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December 3, 2012
Daniel Newhauser and Jonathan Strong
The fourth week of the postelection, pre-sequester session begins with the White House and Democratic leaders appearing no closer to an agreement with congressional Republicans on tax and spending issues than they were when talks began after the elections.“There’s a stalemate. Let’s not kid ourselves,” House Speaker John A. Boehner, R-Ohio, told reporters Nov. 30, at the end of another week of posturing and inconclusive negotiations.
A round of meetings between administration officials and congressional leaders Nov. 29 ended with outright GOP rejection of an administration deficit reduction package. It included $1.6 trillion in new revenue over 10 years, postponement of the automatic cuts in discretionary spending scheduled to begin next year, renewals of extended unemployment compensation and a “patch” for the alternative minimum tax, new economic stimulus spending, $400 billion in unspecified trims from federal health care programs and a new mechanism for increasing the government’s borrowing limit without congressional approval.
Republicans dismissed the package as largely a rehash of President Barack Obama’s fiscal 2013 budget proposal. Senate Minority Leader Mitch McConnell, R-Ky., told The Wall Street Journal that he laughed aloud when the proposal was presented to him by Treasury Secretary Timothy F. Geithner.
Republicans continue to insist that deficit reduction should begin with spending cuts, particularly savings from entitlement programs including Medicare and Medicaid. For that, they are willing to trade a modest amount of increased revenue, although not from increased tax rates at any income level.
There was no sign at week’s end of a Republican counteroffer. Boehner said he expects further conversation, but no meetings had been publicly scheduled.
With the 2001 and 2003 tax cuts scheduled to expire Jan. 1 — along with numerous other tax breaks and extended unemployment benefits — and the automatic spending cuts looming, time is quickly running out to legislate a solution before the holidays. Congressional aides caution that unless some specifics can be agreed upon within the next week or so, it will be difficult to write the necessary legislation in time to clear it by year’s end.
Talks at a ‘Stalemate’
At the end of a week in which each side publicly tried to navigate between sticking to principles and opening up to compromise, Boehner on Nov. 30 offered the glibbest assessment yet of the negotiations, when he told reporters that talks are at a stalemate after Republicans rejected an opening offer from the White House.
Still, Boehner did not shut down the idea that talks will continue between him and the president. He demurred when asked if further conversations are scheduled but noted that ideas have been passed back and forth.
“There are a lot of ideas that have been put on the table. We’ve had conversations, and I’m sure we’ll continue,” he said.
At the same time, Boehner is showing no indication he or other Republicans will make any move to show a counteroffer, which key Democrats are pressing him to do.
In an impromptu news conference to counter an Obama rally earlier in the day in Pennsylvania, organized to drum up public support for a tax hike on high-income earners, a visibly frustrated Boehner was asked to give his candid assessment of the playing field.
He called it a “stalemate,” then continued that the White House’s opening salvo is “not a serious proposal. And so, right now, we’re almost nowhere.”
Earlier in the day, Minority Whip Steny H. Hoyer, D-Md., defended the White House offer and urged Republicans to concede ground on increasing taxes before the discussions move to new spending cuts.
At one point agreeing with a reporter’s characterization of the White House offer as a Democratic “wish list,” Hoyer said the GOP should respond with a detailed counteroffer of its own.
The day before, Geithner had offered the latest administration package: $1.6 trillion in tax increases including higher estate and capital gains taxes, $50 billion in stimulus spending, a permanent raising of the debt ceiling, a one-year deferral of sequester spending cuts and the $400 billion in entitlement cuts to be decided on in the next Congress.
“I don’t think it’s a take-it-or-leave-it offer,” Hoyer said.
But Boehner said that Obama would rather campaign in public than try to come up with a deal in private. “The White House took three weeks to respond with any kind of proposal and, much to my disappointment, it wasn’t a serious one. Still, I’m willing to move forward in good faith,” he said.
While Republicans summarily rejected the Geithner offer, at the campaign-style rally in Pennsylvania, the president showed no signs of giving way. “In Washington, nothing’s easy, so there is going to be some prolonged negotiations, and all of us are going to have to get out of our comfort zones to make that happen,” he said. “I’m willing to do that. I’m hopeful that enough members of Congress in both parties are willing to do that as well.”
While Boehner has offered to increase revenues by cutting tax deductions and loopholes, Hoyer said such ideas wouldn’t bring in sufficient revenue to the scale of federal deficits. If such a plan could work, Hoyer said, Republicans should demonstrate a detailed version of one to prove it. “The Republicans need to come back with something where the math works,” Hoyer said.
Shortly after the meeting with Geithner and other high-ranking administration officials, Boehner sounded a glum note, telling reporters that no progress had been made toward reaching a deal.
