Slipping Off The 'Fiscal Cliff' Might Give Obama A Leg Up
GUY RAZ, HOST:
It's WEEKENDS on ALL THINGS CONSIDERED from NPR News. I'm Guy Raz.
PRESIDENT BARACK OBAMA: Now is not the time for more self-inflicted wounds.
RAZ: The words of President Obama last night in a statement after negotiations over avoiding the so-called fiscal cliff fell apart.
OBAMA: In 10 days, we face a deadline. In 10 days, under current law, tax rates are scheduled to rise on most Americans.
RAZ: Now many economists believe that if a deal isn't reached soon, it could send the U.S. economy back into recession. The White House wants to increase taxes on income over $250,000, but keep taxes where they are on all income below that amount. But a small and committed wing of the House Republican caucus is opposed to any tax increase at all. And this morning, House Speaker John Boehner reiterated that point.
REPRESENTATIVE JOHN BOEHNER: I don't want tax rates to go up and Republicans don't want tax rates to go up. The best way to address our crippling debt is to make significant spending cuts and fix our tax code to pave the way for long-term growth and opportunity.
RAZ: On Thursday night, the speaker proposed an emergency plan. He called it Plan B. And it would raise taxes on income above a million dollars. It's a plan the White House opposed, but in the last minute, Boehner pulled the bill. He realized he didn't have enough support from his Republican backbenchers.
BOEHNER: It's not the outcome that I wanted, but that was the will of the House. So unless the president and Congress take action, tax rates will go up on every American taxpayer and devastating defense cuts will go into effect in 10 days.
RAZ: And all of this could have a profound impact on every single taxpayer in this country. So could a deal be reached before the deadline? We asked NPR senior Washington editor Ron Elving to explain. He began by describing the outlines of that Plan B that never made it to a vote.
RON ELVING, BYLINE: Plan B was an effort on the part of John Boehner to change the politics of the negotiation he was involved in with the president. Now the speaker could see he was negotiating from weakness. And the polls said the country wanted a deal, and the polls said the country was going to blame him more than the president if we didn't get one.
So Plan B was an effort to adjust the Republicans' image, if you will, by adjusting their bargaining stance. Say yes to higher taxes on income over a million dollars a year. Make sure that the spending cuts did not fall on the military. And those two points, just standing on their own, are relatively savable. And if the House could pass that, the House could go back to negotiations with the president or fail to reach a deal with the president but have a little better standing with the public.
RAZ: OK. The president's been calling for higher tax rates on income over 250,000. John Boehner's plan said we'll do it on income over a million dollars. But that wasn't enough to get enough support from the House Republicans. He didn't even bring this up for a vote. What happened?
ELVING: They didn't have nearly enough votes. If it had been just a few shy, they would have brought it to the floor and tried to push it through in the sort of dramatic moment of crisis. But dozens of his members - perhaps 30, 40 of his members - had made it clear they were not going to go for it no matter what. And then we're not even going to listen to any further arguments about it. And so Boehner eventually quit even trying and sent everyone home for Christmas.
RAZ: So before we get to the politics of this, Ron, last night, the president made a very terse statement saying, look, I'm going away for Christmas. Everyone is going away for Christmas. Let's have some Christmas cookies and drink some eggnog and maybe everyone will calm down and come back and we can hammer out a deal. He will be back, what, maybe on the 26th. They will have six days to hammer out a deal before we go over the so-called fiscal cliff. Is that possible?
ELVING: One should never underestimate what Congress can do when it wants to. The president is coming back on the 26th. The House and Senate are due back on the 27th. But negotiations can be taking place in all of the interim. They would not be face to face, but they would be through surrogates long distance. And if they want to, they could put a deal in place to be implemented.
RAZ: But, Ron, if John Boehner could not get the support that he needed from his own backbenchers in the House, how can he cut a deal with President Obama? How can he go into the White House and say, I represent the Republicans in the House, and I will deliver their votes if we can come to an agreement? How would he do that?
