Fiscal Cliff Deal Unlikely With 10 Hours to Go

A deal to resolve the so-called “fiscal cliff” has not been announced, with only 10 hours to go until tonight’s deadline.

Bloomberg’s Joshua Green:

With the caveat that no reporter is privy to the details of the offers being swapped, here is the deal that seemed to be emerging: Democrats would get an extension of unemployment benefits for 2.1 million people; they’d patch the alternative minimum tax for a year to protect the middle class from sharp tax hikes; and they’d implement a “doc fix” to ensure that Medicare reimbursement rates to doctors don’t fall precipitously and limit patients’ access to medical care. Republicans would get to preserve Bush-era income tax rates for households making up to $400,000 (rather than the $250,000 limit Democrats prefer). They’d also get a lower tax rate and a much higher threshold for inheritance taxes (set to revert to 55 percent on estates of more than $1 million on Tuesday). And significantly, Republicans would hold onto their greatest point of leverage in upcoming negotiations over entitlement cuts, because the deal wouldn’t raise the debt limit.

Here’s what’s important about everything Democrats would get: It’s temporary; everything expires (presumably) within a year. Here’s what’s important about what Republicans would get: it’s permanent. The tax rates won’t expire.

Yesterday the Senate GOP caucus gave up on a demand to cut Social Security benefits (via the so-called “chained CPI”) as part of a deal.

“CPI has to be off the table because it’s not a winning argument to say benefits for seniors versus tax breaks for rich people,” said Sen. John McCain (R-Ariz.). “We need to take CPI off the table — that’s not part of the negotiations — because we can’t win an argument that has Social Security for seniors versus taxes for the rich.”

Even without “chained CPI,” any deal that makes the Bush-Obama Tax Cuts For The Rich permanent is a bad deal. Along with the continuing economic slump, tax cuts and the Pentagon budget are the primarily drivers of deficits. Any credible deficit reduction plan must include major economic stimulus, expiration of ALL the tax cuts for the rich, and a significant reduction in military spending.

UPDATE: Tonight, MSNBC and CNN are reporting that President Obama has abandoned his campaign promises from 2008 and 2012, and agreed to make the Bush-Obama Tax Cuts For The Rich permanent for the first $450,000 of income. That nets an estimated $600 billion in revenue over 10 years, not enough to make a dent in deficits. The AMT is fixed permanently. If you are lucky enough to inherit up to $10 million, it’s all tax free. Capital gains will be taxed at 20 percent.

Ordinary working Americans will lose the payroll tax holiday, reducing the take-home pay of the median household by $1,000. Federal unemployment benefits will be extended for one year. Earned Income Tax Credit extended for five years.

The deal sets up three more fake crises early in 2013: (1) over the debt ceiling (which the Treasury has already hit), (2) over sequestration (in two months), and (3) when the continuing resolution expires on March 27 (enabling the GOP to threaten a government shutdown). Worst of all, once again the Republicans get away with hostage-taking tactics – which will encourage them to do it again, threatening to wreck the economy unless Dems cave to their demands.

UPDATE: At 11:45 pm Utah time, the Senate is voting. Senator Tom Harkin (D-IA) delivered an eloquent speech on C-SPAN2 denouncing trickle-down theory, and the idea that $400,000 a year is somehow “middle class” when it represents the top 1 percent. He also pointed out that tax breaks for the rich are made permanent in the bill, while true middle class items like the Earned Income Tax Credit, child tax credit, tuition tax credit and unemployment benefits are only temporary. The vote was 89-8 in favor of the deal.

UPDATE: Paul Krugman:

Anyone looking at these negotiations, especially given Obama’s previous behavior, can’t help but reach one main conclusion: whenever the president says that there’s an issue on which he absolutely, positively won’t give ground, you can count on him, you know, giving way — and soon, too. The idea that you should only make promises and threats you intend to make good on doesn’t seem to be one that this particular president can grasp.

And that means that Republicans will go right from this negotiation into the debt ceiling in the firm belief that Obama can be rolled.

UPDATE: Eric Cantor Really Hates the Senate’s Cliff Deal. There’s a chance that Speaker Boehner won’t keep his promise to let the House of Representatives vote on the Senate-passed bill because House Majority Leader Eric Cantor, the No. 2 Republican in the House, is against it.

UPDATE: Tax cuts for the rich have been made permanent, mostly with Democratic votes. The entire Utah House delegation voted no.

[T]he House passed the measure Tuesday evening by a vote of 257-167, with 85 Republican votes. 151 Republicans, including House Majority Leader Eric Cantor (R-VA) and Majority Whip Kevin McCarthy (R-CA), and 16 Democrats voted against the bill.

  1. #1 by Lyman Hall on December 31, 2012 - 3:54 pm

    All acts of congress are temporary. Any law enacted today can be repealed tomorrow. Any deal made today regarding some future action cannot in any way bind a future congress. So this whole discussion of temporary this and permanent that is entirely fictional.

