As much as I can’t stand the House leadership most days, once in a while they actually do manage to stand on the side of the angels…
The House of Representatives approved a modest budget agreement that would essentially forestall the threat of a government shutdown through late 2015 in a Thursday evening vote.
The budget framework, which enjoys the support of President Barack Obama, passed in a 332 to 94 vote, an overwhelming show of bipartisan unity that trumped the token opposition from 62 conservative Republicans. The Senate could approve the legislation next week.
The budget represented a modest compromise that didn’t satisfy either party. Speaker John Boehner had chastised conservatives and outside advocacy groups for mobilizing against the deal before its terms were finalized.
“Is it perfect? Does it go far enough? No, not at all,” the speaker said in a floor speech before the vote. “But this budget is a positive step in that direction; it’s progress.”(NBC Politics)
For what it’s worth, Democrats’ weren’t exactly thrilled about it as well…
Democrats weren’t fully mollified, either: Minority Leader Nancy Pelosi, Calif., encouraged fellow Democrats to “embrace the suck” and support the measure during a closed-door meeting at the Capitol on Thursday.(NBC Politics)
So, what was in the budget deal?
- For starters, there is no “Grand Bargain” kind of deal as in months past; both Paul Ryan & Patty Murray, the architects of the budget deal, have both said this and by-and-large, they were right
- There are modest increases in discretionary spending (including increases in spending on Head Start, medical research and military training)
- There were no increases in income tax rates; however, fees in several areas did increases, most notably those involving airline fees and airline excise taxes
- Finally, this a long-term budget deal that takes away the potential of future government shutdowns through the end of FY 2014 (i.e. through 30 Sept. 2014)
Now, is this a good deal? FWIW, its’ not the best deal that could be gotten; for instance, there aren’t, at present, extensions in long-term unemployment insurance, included in this agreement, but given the often stop-start nature of past agreements, it is better than past agreements and that is an improvement over past budget deals.
Even when I was a conservative there were certain lines Washington didn’t dare cross…one of those was the debt ceiling, which doesn’t authorize future spending but merely allows the government to spend money Congress has already appropriated…something President Obama made abundantly clear earlier today in his last presidential conference prior to next week’s second inauguration…
President Barack Obama demanded Monday that Congress raise the federal debt limit quickly, warning that “Social Security benefits and veterans’ checks will be delayed if they don’t,” and cautioning Republicans not to insist on concessions in exchange.
“They will not collect a ransom in exchange for not crashing the economy,” he said at the final news conference of his first term. “The full faith and credit of the United States of America is not a bargaining chip. And they better decide quickly because time is running short.”
“We are not a deadbeat nation,” he declared.
In the opening of his press conference, Obama reiterated the point I mentioned in the opening of this post….
Obama opened his news conference with a statement noting that a vote to increase the debt limit “does not authorize more spending. It simply allows the country to pay for spending that Congress has already agreed to. These are bills we’ve already racked up and we need to pay them.”
In addition, he also made clear that both taxes & spending need to be on the table in future debt ceiling talks, something Republicans have resisted in the past and will probably continue to resist down the road; let’s just hope they don’t take the country with them…
We may not have to go over the fiscal cliff after all….according to reports, a tentative deal has been reached. The major points to the agreement are as follows(all quotes are from the Think Progress article, 2nd link above):
- Tax rate adjustments. The deal would extend all of the Bush tax cuts for incomes below $400,000 for individuals and $450,000 for families, while reinstating the Clinton-era 39.6 percent tax rate for income above those thresholds. It will also push the capital gains rate on investment income back to 20 percent for income above $400,000 for individuals and $450,000 for families. President Obama had asked for an extension of rates only for incomes below $250,000.
- Stimulus tax credits. Three tax credits expanded as part of the stimulus will be extended for one year as part of the compromise. The America’s Opportunity Tax Credit, Child Tax Credit, and Earned Income Tax Credit collectively benefit nearly 20 million Americans each year, and extending them was a priority for Obama and Democrats. Republicans allowed all three to expire in tax legislation earlier this year.
- Payroll tax cuts. The payroll tax cut would expire as part of this compromise. The payroll tax cut, which benefits all wage-earning workers, is the most damaging piece of the “fiscal cliff” according to the Congressional Budget Office. Republicans have opposed extending the payroll tax cut in the past; many Democrats opposed its extension over fears that it would undermine Social Security, which it helps fund.
- Unemployment insurance benefits. The federal unemployment insurance program would be extended for one year under this deal. Without an extension, more than 2 million would lose benefits at the beginning of 2013, while another million would lose them in the early part of the year.
- Estate tax. The estate tax was set to revert to its Clinton-era levels, where it was taxed at 55 percent after a $1 million exemption. This deal would set the exemption at $5 million and tax at a 40 percent rate after that — at a cost of $375 billion over 10 years compared to the Clinton level.
- Miscellaneous. The deal would also include a permanent fix to the Alternative Minimum Tax and a one-year “doc fix,” which would prevent cuts in provider payments through Medicare. It also extends certain corporate tax provisions for another year.
The key to this deal is that, by all appearances, they decided to split the tax half of the fiscal cliff from the spending half, opting to defer the sequestration debate for another day; in addition, it also appears they have put off debate on debt ceiling increases, which raises that possible specter down the road. But, and this is the but…if this is the agreement that gets America away from the fiscal edge, then it appears that while both sides bent some, Republicans bent further over to the center than did the Democrats in coming to this potential agreement.
