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House GOP balks at tax increase

No vote taken; move complicates talks on fiscal cliff

– Despite all the hot fiscal cliff rhetoric, the differences between President Obama and House Speaker John Boehner seem relatively narrow.

So why haven’t they shaken hands already? One answer: Both sides need to keep – or get – their own troops behind them.

That proved difficult Thursday for House Speaker John Boehner.

Unable to round up enough support, House Republicans abruptly put off a vote Thursday night on legislation allowing tax rates to rise for households earning $1 million and up, complicating attempts to avoid a year-end fiscal cliff that threatens to send the economy into recession.

In a brief statement, Boehner said the bill “did not have sufficient support from our members to pass.”

He said that now it is up to the president to work with Senate Majority Leader Harry Reid “on legislation to avert the fiscal cliff.”

The White House says President Obama is willing to continue bargaining for a bipartisan solution to avert the fiscal cliff after House Republicans abandoned efforts to pass an alternative plan.

White House spokesman Jay Carney says Obama intends to work with Congress. He did not mention House Speaker John Boehner’s failure to muster the votes for his so-called Plan B.

In their cliff standoff, Obama wants to raise taxes by about $20 billion a year more than Boehner. The two men differ over spending cuts by roughly the same amount.

That’s real money by most measures. Yet such numbers are barely noticeable compared to the $2.6 trillion the government is projected to collect next year, and to the $3.6 trillion it’s expected to spend.

As the cliff approaches – economy-shaking tax increases and spending cuts that start hitting in early January unless lawmakers act first – each side says the other isn’t being serious enough about trimming federal deficits. But their inability so far to strike a compromise underscores that their problem is more than arithmetic – it’s also about the difficult politics that Democrat Obama and Republican Boehner face when it comes to lining up votes.

Chastened by Obama’s re-election, Boehner has violated a quarter-century of Republican dogma by offering to raise taxes, including boosting income tax rates on earnings exceeding $1 million annually.

Eager for a budget deal that would let him move on to other issues, Obama in turn would cut the growth of Social Security benefits, usually off-limits to Democrats. He also would impose tax increases on a broader swath of people than millionaires – those with incomes over $400,000.

But that, too, is a retreat from what he campaigned on: the $200,000 income ceiling on individuals and $250,000 on couples.

That means both men have angered lawmakers and staunch supporters of their respective parties, just when the need to retain that support is crucial.

Neither wants to risk his political capital by embracing a deal his own party rejects.

Economists say the tens of billions of dollars separating the president and speaker are relatively minuscule, especially when compared to the size of the U.S. economy, which exceeds $15 trillion a year.

“It’s not vanishingly small, but it is minor,” said Alan D. Viard, a tax scholar at the conservative American Enterprise Institute. “It certainly would be a disappointment if that minor of a gap would end up blocking an agreement.”

There are real budget differences between Democrats and Republicans.

Obama has proposed raising taxes by $1.2 trillion over the coming decade by boosting the current top 35 percent rate to 39.6 percent for income over $400,000, plus other increases on the highest earning Americans. The president also says he’s offered about $1.2 trillion in spending cuts over 10 years, including slowing the growth of benefits from Social Security and other programs.

In addition, the president would pluck $400 billion in savings from Medicare and Medicaid, the health care programs for the elderly and poor whose defense Democrats consider precious priorities.

Boehner has offered about $1 trillion in tax increases and roughly the same amount in spending savings.

An earlier Boehner offer had $600 billion in Medicare and Medicaid savings – well more than Obama – but it’s unclear whether the speaker is still seeking that figure.

There are other differences:

Obama wants several billion dollars in infrastructure spending to goose the economy and to extend expiring unemployment benefits.

He also wants the government’s authority to borrow money extended for two more years – until after the 2014 congressional elections – with Congress having little more than symbolic opportunities to block it, a year longer than Boehner has offered.

Even so, the numbers being proposed by Obama and Boehner are so close, and the political risks both men have taken on taxes and Social Security benefits are so stark, that many consider it almost unthinkable they would not eventually complete a deal.

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