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Fiscal Cliff Deal Likely to Tell a Tale of Trimmed Ambitions


Whether negotiated in a rush before the new year or left for early January, the fiscal deal President Barack Obama and Congress cobble together will be far smaller than what they initially envisioned as an alternative to purposefully distasteful tax increases and spending cuts.

Instead, their deal, if a deal they indeed cut, will put off some big decisions about tax and entitlement changes and leave other deadlines in place that will likely lead to similar moments of brinkmanship, some in just a matter of weeks.

Republican and Democratic negotiators in the Senate were hoping for a deal as early as Sunday on what threshold to set for increased tax rates, whether to keep current inheritance tax rates and exemptions and how to pay for jobless benefits and avoid cuts in Medicare payments to doctors.

An agreement would halt automatic across-the-board tax increases for virtually every American and perhaps temporarily put off some steep spending cuts in defense and domestic programs.

Gone, however, is the talk of a grand deal that would tackle broad spending and revenue demands and set the nation on a course to lower deficits. Obama and Republican House Speaker John Boehner were once a couple hundred billion dollars apart of a deal that would have reduced the deficit by more than $2 trillion over ten years.

Republicans have complained that Obama has demanded too much in tax revenue and hasn't proposed sufficient cuts or savings in the nation's massive health care programs.

In an interview on NBC's "Meet the Press" that aired Sunday, Obama upped the pressure on Republicans to negotiate a fiscal deal, arguing that GOP leaders have rejected his past attempts to strike a bigger and more comprehensive bargain.

"The offers that I've made to them have been so fair that a lot of Democrats get mad at me," Obama said.

The interview was taped Saturday while aides to the Senate Republican leader, Mitch McConnell of Kentucky, and to Senate Majority Leader Harry Reid, D-Nev., were engaged in negotiations in the Capitol in hopes of having something to present senators as early as Sunday.

"I was modestly optimistic yesterday, but we don't yet see an agreement," Obama said, referring to his mood Friday. "And now the pressure's on Congress to produce."

The trimmed ambitions of today are a far cry from the upbeat bipartisan rhetoric of just six weeks ago, when the leadership of Congress went to the White House to set the stage for negotiations to come.

"I outlined a framework that deals with reforming our tax code and reforming our spending," Boehner said as the leaders gathered on the White House driveway on Nov. 16.

"We understand that it has to be about cuts, it has to be about revenue, it has to be about growth, it has to be about the future," House Democratic leader Nancy Pelosi said at the time. "I feel confident that a solution may be in sight."

And Senate Majority Leader Harry Reid, D-Nev., offered a bold prediction: "There is no more let's do it some other time. We are going to do it now."

That big talk is over for now.

Senate negotiators were haggling over what threshold of income to set as the demarcation between current tax rates and higher tax rates. They were negotiating over estate limits and tax levels, how to extend unemployment benefits, how to prevent cuts in Medicare payments to doctors and how to keep a minimum income tax payment designed for the rich from hitting about 28 million middle class taxpayers.

But the deal was not meant to settle other outstanding issues, including more than $1 trillion in cuts over 10 years, divided equally between the Pentagon and other government spending. The deal also would not address an extension of the nation's borrowing limit, which the government is on track to reach any day but which the Treasury can put off through accounting measures for about two months.

That means Obama and the Congress are already on a new collision path. Republicans say they intend to use the debt ceiling as leverage to extract more spending cuts from the president. Obama has been adamant that unlike 2011, when the country came close to defaulting on its debts, he will not yield to those Republican demands.

As the day ended Saturday, there were few signs of success on a scaled-back deal. But no one was declaring a stalemate either.

Lawmakers have until the new Congress convenes to pass any compromise, and even the calendar mattered. Democrats said they had been told House Republicans might reject a deal until after Jan. 1, to avoid a vote to raise taxes before they had technically gone up, and then vote to cut taxes after they had risen.

Republicans said they were willing to bow to Obama's call for higher taxes on the wealthy as part of a deal to prevent them from rising on those less well-off.

Democrats said Obama was sticking to his campaign call for tax increases above $250,000 in annual income, even though he said in recent negotiations he said he could accept $400,000. There was no evidence of agreement even at the higher level.

