President Obama talks tough on the fiscal cliff

Top congressional Republicans and President Obama took turns this week analyzing what Tuesday’s election results mean for the federal budget and the looming “fiscal cliff.” Here’s a short version: House Speaker John A. Boehner (R-Ohio) and Senate Minority Leader Mitch McConnell (R-Ky.) said the election wasn’t a referendum on Obama’s economic plan, and Obama said it was. Or to put in another way, the GOP said “no mandate,” and Obama said “yes mandate.”

Good thing that’s settled!

Obama actually went a bit further than his Republican counterparts in trying to ratchet up the political pressure. He noted that everyone’s taxes are slated to rise in January; the only disagreement between Republicans and Democrats is whether to raise rates for individuals earning more than $200,000 and couples earning more than $250,000.

“Now, fortunately, we shouldn’t need long negotiations or drama to solve that part of the problem,” Obama said. Noting that the Senate has already passed a bill to continue the Bush-era tax cuts for everyone except those higher-income households and small businesses, Obama said, “All we need is action from the House. And I’ve got the pen ready to sign the bill right away. I’m ready to do it.”

The president knows full well that Republicans aren’t about to step into that trap; renewing the tax cuts for the middle class eliminates much of the negotiating leverage they might have for continuing the tax cuts for the upper incomes.

Boehner wasted little time putting a match to that proposal:


“The increased tax rates that would be allowed under the Senate-passed bill are part of the fiscal cliff that economists are warning us to avoid,” the speaker said. “Those increased tax rates will destroy jobs in America by hurting small businesses across the country. Republicans are eager to get to work on an agreement that averts the entire fiscal cliff.”

Still, Obama made clear Friday that he’s not backing away from his campaign pledge to seek a “balanced” solution to the deficit that cuts spending and wrings more tax dollars from high-income Americans.

“That’s how we did it in the 1990s, when Bill Clinton was president,” Obama said. “That’s how we can reduce the deficit while still making the investments we need to build a strong middle class and a strong economy. That’s the only way we can still afford to train our workers, or help our kids pay for college, or make sure that good jobs in clean energy or high-tech manufacturing don’t end up in countries like China....

“And I just want to point out this was a central question during the election. It was debated over and over again. And on Tuesday night, we found out that the majority of Americans agree with my approach.”

Bear in mind that Boehner had doubled down Friday morning on his opposition to raising tax rates on anybody, including high-income “job creators.” But these are just opening offers. Even with the government slated to reach the fiscal cliff on Jan. 1, it’s too early for either side to make any real concessions.

And besides, the positions taken by each side, as far apart as they may seem, still have some overlap.

As The Times’ editorial board observed Friday, the GOP’s opening offer rules out only tax rate increases, not revenue increases achieved through tax “reform.” In other words, Republicans explicitly left on the table the possibility of having high-income households pay more by eliminating some of the deductions, exemptions and other preferences that lower their tax bills.

Meanwhile, notice what Obama didn’t say Friday. His statement didn’t call for Congress to end the Bush-era tax cuts for the wealthy; he simply said the right solution to the fiscal mess should include “asking the wealthiest Americans to pay a little more in taxes.”

It’s worth noting that taxes on the upper brackets are already slated to increase next year, thanks to the 2010 healthcare law. The Medicare portion of their payroll taxes will go up a little less than 1 percentage point, and they’ll have to pay an additional 3.8% Medicare tax on capital gains and other unearned income.

In addition, taxes for every working American almost certainly will go up 2 percentage points in January when a temporary cut in the payroll tax expires. Although some Democrats have talked about extending it, there’s no appetite for doing so among Republicans, and it’s quite expensive -- almost $100 billion per year, which is more than the Bush tax cuts for the wealthy.

That’s just another way of saying that there’s much more at issue here than just the income tax rates for the small percentage of households above Obama’s threshold. And it’s likely that any deal will cause pain not just for those taxpayers but for everybody.

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