Signs Of A Fiscal Cliff Deal Coming Together?

December 17, 2012

Comments

President Obama made a new offer in the fiscal cliff negotiations that may be a signal that the parties are moving closer to a deal:

WASHINGTON — The White House made a new offer to House Speaker John Boehner (R-Ohio) on Monday to avoid the so-called fiscal cliff. The proposal matches the amount of spending cuts with revenue-raisers, calls for two stimulus measures and seeks an avoidance of a debt limit fight for the next two years.

The details of the offer were sent to The Huffington Post on condition of the source’s anonymity.

The White House has moved off of its initial and second revenue demands of $1.6 trillion and $1.4 trillion respectively. As of now, the president would be fine raising $1.2 trillion in revenue. He also is no longer insisting that taxes increase on families with income above $250,000. Instead, he is calling for a permanent extension of the Bush tax cuts for incomes of less than $400,000.

To meet the $1.2 trillion revenue goals, the White House proposal calls for limiting the tax benefit of itemized deductions to 28 percent for taxpayers. It would return the estate tax to 2009 parameters, which would mean that estates worth more than $3.5 million would be taxed at a 45 percent rate.

The compromise on revenue may be difficult for some in the president’s own party to swallow, though few would have imagined the White House scoring such a victory just one year ago. The spending cuts in the new proposal could be a harder sale.

In his latest offer to Boehner, the president proposes $800 billion in savings, including $290 billion in interest savings and $130 billion in savings that would come from an adjustment to the inflation index for Social Security benefits. The administration insisted that there would be “protections for most-vulnerable populations” perhaps by indexing the changes so that they don’t affect those with low-income.

The move on the tax on Social Security fronts is probably the most significant. Where it goes from here is unclear, but I wouldn’t be surprised to see a new offer from the Republican side some time tomorrow.

9 responses to “Signs Of A Fiscal Cliff Deal Coming Together?”

michael reynolds

December 17, 2012 at 10:10 pm

Yep. I figured the revenue side would end up at 1.2. 800 billion in cuts makes the whole package 2 trillion or 200 billion a year. Not much but better than it rising every year.
anjin-san

December 18, 2012 at 12:07 am

It looks like this thing is moving in the right direction. A true compromise is one where both sides walk away a little unhappy.
Commonist

December 18, 2012 at 7:30 am

@anjin-san:

But a true compromise is worse for the country than an unfair compromise.

Republicans are worse people, they have worse ideas, they have a worse agenda and they have less support among Americans. They do not deserve any happiness at all.
Brummagem Joe

December 18, 2012 at 8:57 am

But will Boehner’s caucus sign off on it. I’d also beware of trial balloons. And the SS change isn’t a tax it’s the chained cpi concept. I don’t see this going down too well with the Democrats even though paradoxically the main sufferers would be seniors a majority of whom voted for Republicans. And no mention of the debt ceiling? Overall however, the ice does appear to be shifting still no better then 50/50 of a deal before December 31.
Tsar Nicholas

December 18, 2012 at 9:06 am

I’ve negotiated a lot of deals in my time. And I have to say I’ve never seen someone with 100% of the leverage give even 10% of the concessions much less 20-30% or more of the concessions.

In any event, a few other points are worth mentioning:

– That the line in the income tax sand already is moving from $250k per year all the way up to $400k per year speaks at high volumes, and perhaps the greatest irony is that dopey leftists will be deaf to the irony.

– That estate tax hike will be a real tough sell to farm state Democrats.

– Any Dem proposal including new “stimulus” money really can’t be taken all that seriously. The last “stimulus” worked so smashingly we now have one of the lowest labor force participation rates on record, around the lowest number of hours worked on record, real wage growth that’s basically zero and job growth so anemic the likes of CNBC actually celebrate when we post around 150k net in a given month, which doesn’t even match population growth. Fixing potholes in Democrat districts and handing out some free cash to green energy companies and to political donors is not the stuff of which actual recoveries are made.

– Using chained CPI for entitlements is so clearly a no brainer I’m actually surprised Team Obama seriously is considering it, albeit in a watered down format. But truth be told Social Security is such an incipient disaster nothing short of a radical transformation will save us. The notion that Gen. Y will be able to support the Boomers patently is absurd.

– The notion that we’re only capable of reducing federal spending only by $800B over a decade, including debt service reductions and COLA reductions, is ludicrous. The government pisses away a lot more than $80B every year merely in waste and fraud.
Ben Wolf

December 18, 2012 at 9:51 am

@anjin-san: This plan as currently announced is not a good deal.

Firstly, it allows the payroll tax cut to lapse entirely, and the economy is too fragile for a cut with such a direct impact on consumer spending and savings patterns.

Secondly, the SS adjustment is based on a switch to chained-CPI. Chained CPI-is based on the phenomenon of switching to a different brand if a specific product becomes too expensive, thereby creating “savings”. The problem is our studies of chained-CPI are based on working households, not the spending habits of retirees on fixed incomes. We have no idea whether the same patterns hold for a difereing demographic.

Thirdly, the primary source of cost growth among the elderly is in health costs, not canned green beans, and substitution to achieve savings is often not optional for medical procedures.
Rob in CT

December 18, 2012 at 9:57 am

Letting the payroll tax cut expire is the worst idea on the revenue side, definitely.
Dave Schuler

December 18, 2012 at 3:57 pm

From a policy standpoint neither the president’s proposal nor Speaker Boehner’s makes a lick of sense. They’re political postures, not serious policy positions. And the mechanical compromise position, splitting the difference, is unhinged.
Brummagem Joe

December 18, 2012 at 4:29 pm

@Tsar Nicholas:

I’ve negotiated a lot of deals in my time

I can only imagine the expression on the faces of the counterparties Nicko. In fact it reminds of a joke that was once played on me when I was involved in a rather heavy arm wrestle and some of my colleagues introduced a stooge into the negotiation who got progressively crazier. I should have sussed it when I saw he had a bit of newspaper sticking to a razor nick on his neck. Do you use newspapers?