WASHINGTON – The GOP-controlled House is moving ahead Thursday on a bill that would raise taxes on people earning over $1 million a year, sparing most workers from a tax hike but leaving in place painful budget cuts to the military and domestic agencies as “fiscal cliff” talks appear stalled.
The move, dubbed “Plan B” by House Speaker John Boehner, R-Ohio, seems to be aimed at upping the year-end pressure on Capitol Hill Democrats and President Barack Obama, but it looks to be a dead letter in the Senate and earned a White House veto threat Wednesday.
A supremely confident Obama dismissed Plan B in a Wednesday news conference, telling reporters that he and Boehner were just a few hundred billion dollars apart on a 10-year, $2 trillion-plus deficit-cutting pact.
Republicans should “peel off the war paint” and take the deal he’s offering, Obama said sharply at the White House. He noted that he had won re-election with a call for higher taxes on the wealthy, then added pointedly that the nation aches for conciliation, not a contest of ideologies, after last week’s mass murder at a Connecticut elementary school.
Obama continues to press for a comprehensive budget pact with Boehner to replace an economy-jarring set of automatic tax hikes and sweeping spending cuts to the Pentagon and domestic agencies set to take effect in January.
Boehner countered that the president will bear responsibility for “the largest tax increase in history” if he makes good on his veto threat.
But to a remarkable extent, the two sides have flip-flopped.
Republicans have for years argued that voting to renew most Bush-era tax cuts on income, investments and elsewhere, but allowing upper-end tax cuts to expire would be a debilitating blow to the economy and small businesses. Now, they point to the 99-plus per cent of taxpayers who wouldn’t be affected by their latest plan.
For their part, Democrats have lashed themselves to Obama, who carries great leverage into the battle over the fiscal cliff, the price to pay for Washington’s chronic inability to address the deficit.
Boehner expressed confidence the Republicans’ narrow, so-called Plan B bill would pass the House on Thursday despite opposition from some conservative, anti-tax dissidents. The leadership worked to shore up the measure’s chances late in the day by setting a vote on a companion bill to replace across-the-board cuts in the Pentagon and some domestic programs with targeted reductions elsewhere in the budget, an attempt to satisfy defence-minded lawmakers.
With Christmas approaching, Republicans also said they were hopeful the tax measure could quickly form the basis for a final bipartisan “fiscal cliff” compromise once it arrives in the Senate.
Democrats, in the majority in the Senate, gave no indication of their plans.
On paper, the two sides are relatively close to an agreement on major issues, each having offered concessions in an intensive round of talks that began late last week.
But political considerations are substantial, particularly for Republicans.
After two decades of resolutely opposing any tax increases, Boehner is seeking votes from fellow Republicans for legislation that tacitly lets rates rise on million-dollar income tax filers. The measure would raise revenue by slightly more than $300 billion over a decade than if all of the Bush-era tax cuts remained in effect.
Boehner won a letter of cramped support from anti-tax activist Grover Norquist during the day. Norquist’s organization, Americans For Tax Reform, issued a statement saying it will not consider a vote for the bill a violation of a no-tax-increase pledge that many Republicans have signed.
But another conservative group came to an opposing conclusion. “Allowing a tax increase to hit a certain segment of Americans and small businesses is not a solution; it is a political ploy,” the Heritage Foundation said in a statement.
That appeared to be the hope of Boehner and the rest of the leadership — that by showing his rank and file is united behind the fallback bill, the speaker would be in a strong position to demand concessions from the White House in the broader endgame.
At the White House, Obama repeated that he is ready to agree to spending cuts that may cause distress among some fellow Democrats, but he saved his sharpest words for Republicans.
“Goodness, if this past week has done anything, it should just give us some perspective,” he said in a reference to the shootings of schoolchildren in Connecticut.
Speaking of Republicans, he said: “It is very hard for them to say yes to me. But at some point, they’ve got to take me out of it.”
He added: “I’m often reminded when I speak to the Republican leadership that the majority of their caucus’ membership come from districts that I lost. And so sometimes they may not see an incentive in co-operating with me, in part because they’re more concerned about challenges from a tea party candidate, or challenges from the right, and co-operating with me may make them vulnerable.”
Nor did Boehner slam the door on further compromises in his brief appearance before reporters. “Republicans continue to work toward avoiding the fiscal cliff,” he said.
In the talks to date, Obama is now seeking $1.2 trillion in higher tax revenue, down from the $1.6 trillion he initially sought. He also has softened his demand for higher tax rates on household incomes so they would apply to incomes over $400,000 instead of the $250,000 he cited during his successful campaign for a new term.
He also has offered more than $800 billion in spending cuts over a decade, half of it from Medicare and Medicaid, $200 million from farm and other benefit programs, $100 billion from defence and $100 billion from a broad swath of government accounts ranging from parks to transportation to education.
In a key concession to Republicans, the president also has agreed to slow the rise in cost-of-living increases in Social Security and other benefit programs, at a savings estimated at about $130 billion over a decade.
By contrast, Boehner’s most recent offer allowed for $1 trillion in higher taxes over a decade, with higher rates for annual incomes over $1 million. His latest offer seeks about $1 trillion in spending cuts.