Taxing Work Ahead: Have Negotiating Tables Turned?
November 10, 2012
Republicans and Democrats agree: Election season may have ended just four days ago, but it's already time to get back to work. In this case, "back to work" might mean "back to fighting."
Leaders in both parties made their opening bids Friday on how to deal with the tax, spending and debt problems that face the country at the end of this year.
While the scenario echoes last year's spending battle, there are some differences that could push the parties toward the resolution they never reached last time around.
Where The President Stands
In the East Room of the White House, nearly 200 Obama supporters sat in chairs, ready to jump to their feet the minute the commander in chief entered the room. These were President Obama's first public remarks since election night.
"Now that those of us on the campaign trail have had a chance to get a little sleep, it's time to get back to work," he said. "And there is plenty of work to do."
The campaign was challenging. But two days back in Washington was enough to remind everyone that governing is no cakewalk either. Many of the president's lines Friday were lifted directly from his stump speech.
"We can't just cut our way to prosperity. If we're serious about reducing the deficit, we have to combine spending cuts with revenue," he said. "And that means asking the wealthiest Americans to pay a little more in taxes."
The president said he's open to compromise, with one caveat: The rich must pay more. According to Election Day exit polls, six in 10 voters said they agree, a number you're likely to hear a lot from Democrats.
"I'm open to new ideas. I'm committed to solving our fiscal challenges, but I refuse to accept any approach that isn't balanced," Obama said.
Later, spokesman Jay Carney said that by "balance," the president doesn't just mean a balance between revenues and spending cuts. Carney said the president will veto any bill that extends Bush-era tax rates for the rich.
Revenue Without Tax Hikes?
On the other side of Pennsylvania Avenue, House Speaker John Boehner made his own opening play. He said it's time to clean up the tax code and lower people's rates.
"It's clear that there are a lot of special interest loopholes in the tax code, both corporate and personal. It's also clear that there are all kinds of deductions, some of which make sense, others don't," he said, "and by lowering rates, cleaning up the tax code, we know we're going to get more economic growth."
So Boehner said he's willing to get more money by changing the tax code — but he gave no indication that he'll go along with a tax rate hike.
Is there potential common ground here? Professor Ed Kleinbard of the University of Southern California law school thinks so.
"It is possible to skin the cat by increasing tax collection from higher-income Americans without increasing their nominal tax rates," he says.
Kleinbard says there are lots of deductions that favor the wealthy. Get rid of them, and you can get more tax money from rich people without raising their tax rates.
But the deductions he's talking about are also popular with middle-class Americans and members of Congress from both parties.
Obama and Boehner have been down this path before. Last year, they came painfully close to getting a deal, but it fell apart at the last minute.
Now, the battle lines are more or less where they were last year. But Obama says a few things have changed.
"This was a central question during the election. It was debated over and over again," he said, "and on Tuesday night, we found out that the majority of Americans agree with my approach."
There are other differences between these negotiations and the failed talks from a year ago. This time, everyone has a powerful incentive to get something done.
At the end of the year, the Bush tax cuts end. Deep automatic spending cuts, known as sequestration, will go into effect. Payroll tax cuts expire.
These are just a few of the biggest items on a long list of dire consequences that are collectively called the "fiscal cliff." The Congressional Budget Office says if Washington doesn't fix the problem, the U.S. economy could go into another recession.
Congressional leaders of both parties will come to the White House next Friday to start hashing this out in person.
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