Is there some movement in talks on the so-called “fiscal cliff?” It remains unclear right now, but House Speaker John Boehner made a pretty big concession on Saturday that may provide a path to a deal. According to Politico, Boehner is willing to raise tax rates on anyone earning over $1 million in exchange for significant entitlement cuts:
Speaker John Boehner has proposed allowing tax rates to rise for the wealthiest Americans if President Barack Obama agrees to major entitlement cuts, according to several sources close to the talks.
It is the first time Boehner has offered any boost in marginal tax rates for any income group, and it would represent a major concession for the Ohio Republican. Boehner suggested hiking the Bush-era tax rates for top wage earners, including those with annual incomes of $1 million or more annually, beginning Jan. 1, two sources said.
Obama and Boehner spoke by phone Friday after a lengthy face-to-face session at the White House on Thursday. The quickening pace of private conversations between the two key players in the fiscal-cliff talks shows progress is being made in the negotiations, although they are not close to a deal yet, sources said.
Boehner also wants to use a new method of calculating benefits for entitlement programs known as “chained CPI,” which would slow the growth of Medicare and other federal health programs and save hundreds of billions over the next decade.
News also broke last night that Boehner has also offered to take the debt ceiling off-the-table for a year, which is another major concession to President Obama.
Senate Republicans have also worked up a proposal of their own. According to the Washington Post, their plan “would not significantly restrain the national debt but would at least avert widespread economic damage by canceling tax increases scheduled to take effect next year for the vast majority of Americans.” Like Boehner, Senate Republicans would “capitulate to Obama’s demand to let tax rates rise on wage and salary income for the wealthiest 2 percent of taxpayers.”
One would think that this is a deal that President Obama would take Boehner’s deal given that Republicans have ceded significant ground. However, it appears that the White House rejected Boehner’s offer, though no specific reason was given.
Even if Obama did accept the deal, party leaders in Congress may not have. Late last month, Senate Democrats essentially pulled entitlements off the table, telling The Hill that they “would not agree to any entitlement reforms before the end of the year that cut spending on Medicare and Medicaid beneficiaries.”
None of us are thrilled with the thought of Republicans selling out their principles by raising taxes. But as I wrote last week, if he is prepared to give ground to the White House, Boehner should raise the threshold for income earners affected by these tax hikes to minimize the impact to small businesses and, ostensibly, the middle class, which would bear the brunt of President Obama’s original tax hike proposal. Boehner is doing exactly that with this deal.
There are no doubt conservatives unhappy with this. It’s a political solution. Sadly, it’s all about mitigating the impact of the tax hikes at this point in the game. Unfortunately, there aren’t many cards left for Boehner to play.