Boehner said he had a “very direct” phone conversation with Obama the previous evening of Nov. 27, but said neither that nor the “frank” meeting in the Capitol moved the needle. “No substantive progress has been made in the talks between the White House and the House over the last two weeks,” Boehner said.
Democratic leaders pounced on Boehner’s Nov. 29 comments. Minutes after Boehner spoke, House Minority Leader Nancy Pelosi, D-Calif., dismissed his comments as a “tactic” and took a hard line on spending cuts.
Pelosi appeared to oppose spending cuts beyond those already enacted as part of the Budget Control Act. She was asked about Republicans’ view that while “some cuts may have already been agreed to, there needs to be more.”
Pelosi replied: “No, no, no. A trillion and half in cuts is a lot of money. I know we’re in Washington, D.C., and we get used to big numbers, but a trillion and a half dollars in cuts . . . you go beyond that you’re talking about hurting the growth of our infrastructure and the education of our people. The very pillars — the very pillars — of our economic strength. Not to mention the economic and health security of our seniors and the American people and their families.”
However, at another point in the news conference, Pelosi referred to private discussions last summer between Boehner and Obama about a $4 trillion deal as a “good start.”
Rep. Chris Van Hollen, D-Md., the ranking member of the Budget Committee, took a similar stance. Echoing Pelosi that the Budget Control Act showed Democrats had already provided significant spending cuts, Van Hollen said a fiscal-cliff deal should be more balanced than that law.
The fiscal cliff deal should include a “combination of cuts, but also revenue,” Van Hollen said.
Cliff’s Effect on Consumer Spending
As the week began, the White House was saying that it remained “hopeful” that the fiscal cliff would be averted. In an attempt to underscore the seriousness of the issue, it also released a new study warning that not extending the Bush-era tax cuts for the middle class would reduce consumer spending by about $200 billion next year; it ignored the potential impact of not extending the payroll tax cut.
Alan Krueger, chairman of the Council of Economic Advisers, could not say whether extending the payroll tax cut would be better for the economy than the Bush tax cuts, although he reiterated the White House’s non-position on the payroll tax cut — that extending it remains “on the table” for discussion. Krueger did say that the payroll tax cut helped the economy this year, contributing to the highest level of consumer confidence in four years.
Top White House aides met early in the week with senior business leaders to talk about the fiscal cliff; among them were U.S. Chamber of Commerce President Thomas J. Donohue and John Engler, president of the Business Roundtable. Aides on the Hill see pressure from the business community as key to getting votes for any year-end package.
Meanwhile, several Senate Democratic leaders promoted the idea last week that savings can be found in Medicare in ways other than raising the eligibility age, indicating some reluctance to accept such a change.
Senate Agriculture Chairwoman Debbie Stabenow, D-Mich., said on Nov. 27 that she, for one, would not support increasing the program’s eligibility age as part of a deficit-reduction deal. The concept was included in Wisconsin Republican Rep. Paul D. Ryan’s budget proposals and has continued to surface as one area in which Democrats might decide to compromise, especially because Obama entertained the idea during debt limit negotiations in 2011. “I personally think that that goes in the wrong direction for us in providing comprehensive health care coverage,” she said.
But she said there are other efficiencies and cost reductions that Congress “absolutely can do,” noting that provisions in the 2010 health care law (PL 111-148, PL 111-152) already extend the life of the Medicare trust fund.
Budget Chairman Kent Conrad, D-N.D., who has supported lifting the eligibility age in the past, also said there are other ways to achieve the necessary savings. “You can get the savings that you need to get a balanced package without raising the age,” he said.
According to the Congressional Budget Office, gradually raising the eligibility age from 65 to 67 by two months every year from 2014 to 2027 would reduce federal Medicare spending by $148 billion from 2012 through 2021. That means the program’s net spending would be roughly 5 percent under what it otherwise would be by 2035, CBO said.
But Health, Education, Labor and Pensions Chairman Tom Harkin, D-Iowa, made no mention of the eligibility age issue when he was asked whether Senate Democrats have agreed to minor Medicare changes as part of the negotiations. “Oh, sure. Just things that have to do with providers and reimbursements and things like that,” he said.
Senate Majority Whip Richard J. Durbin also said that he has “trouble” with proposals to raise the Medicare eligibility age in a speech Tuesday at the Center for American Progress. He pointed to the experience of his brother, who lost his insurance before he was eligible for Medicare.
“If anybody wants to talk about a later eligibility age for Medicare, what I want to hear is the assurance and guarantee that people like my brother will have access to affordable insurance until the time they are eligible for Medicare,” said the Illinois Democrat. “Until I hear that, I’m skeptical.”
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