained CPI, for Social Security beneficiaries, a move that Republicans have sought for years. House Democrats on Tuesday met with White House Director of Legislative Affairs Rob Nabors, who outlined the administration’s latest offer. Leaving the meeting, many members expressed concern about any potential cuts to Social Security benefits—though none went to as far to say they would vote against a deal.
Boehner’s backup legislation to raise rates only on millionaires, however, would not include any spending cuts. The speaker’s “Plan B” could to come to the floor as early as Thursday, according to several Republican House members and a Republican aide.
Even the debt ceiling is less of an obstacle. The president wants it extended for two years as part of the package; the speaker, one year.
Despite all this agreement, the politics of the deal had a frenzied tone on Tuesday as Boehner vowed to keep negotiating with Obama even as he put forth his Plan B. “The White House just can’t seem to bring itself to agree to a ‘balanced’ approach, and time is running short,” he told his members. “Taxes are going up on everyone on January 1. They’re baked into current law. And we have to stop whatever tax-rate increases we can.”
Meanwhile, Nabors prowled the hallways of the Capitol after presenting the latest offer to House Democrats, who expressed their strong dislike of chained CPI and balked at increasing the Medicare eligibility age. “The age limit is much more sensitive,” said House Minority Whip Steny Hoyer, D-Md. Hoyer also said he would urge his fellow Democrats to vote against the Republicans’ Plan B proposal if and when it comes to the floor.
This made for excellent political theater. If the members look at the numbers rather than listen to the rhetoric, they’d see how close they truly are to a compromise.
This article appears in the December 19, 2012, edition of NJ Daily as Differences on Cliff Are Smaller Than You Think .