According to reports, there might just be a deal in the works to avoid going off the fiscal cliff….the outlines of the current proposal are as follows:
- The threshold for the top tax rate would be set at $450k for couples instead of $250k. This would be a big Democratic concession; most Dems’ wanted to keep the threshold for the top rate at a quarter-million while Republicans were looking for $550k.
- Capital gains & dividend tax rates would increase to 20 percent on households over a quarter-million, with an equal reduction in household deductions. The first concession came at a price for Republicans, though: in exchange for the higher individual income threshold, they gave up a lower investment tax rate in turn. It’s still a tax cut, though, as those affected will see upwards of 35-40% in tax savings over current rates.
- In addition to #2, the Alternative Minimum Tax would be raised to protect middle-class families long-term. No information on how this would work, but this is a big thing; at present, more and more people fall under the AMT rules instead of the standard tax rules, so anything that shelters them from the AMT is a good thing.
- In terms of spending, both sides would agree to delay the sequester until 2015. Costing $200 billion total, it would hurt discretionary spending but would avoid defense cuts that Republicans were cringing at.
- In exchange for #4, unemployment benefits would be extended for one additional year and adjustments to Medicare(i.e. the Medicare doc fix) would be postponed until a later date. While Republicans want offsetting cuts to the UEI part, the fact that they’re even willing to allow UEI extensions(considering their past intransigence on the subject) is a major give on their end.
For what it’s worth, it’s not the prettiest bargain I’ve seen…but it does seem workable. The only question is whether they can get it to avoid damaging the economy more than it has been at present.
It would appear after all that America is indeed headed off the fiscal cliff…quoting NBC News:
Senate Democrats said talks toward resolving the so-called fiscal cliff before the end-of-year deadline had hit a “major setback” on Sunday afternoon due to a standoff over proposed changes to Social Security.
Democrats said that Republicans, led by Minority Leader Mitch McConnell, Ky., are insisting that a deal to resolve the fiscal cliff include what is known as “chained CPI” — a change in how Social Security benefits are calculated to increase over time.
Just before a self-imposed deadline at which Senate leaders were set to brief their respective caucuses about a prospective deal, negotiations toward a scaled-back agreement to avoid the onset of automatic tax hikes and spending cuts on Jan. 1 appeared on the verge of breakdown.
Oh, well…judging by all the latest polling, the Republicans are going to get blamed for this one, so let’s jump off together, shall we?
NBC First Read: Cliffs Notes – Five Things To Watch At Today’s White House Meeting
…and those five things are:
- The tone of the negotiators. One way to tell what might happen in regards to the fiscal cliff is how those involved talk afterwards; if Boehner, Reid, Cantor, Pelosi and others appear jointly to speak about what transpired at the White House today, that could bode well for whatever decision they make. If, on the other hand, they appear separately with the press, that’s not a good sign.
- The process of the matter. In recent days, there’s been calls for the Senate to send their own fiscal cliff package, which they’ve already voted on, over to the House for them to vote on. Only one problem…under the Constitution, all tax & appropriations bills must begin in the lower chamber(i.e. the House); normally, this would be the end of any Senate package except that there is a pathway they can use, which is this: the Senate could take up any bill already passed by the House that is currently on the Senate calendar, offer a substitute amendment to said bill(assumption here is that the fiscal cliff package would be the substitute), pass it in lieu of the original bill, get unanimous consent to move forward on the amended bill, pass amended bill and send back to the House with the amendment therein. If fiscal cliff negotiators come out of their meeting today with a clear path on how to proceed, that could spell good tidings.
- Numbers, numbers, numbers. One of the major stumbling blocks to any fiscal cliff package has been where the threshold for the top tax rates should be set at; Republicans want it to remain at 35% regardless of income while Democrats want to, in principle, raise it back to the 39.6% rate, set during the Clinton Administration. One possible solution here might be a compromise: raise the rate to 37 or 38 percent with an income limit of 250-400 thousand dollars income. In addition, another sticking point has been the amount of spending cuts that will have to be made in conjunction with revenue increases: Republicans are calling for $800 billion or so in revenue-matched cuts while Democrats are calling for roughly $1 trillion in revenue-matched cuts, down from their original amount of $1.2-$1.4 trillion. Here, another compromise might be a sign of progress on fiscal cliff discussions; the question, of course, is where the lines are eventually drawn.
- Screw this; just kick the can down the road again. This could be the deal in and of itself; just pass something that delays its’ until a later time and date, which is what got us in this predicament in the first place 18 months ago. The very reason America’s staring at a fiscal cliff that we’ll likely go over in a few days was due to the summer 2011 debt-ceiling talks, when America’s credit rating was degraded due to Congress not getting its’ act together when Washington smashed into the nation’s debt ceiling; God only knows what the markets might do if Washington engages in another can-kicking routine now…
- Watch the base, everyone. One of the reasons politics in Washington have become so polarized is the fact that leaders have to be careful not to anger their respective parties’ bases(liberals & progressives on the Democratic side, conservatives on the Rpeublican side); if there appears to be a lot of saber-rattling anger from either of these groups, there might not be a fiscal cliff deal that would pass.
In the final analysis, any fiscal cliff package that is agreed to would need a bipartisan push to pass in either house of Congress but there are plenty of minefields that the respective negotiators will have to navigate to get any sort of package passed…meanwhile, the rest of us out in the hustings will just have to simply wait and bide our time.