With little evidence of progress in the "fiscal cliff" negotiations in Washington, President Obama today takes his message on the road: The president will travel to a toy manufacturing facility in Hatfield, Pa., where he will make the case that Congress should immediately extend the Bush-era tax cuts on income under $250,000 per year.
Mr. Obama's destination appears designed to underline his argument that passage of that extension will help boost holiday spending, and, in turn, the overall U.S. economy. He will tour one of two manufacturing plants of The Rodon Group, which makes parts for Tinkertoys, K'NEX Building Sets and Lincoln Logs, among other products.
K'NEX and The Rodon Group, its subsidiary, boast that the vast majority of the parts in their products are now made in the United States. Mr. Obama is expected to make the case that the companies depend on consumer spending, and that the extension of the tax cut will help keep the company making toys and employing workers. K'NEX has moved much of its production from China to the United States over the past four years.
K'NEX CEO Michael Araten donated to Mr. Obama during the presidential campaign. His company is located in Montgomery County, outside Philadelphia, which broke for the president over Mitt Romney 57 percent to 42 percent on Election Day.
Mr. Obama's trip is an attempt to use the bully pulpit of the presidency to gain additional leverage in the seemingly-stagnant debate in Washington over how to avert the combination of tax hikes and spending cuts known as the "fiscal cliff" which is set to kick in at the end of the year in the absence of a deal. He argues that Democrats and Republicans should extend the Bush-era tax cuts now as discussions over other aspects of the "fiscal cliff" continue.
The key players in the negotiation are Mr. Obama and House Speaker John Boehner, who are seeking to craft a deal that is palatable to their party bases. Mr. Obama wants Republicans to agree to allow the Bush-era tax cuts on income over $250,000 to expire, something the vast majority of Republican lawmakers say is unacceptable; Boehner wants Mr. Obama to agree to significant cuts in Medicare, Medicaid and Social Security, something the vast majority of Democrats oppose.
Boehner has said he is open to raising revenues by closing loopholes in the tax code and eliminating deductions, but he has said he will not accept increases in tax rates - and many House Republicans fear that if they vote for tax hikes, they will face well-funded Tea Party-aligned primary challengers in their next election. Negotiators for Mr. Obama are reportedly calling on Republicans to make a specific proposal for what cuts they would like to make to entitlements. If the Bush-era tax cuts expire on the highest earners, tax rates on income over $250,000 would increase from 35 percent to 39.6 percent, the rate under President Clinton.
Late Thursday, House Republicans an offer from the Obama administration that was presented by Treasury Secretary Tim Geithner and White House Congressional Liason Rob Nabors in meetings with lawmakers on Capitol Hill. The $4 trillion offer would have raised taxes $1.6 trillion over a decade and cut $400 billion from Medicare and other entitlements, to be worked out next year.
It would also have extended the payroll tax cut, raised the estate tax to 45 percent on inheritances over $3.5 million, kept Medicare reimbursement rates from being cut (the "doc fix"), extended unemployment insurance and added $50 billion in infrastructure/stimulus spending in the first year, with more such spending in the future. House Republicans characterized the offer as a joke. Senate Republican Leader Mitch McConnell, R-KY, called it a "step backward, moving away from consensus and significantly closer to the cliff, delaying again the real, balanced solution that this crisis requires."