  2. #2 by cav on December 31, 2012 - 7:10 pm

    I just hope the Fictional / Fecal Cliff doesn’t latch onto our host.

  3. #3 by cav on December 31, 2012 - 7:31 pm

    I’ve never known whether or not it was really uncertainty I felt. It could have been practically anything, you know.

    Wall Street seems certain that is IS uncertainty. Me? I just don’t know.

  4. #4 by cav on December 31, 2012 - 7:42 pm

    Worst congressional ratings in history and they give themselves a raise?

    EVERYONE should be enraged. I know I am. Of THAT I’m quite certain.

  5. #5 by cav on December 31, 2012 - 7:59 pm

    Social Security has nothing to do with the deficit or the debt. John McCain and his criminal cohort had better start thinking about paying back the money they have misappropriated from the Social Security fund to cover up the deficit. They won’t even admit they have borrowed from the funds we have contributed for the last 40+ years. They taught Bain how it’s done.

    Pay it back.

  6. #6 by cav on December 31, 2012 - 8:16 pm

    Lyman. How about they just vote to undo putting the fictional, fiscal cliff they wrote into the law in in the first place?

    Nothing happening before midnight. At 11:59 it’s a tax hike. at 12:01 it’s a tax cut.

    Stupid. But there you have it.

  7. #7 by Larry Bergan on December 31, 2012 - 8:32 pm

    Lyman:

    I agree.

    As far as the law goes, permanent doesn’t exist any more then the law exists for most of us.

    Put Karl Rove in jail and prove me wrong.

  8. #8 by Richard Warnick on December 31, 2012 - 9:43 pm

    Howard Dean was right. The other day he said that if the Republicans and Democrats make a deal, you can be sure it will be good for the Republicans and Democrats (in Washington). Not so good for the country.

    They need fake crises as an excuse to go against the will of the people.

  9. #9 by cav on December 31, 2012 - 9:48 pm

    And we get to celebrate!!!

    Yea1

  10. #10 by Larry Bergan on December 31, 2012 - 10:29 pm

    Howard Dean is always right. That’s why his own party wouldn’t stand up for him when the media slammed him for no reason.

    He’d make a great adviser and next Pres.

  11. #11 by Richard Warnick on January 1, 2013 - 12:14 am

    Senate vote in favor of the deal: 89-8.

  12. #12 by cav on January 1, 2013 - 8:10 am

    Blessed are the job creators …

    Now we have only to wait until the debt ceiling blackmail starts. Shouldn’t take too long.

  13. #13 by cav on January 1, 2013 - 8:20 am

    The FICA holiday did not get extended.

  14. #14 by cav on January 1, 2013 - 8:34 am

  15. #15 by cav on January 1, 2013 - 8:40 am

    “It’s not exactly clear what is happening with Secretary Clinton’s health,” NBC News chief science and health correspondent Robert Bazell said.

  16. #16 by cav on January 1, 2013 - 9:43 am

    Even though I luvs me sum conspiracy theories, now that it’s really 2013, I suppose they’re pretty past tense. I’ll try to behave for the duration.

    Happy New Year.

  17. #17 by Richard Warnick on January 1, 2013 - 9:47 am

    Maybe the tea partyers in the House can rescue us from Obama again, but this time I think the fix is in.

  18. #18 by cav on January 1, 2013 - 10:13 am

    I DEMAND more and more crisis. My adrenal level has adapted now, so bring it. And the tea partiers don’t look like rescuers to me. I mean, weren’t they among the creators of this cycle of doom?

    At the bottom of the cliff…there’s another cliff!

  19. #19 by cav on January 1, 2013 - 11:43 am

    http://www.nytimes.com/2013/01/02/us/politics/house-takes-on-fiscal-cliff.html?hp&_r=0

    Or at least they’ll do battle on ‘how to proceed’.

  20. #20 by Larry Bergan on January 1, 2013 - 5:01 pm

    At least people who make $399,999 dollars a year will be be huffing around saying, ‘FINE, I guess there’s no reason for me to work any harder’.

    That gives me a little satisfaction.

    Also, didn’t Republicans have to vote against Grover Norquist’s pledge? Are heads going to roll?

  21. #21 by Richard Warnick on January 1, 2013 - 5:18 pm

    Those “hard-working” rich people of the 1 Percent sure will feel the pain when they have to pay an extra 4.6 cents income tax on that additional dollar! That’s almost a nickel! Maybe they will be forced to re-think their support of pointless unwinnable wars halfway around the world.

    Post-cliff, tax cut legislation isn’t a tax increase, even by Norquist’s twisted logic.

  22. #22 by cav on January 1, 2013 - 6:16 pm

    Talking in terms of ‘Post-Cliff’ makes me worry about our Host.