Obama, who once proposed nearly $1.6 trillion in tax revenue over 10 years, would get about half of that if he succeeded in getting a $250,000 threshold over 10 years. At a $400,000 level, the revenue figure drops to about $600 billion over a decade.

Republicans want to leave the estate tax at 35 percent after exempting the first $5 million in estate value. Officials said the White House wants a 45 percent tax after a $3.5 million exemption. Without any action by Congress, it would climb to a 55 percent tax after a $1 million exemption on Jan. 1. Obama's proposal would generate more than $100 billion in additional revenue over 10 years.

Democrats stressed their unwillingness to make concessions on both income taxes and the estate tax, and hoped Republicans would choose which mattered more to them.

Associated Press writer David Espo contributed to this article

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Let the Bush tax cuts go, all of it. Let the Democrats raise the taxes as they see fit, and you know that is going to be a lot. Slightly over 50% of the electorate voted for Obama so provide them with what he campaigned for over the past 4 years. However, don't give them one extra cent on the deficit increase unless there is a minimum of 2 or 3~1 cut in spending for every cent of increased taxes. No cheating either by counting the costs saved by backing out of Iraq and Afghanistan. Other sneaky double dipping is not allowed either. No crying either about potential damage to our credit rating. When you increase the deficit by some 6.5 trillion in 4 years only fools or someone who is totally incompetent would even raise the issue of a credit rating.

December 31 2012 at 3:46 AM Report abuse +1 rate up rate down Reply
1 reply to rich's comment

That would be Obama's last stand. He would be nothing but a lame duck after that. John Boehner will not budge one bit because this is just party grandstanding. Both parties should be held accountable for the state of the nation, it's just too bad the American people can't fire both sides immediately and start over, at least revoke their pay for the last four years for doing not a damn thing, except kicking the can down the road and adding to the nations debt.

December 31 2012 at 9:52 AM Report abuse rate up rate down Reply

American taxpayers are wondering when Obamas freeloading welfare recipients who got him elected, are going to start paying their fair share and stop stealing our hard earned money to fund their welfare benefits.

December 31 2012 at 12:47 AM Report abuse +3 rate up rate down Reply

LOL I see the Obamite was here voting comments down. What a meaningless life that guy must have if all he has to look forward to is voting coments down under all his different screen names.

December 31 2012 at 12:45 AM Report abuse +2 rate up rate down Reply

A latest US poll shows that the majority of American taxpayers would like to see the generations of career freeloading welfare recipients to start paying their fair share.

December 30 2012 at 11:33 PM Report abuse +2 rate up rate down Reply

I wake, poor and broke.
Take bus, go see employment folk.
Nice man treat me good in there.
Say I need to see welfare.
Welfare say,' You come no more,
We send cash right to your door.'
Now welfare check make me wealthy,
And Medicaid, it keep me healthy!
By and by, I get plenty money
Thanks to you, American dummy.

December 30 2012 at 9:48 PM Report abuse +1 rate up rate down Reply

And then we have to deal with over the hill Harry Reid the obstructionist.

December 30 2012 at 9:42 PM Report abuse +3 rate up rate down Reply

It's really sad that Obama and the democrats won't compromise on anything.

December 30 2012 at 9:41 PM Report abuse +1 rate up rate down Reply

I wonder how many people that had no holiday this year were thinking about how the Obama's were enjoying their 4 million dollar holiday vacation compliments of the taxpayers. Just think how many smiles could have been put on all the childrens faces that didn't have a holiday with that 4 million dollars.

December 30 2012 at 9:39 PM Report abuse +2 rate up rate down Reply
1 reply to democrackso's comment

Rich 1%ers like the Obama's only care about getting theirs.

December 30 2012 at 9:40 PM Report abuse +1 rate up rate down Reply

When you are simpy & dopey you wait until others leave the board and sign in to all your different screen names to vote comments down you know are the truth. That's the Obamite way.

December 30 2012 at 9:36 PM Report abuse rate up rate down Reply

When Obama cashes his tax refund check this year I wonder if he'll think about what a liar he is when he says he wants to pay more taxes.

December 30 2012 at 9:34 PM Report abuse +1 rate up rate down Reply