On Friday, President Barack Obama sat down with congressional leaders, including House Speaker John Boehner, to discuss avoid the so-called “fiscal cliff,” automatic tax hikes that would come from the expiration of the 2001 and 2003 tax cuts and spending cuts that were signed into law last year as part of the debt ceiling deal.
All sides left the table believing that a deal was possible, though it doesn’t seem like they’re going to have time to get something comprehensive done by the end of the year:
In a signal to financial markets that have fallen precipitously since Obama’s election last week, Speaker John Boehner (R-Ohio), House Minority Leader Nancy Pelosi (D-Calif.), Senate Majority Leader Harry Reid (D-Nev.) and Senate Minority Leader Mitch McConnell (R-Ky.) expressed confidence they would reach a deal.
The four all appeared outside the White House after the meeting as a group to telegraph their seriousness and unity to the markets and the public.
“We all know something has to be done … we feel very comfortable with each other and this isn’t something we’re going to wait until the last day of December to get it done,” Reid (D-Nev.) said. “We have a plan. We’re going to move forward on it.”
Boehner said the parties had developed the “cornerstones of being able to work something out.”
Democrats, meanwhile, expressed a willingness to consider spending cuts despite heavy lobbying from union and senior groups, who argue Medicare and Social Security should not be touched.
“We understand our responsibility there. We understand that it has to be about cuts,” Pelosi said.
But the Democratic leader said discussions about spending cuts must be done “in a way that promotes growth and supports the future.”
Boehner’s office said the Speaker “formally offered” to the president a framework for a two-step process along the lines of what he presented in a public speech the day after the elections.
“He said Republicans recognize neither side is going to get everything it wants, and noted Republicans have put revenue on the table to demonstrate their seriousness about finding common ground,” Boehner’s office said in a readout of the meeting.
Under the Speaker’s framework, the White House and congressional leaders would use the next several weeks to agree to specific “targets” for revenue and savings through entitlement reforms. Boehner has said repeatedly that tax and entitlement reforms are too complex to complete this year, and he reiterated that in the meeting.
Senate Majority Leader Harry Reid (D-NV) does want to try to get a big deal done during the lame duck session because, as The Hill notes, Democrats have momentum in the discussion right now due to a successful election and the expiration of the tax cuts and spending cuts scheduled to take place at the beginning of the year.
Keep in mind that these spending cuts, which are now suddenly a bad thing, were agreed to by both chambers and President Obama last year. The Wall Street Journal reports that the White House will apparently offer a smaller package of spending cuts as part of a deal worked out with House Republicans; though they will be included with tax hikes. These cuts would be taken up next year, instead of in the lame duck session of Congress.
Sen. Rob Portman (R-OH) is pushing for a temporary extension of current tax rates to give negotiators more time to weigh their options on a more comprehensive approach. That may sound like an option, but President Obama has indicated that he will not extend current tax rates again, despite the slow economy.
Whatever Republicans in Congress propose to deal with the “fiscal cliff,” it doesn’t really matter. President Obama holds all the cards in these talks. Senate Democrats are going to do whatever he wants. House Republicans are worried about the fallout if they can’t come to an agreement with the White House.
As has been previously explained, the situation in which we currently find ourselves is reminiscent of the run up to the passage of the 2008 bailout. Republicans may once again find themselves signing off on bad policy for the sake of political expediency.