  23. #23 by Lyman Hall on January 1, 2013 - 6:17 pm

    Let’s just make it 99% since those people have too much anyway. It’s only fair.

  24. #24 by Larry Bergan on January 1, 2013 - 6:39 pm

    Things are just plain strange. Under Eisenhower, they tell me tax rates were at 90% and Kennedy lowered them to around 70%. Now we’re talking about going from 35% to 39% and it’s like the Mayan apocalypse got delayed by a couple of weeks.

    Could we just get the Republicans to stop exaggerating. Just before Kennedy got assassinated seemed like a really great time in America to me. I remember frolicking on my front lawn as a twelve year old and the rich weren’t bitching all the time.

  25. #25 by Larry Bergan on January 1, 2013 - 6:47 pm

    I think “our host” has been losing as much sleep as the congress, trying to get this blog going.

    My thanks!

  26. #26 by Lyman Hall on January 1, 2013 - 7:56 pm

    The rich didn’t pay those rates.

    In 1958, the top 3% of taxpayers earned 14.7% of all adjusted gross income and paid 29.2% of all federal income taxes. In 2010, the top 3% earned 27.2% of adjusted gross income and their share of all federal taxes rose proportionally, to 51%.

    So if the top marginal tax rate has fallen to 35% from 91%, how in the world has the tax burden on the wealthy remained roughly the same? Two factors are responsible. Lower- and middle-income workers now bear a significantly lighter burden than in the past. And the confiscatory top marginal rates of the 1950s were essentially symbolic—very few actually paid them. In reality the vast majority of top earners faced lower effective rates than they do today.

    The tax code of the 1950s allowed upper-income Americans to take exemptions and deductions that are unheard of today. Tax shelters were widespread, and not just for the superrich. The working wealthy—including doctors, lawyers, business owners and executives—were versed in the art of creating losses to lower their tax exposure.

  27. #27 by Lyman Hall on January 1, 2013 - 8:45 pm

    “Howard Dean is always right.”

    Huh?

    Howard Dean falsely claimed that “60 percent of the deficit is due to the Bush tax cuts.” Last year, the nonpartisan Congressional Budget Office said that allowing the tax cuts to expire at the end of 2010 would decrease the deficit from $1.3 trillion in 2010 to $1.07 trillion in 2011. That’s a 17.7 percent drop. It’s sizable. But it’s not 60 percent.

    Dean, the former Vermont governor and Democratic National Committee chairman, made his claim on CBS’ “Face the Nation” on Aug. 7:

    Dean, Aug. 7: Sixty percent of the deficit is due to the Bush tax cuts. That’s CBO saying that, not me.

    But the CBO didn’t say that.

  28. #28 by Larry Bergan on January 1, 2013 - 9:05 pm

    Lyman:

    Based on what you said at #26, is there any reason to try and make sense out of “top marginal rates”, “gross national product”, “effective rates”, “standard rates”, “capital gains”, “adjusted gross income”, “flat taxes”, “unicorns”, or anything else?

    You may be absolutely correct, but I don’t understand any of it and I don’t want to, because I don’t have anything to work with in the first place. The only bumper sticker I understand is probably, “living wage”. I like to keep things simple.

  29. #29 by Larry Bergan on January 1, 2013 - 9:13 pm

    Yeah, I must have got Howard Dean mixed up with Glenn Beck.

    Buy gold!

  30. #30 by Richard Warnick on January 1, 2013 - 9:58 pm

    2001 – 2010 Bush Tax Cuts For The Rich
    2011 – 2012 Bush-Obama Tax Cuts For The Rich
    2013 – ???? Obama Tax Cuts For The Rich

    Now, get ready for the debt limit cliff, the sequestration cliff, and the government funding cliff. Tax cuts for the rich are permanent, so the only thing up for debate from now on will be budget cuts.

    With “friends” like President Obama, the American middle class has no need of enemies.

  31. #32 by Lyman Hall on January 1, 2013 - 10:39 pm

    “What has the African Prince done to piss you off this time (besides be Black and YOUR BOSS)?”

    - Cliff Lyon

  32. #33 by cav on January 2, 2013 - 9:47 am

    The devilish details of what kept us from going “over the cliff:”

    To make the House happy, the legislation also would kill the part of Obama’s 2010 Affordable Care Act designed to let millions of elderly and disabled people get help at home rather than be placed in institutional care, which tends to be more expensive.

    Because, you know: Fuck people.

    http://www.huffingtonpost.com/2013/01/01/fiscal-cliff-bill_n_2393253.html

  33. #34 by Larry Bergan on January 2, 2013 - 6:58 pm

    In other words; they changed the affordable care act to be unaffordable for the elderly and disabled.

  34. #35 by cav on January 2, 2013 - 7:33 pm

    Nickles and dimes, one after another, pick a cliff and see how far down you can toss em.

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