CQ TODAY ONLINE NEWS
May 29, 2012 – 9:42 p.m.
Congress Taking No Action to Address ‘Fiscal Cliff’
By Joseph J. Schatz, CQ Staff
With strong words on taxes and spending flying back and forth, it’s as if negotiations were under way toward resolving the “fiscal cliff” issues that will confront Congress and the country at the end of the year.
But in reality, nothing like that is happening. Neither side is ready to budge, and the increasingly aggressive rhetoric from Republicans and Democrats is aimed at reinforcing positions, closing party ranks and setting up the political dynamics that each side hopes will drive a post-election deal.
Despite warnings from the Congressional Budget Office, the Federal Reserve and others about dire economic consequences if taxes rise and spending drops as scheduled under current law come Jan. 1, no one is suggesting that anything will be resolved until voters are heard from in November.
Although no serious talks have occurred, party leaders have begun to stake out positions. Some Democrats are increasingly vocal in saying that they will use the $98 billion in automatic fiscal 2013 discretionary spending cuts as leverage to force Republicans to accept revenue increases. But while Republicans appear to remain dug in against tax hikes, Democrats are not of one mind when it comes to tax policy.
Republicans also could find themselves divided when the showdown occurs, and Speaker
The verbal skirmishing is occurring in what amounts to a political echo chamber, with each side trying to pin blame for the current impasse on the other side.
In mid-May, most Senate Republicans signed a letter to Majority Leader
Action on the tax rates or the spending sequester required under last summer’s debt deal (PL 112-25) before the fall elections has never been a real possibility, and the most likely alternative has become that lawmakers will kick major decisions into 2013 with some kind of short-term post-election truce.
That became even more clear when Republican presidential candidate Mitt Romney said that, if elected, he would want Congress to put off all major decisions until after he has taken the oath of office Jan. 20. “I would like to be able to deal with these issues on a structural basis, on a permanent basis as opposed to a stopgap effort that would require unraveling and re-evaluation,” he told Time magazine in an interview published May 23.
But there is at least some bipartisan resistance to action that would blunt the impact of the automatic budget cuts. Sens.
Reid is taking the position that unless Republicans agree to make additional revenue part of the deficit-reduction equation, there will be no deal to alter the automatic spending cuts. “Unfortunately, it appears that Republicans’ blind adherence to tea party extremism is making it impossible to reach this sort of balanced agreement before the election,” the Nevada Democrat said in a letter last week responding to the GOP senators.
Support for Smaller Defense Budget
Although Republicans have sought to pressure Democrats into rolling back the defense cuts, which will account for half of the total spending reductions, Reid and Senate Democrats have held firm, seeing the impending cuts as their best leverage on taxes. There are signs of public support for a shrinking defense budget — underscored in a recent study by the Center for Public Integrity, the Program for Public Consultation and the Stimson Center — that may bolster their position.
Congress Taking No Action to Address ‘Fiscal Cliff’
What House Democrats will hold out for, however, is less clear. Minority Leader
That is a departure from the $250,000 threshold the White House has used as the level where “wealthy” begins and beyond which the tax cuts should run out.
The $1 million level has been used before. Democratic proposals to levy a “millionaire’s tax” have been a constant feature of fiscal debate over the past year. But some liberal groups have raised alarms over what they see as a potentially substantial shift, and that may muddy the Democratic position on the George W. Bush administration tax cuts.
Senate Majority Whip
House to Vote on Tax Rates
House GOP leaders plan a vote before the August recess on extending all the current tax rates. “The Senate should join us in providing this very basic level of certainty prior to November,” Majority Leader
House Republicans may agree on that point, but after the election Obama or a President-elect Romney will be dealing with a volatile House Republican caucus unable to agree on many other big-ticket issues.
Boehner has made clear, very early in the process, that he will not support an increase in the federal debt ceiling unless it is accompanied by an equal amount of savings. The Speaker took the same position in last summer’s debt limit showdown. Democrats quickly declared that Boehner is promising another round of damaging fiscal brinkmanship.
Other observers, however, suggest that Boehner’s position can be read as a cry for help — an acknowledgment that, once again, it will be difficult to deliver Republican votes for a debt ceiling increase. That political dynamic is unlikely to change after Election Day.