First Round of Fiscal Cliff Negotiations

Posted on December 3, 2012

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This afternoon Speaker John Boehner (R-Ohio) sent The White House the GOP’s “solution” to the fiscal cliff. Like their presidential candidate’s entire campaign, the GOP letter tried to put the onus of austerity on the middle class and was devoid of specifics.

A few things we do know ($2.2 T savings over 10 years):

  • $800 B savings from an overhaul of tax code (no deductions or loopholes specified for closing)
  • $600 B savings from cuts to Medicare and Medicaid (no specifics as to amounts, timing, etc.)
  • $200 B savings from cuts to Social Security… voucher-care anyone?
  • $600 B savings from “other” spending cuts – again, no specifics

The offer continues the Bush tax cuts for the wealthiest Americans, and White House spokesman Jay Carney, earlier said the president “will not sign a bill that extends those tax rates for the top 2%,” as the GOP proposal would do.

What was the President’s response?

President Obama rejected the GOP offer through spokesman Dan Pfeiffer, who dismissed the GOP plan for providing “no details on which deductions they would eliminate, which loopholes they will close or which Medicare savings they would achieve.”

Trying to cloak the offer in the spirit of Simpson-Bowles, the GOP soon realized that perhaps they had overstated their claim when Erskine Bowles released a statement saying, “While I’m flattered the Speaker would call something “the Bowles plan,” the approach outlined in the letter Speaker Boehner sent to the President does not represent the Simpson-Bowles plan, nor is it the Bowles plan.”

Both parties are being intentionally vague on the specifics of the policies that could potentially hurt them with their respective bases. For instance, the White House, fresh off of an election triumph has leverage and intends to play its stronger hand by requiring increased tax rates on the top 2% yet providing little detail on the entitlement cuts (playing to the Dem base). The GOP plays to its base by cutting entitlements while attempting to appear even-handed while proposing of “increasing revenues” but not increasing tax rates on the wealthy.

It’s clear that neither party wants to be the first to specify cuts to specific entitlement programs. The President doesn’t need to. He just won the election and could wait to go over the cliff – allowing the Bush tax cuts to expire, thereby getting his increased tax rates on the wealthy. Setting out specific or considerable cuts to entitlements so soon after winning an election where he claimed to be the candidate to fight for entitlements would squander all political capital the President enjoys.

The GOP has an image problem (47%, “legitimate rape”, the plethora of Ass Clowns), and being the first party to slash entitlements that primarily affect seniors and the poor in such a public way would further cement the existing perception that the Republican Party fails to care about anyone other than the rich. By specifying deep entitlement cuts, the GOP would provide fodder for Dems during the mid-term 2014 election, and make changing their image much more difficult.

Now that the parties got the first round of bullshit out of the way, it’s time to get down to business… Let the games begin!

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