House Speaker John Boehner wants Americans to know that House Republicans are serious about dealing with the "fiscal cliff."
"This week we made a good faith offer to avert the fiscal crisis and that offer included spending cuts and reforms and included additional revenue," he said Wednesday. "Frankly, it was the balanced approach that the president's been asking for. Now we need a response from the White House. We can't sit here and negotiate with ourselves."
But here's the thing: The "good faith offer" was little more than a general statement of priorities that lacked the specifics necessary to actually get to a deal. It was no more of an attempt to find common ground than the White House's initial proposal, which
Boehner and the rest of the House Republican leadership laid out their offer in a letter to the president earlier this week. It said Republicans would cut a total of $1.2 trillion in spending, but it does not actually say what would be cut. The letter broadly says that the cuts would follow those put forth in what was called "the Bowles plan," a reference to Democrat Erskine Bowles, who quickly put out a statement saying that the letter does not represent his beliefs. (Republicans were referencing testimony that Bowles gave to the Joint Select Committee on Deficit Reduction last year. That testimony represented Bowles' understanding of the midpoint between the two sides at the time; he noted Monday that "circumstances have changed since then.")
Let's give House Republicans the benefit of the doubt and assume they are calling for the cuts articulated last year by Bowles. His testimony called for roughly $600 billion in Medicare savings, in part from raising the Medicare eligibility age, $300 billion in other discretionary spending cuts, and $300 billion in cuts to other mandatory spending programs.
Despite GOP claims that they represent a middle ground, there is simply no reason Democrats would agree to these cuts. Here's why: If the nation goes off the fiscal cliff, it faces $1.2 trillion in automatic spending cuts split between domestic spending and military spending. Republicans are effectively proposing to keep the cuts but focus them entirely areas that Democrats want to protect: Domestic spending and other entitlements. Meanwhile, under the GOP plan, there would be no cuts to defense programs -- the area Republicans want to protect. Why on earth would Democrats agree to a deal in which all the cuts are made to their priorities when they could simply do nothing and let the pain be shared by both sides?
That's not the only problem. When it comes to new revenue - aka, additional money coming into the government - Boehner has set a target of $800 billion. This is not insignificant: The offer has already prompted
Republican aides point to a paper from the Committee for a Responsible Federal Budget that they say shows how this can be done. The letter lays out three options that could generate the new revenue without raising tax rates on income above $250,000. Mr. Obama, who strongly backs raising rates on income over $250,000, has said the math in raising the revenue without raising rates "doesn't work."
But as Republicans have gleefully pointed out, the president sang a different tune in the past: Roughly one year ago, he said that his proposal to Republicans at the time was for $1.2 trillion in revenues "which could be accomplished without hiking taxes -- tax rates -- but could simply be accomplished by eliminating loopholes, eliminating some deductions and engaging in a tax reform process that could have lowered rates generally while broadening the base." On Wednesday, Mr. Obama seemed to acknowledge the inconsistency: "It is possible to do theoretically," he said of relying on closing loopholes and taxing deductions, "[but] it is not possible or wise to do as a practical matter."
As the New York Times lays out, there are red flags in the three options articulated by the Committee for a Responsible Federal Budget: One option, for example, would effectively remove the incentive for charitable contributions for many Americans, while another would be mystifying for many taxpayers to untangle. And since Republicans aren't even choosing a particular option, it's hard to know where to start in assessing what is ostensibly their offer.
Now, the White House proposal suffers from some of the same problems. There is one specific way that plan generates revenue: By letting the Bush-era tax cuts expire on income over $250,000, raising the rate from 35 percent to 39.6 percent. But the proposal also calls for $600 billion in unspecified additional tax revenue, and it is less than specific in its call for $400 billion in savings from entitlements. (Though to be fair, $360 billion in health care savings can be found in Mr. Obama's 2013 budget.) More broadly, the proposal was that it amounted to little more than an opening salvo from a particularly aggressive negotiator.
In other words, there's still a long way to go in getting to a deal. And the two sides don't appear to be getting closer: As CBS News' Major Garrett reported Wednesday, there was a halt this week in substantive conversations at any level between the White House and Boehner on the framework for a deal. (The president and House speaker did speak on Wednesday afternoon, according to a Boehner aide.)
So what's the good news? Start with this: Despite the fact that we are less than a month from the deadline for going off the "fiscal cliff" - which is
And despite the angry rhetoric, the contours of a potential compromise on tax rates, the biggest sticking point, may be taking shape. The president is continuing to insist that rates on the highest earners go up, but he notably declined in an interview this week to insist they revert exactly to the Clinton-era levels. On Wednesday, Sen. Tom Coburn, R-Okla, became the latest Republican to say he is open to letting the rates go up. Both sides may be able to live with a deal in which rates on income over $250,000 goes up, say, 2 percent instead of the 4.6 percent that Mr. Obama has been calling for.
Another possibility: Republicans, who polls suggest are losing the public opinion battle on the "fiscal cliff," may simply decide their continued opposition to raising rates on the highest earners isn't worth the political cost. Sen. Bob Corker, R-Tenn., told Reuters this week that he is "hearing whispers" among House Republicans that they might be willing to give in on raising rates. Corker's thinking is that if Republicans give in on the upper income tax rates, they'll have more leverage to reform entitlement programs, "which is where [the discussion] ought to be in the first place."
Undeniably, there are some Republicans who won't budge. But assuming most Democrats back a deal, Boehner would easily clear a majority if just half of his caucus goes along with it. And keep in mind that the closer we get to the deadline, the easier it gets for both sides to make concessions - in part because there is less time for recriminations from those who don't like the deal. It's also worth noting that as Jonathan Chait points out, it might be easier for both parties to come to a deal in January -- and because the tax hikes and spending cuts that make up the "cliff" are phased in gradually, a January deal likely wouldn't mean a significant negative impact on the economy. (Treasury Secretary Timothy Geithner's comment Wednesday that seems to reflect a combination of (1) the fact that the posturing continues and (2) going over the cliff wouldn't actually be that bad, so long as a deal gets done.)
In short: Even though both sides have offered up proposals that do not reflect compromise and talks have mostly ground to a standstill, there are reasons to be hopeful. And as the holidays get closer - and lawmakers start to seriously consider being trapped in Washington instead of with their families in late December - the posturing may well give way to actual progress. On Wednesday, the president told executives at a meeting organized by the Business Roundtable that if Republicans agree to raise rates, a deal can be had relatively soon because "the numbers actually aren't that far apart."
"Another way of putting this is we can probably solve this in about a week," he said. "It's not that tough, but we need that conceptual breakthrough."