ELVING: Well, this is the same problem that we had with the debt-ceiling crisis back in August of 2011 when he and the president reached a grand bargain and then John Boehner discovered he couldn't sell that back to his folks in the House. That is exactly the same situation that we're in now. We have seen that demonstrated yet again.
But I actually think that there is a way for Boehner to recover. I think there's a way for him to come out of this as something of a hero, at least in the sense of the broad public opinion, and even to keep his speakership when the new Congress convenes in January.
RAZ: And how would he do that?
ELVING: Well, he'd have to go back to the negotiations with the president. They have to go back to where they were a week ago - face to face, long distance, whichever. And they have to get a deal that can pass in the House and the Senate with what I would call half-and-half support. It's particularly crucial in the House that they get half the Democrats and half the Republicans plus one, and that deal would probably be able to clear the Senate. Probably. And it could get done in time to avoid the fiscal cliff. And, of course, it wouldn't satisfy everybody in anybody's camp, but it could get done.
RAZ: Will John Boehner's speakership survive this?
ELVING: John Boehner's speakership is really already in tatters. It's already very much jeopardized. He would be in a stronger position if they can get the deal, get it through, even using Democratic votes, and please the country. That, I believe, would make enough Republicans feel better than they feel right now. Right now, the way they feel is that they have been embarrassed by some of their members. Their speaker has been humiliated in public.
This is not a long-term strategy for the Republican Party. And I think most of the House Republicans would prefer another scenario than this, something with a little bit more of a future.
RAZ: Ron Elving is NPR's senior Washington editor. Ron, thanks.
ELVING: Thank you, Guy.
RAZ: Now if a deal isn't reached, taxes will go up for everyone and the automatic spending cuts will go into effect. The biggest chunk will come out of the defense budget. But in a recent article in The New Republic, reporter Noam Scheiber suggested that going over the fiscal cliff may not actually be a bad outcome for the president.
NOAM SCHEIBER: If the president sits back and does nothing, he gets basically the tax, the income tax regime that he wants, which obviously is one of the - if not the most - sensitive part of these negotiations. I think no one wants the cuts the way that they are designed now, but I think Republicans want them less because they absolutely eviscerate the Pentagon, which is close to the hearts of many Republicans. So even if you set aside the tax issue, I think the president still has a lot of leverage because Republicans want out of these defense cuts, and only the president can give them a way out of them.
RAZ: But you actually go beyond the political argument. You actually think that it would make sense to do this because the president would get more than half of what he wants. The top income tax rates would go up. Yes, taxes on the middle class would go up, but you argue he could sort of negotiate to roll that back. But once we go over the cliff, you're saying it's going to be hard for Republicans to lower the tax rates on the highest income earners.
SCHEIBER: Yeah. I mean, once we go over the cliff, I think the obvious next step is that Barack Obama and Harry Reid immediately propose a middle-class tax cut for the bottom 98 percent. And at that point, I think it's going to be very difficult for Republicans to oppose that so that they can argue that the top 2 percent should have their tax cut along with it.
RAZ: But could we avert an economic recession by passing middle-class tax cuts? I mean, you're talking about hundreds of billions of dollars in very rapid cuts. I mean, this is a huge risk that the president would be taking. I mean, it would be happening on his watch.
SCHEIBER: Well, I would say it's a risk. A huge risk seems overstated to me. I think the whole notion of the cliff is a bit of an inept metaphor. It's more like a gradual slope. There are some $500 billion in cuts and tax increases slated to happen next year, but they're spread out over the course of the entire year. And if this thing were to end in a matter of days or weeks after January 1st, the impact to the economy would be very, very minimal, and much of it could be retroactively corrected.
RAZ: But what about the huge spending cuts? I mean, it's not just cuts in areas that Democrats want to see those cuts. It's also in place like entitlement spending.
SCHEIBER: Those, if allowed to go in place and stay in place, could be potentially severe. But the way that this thing is designed is these agencies could continue their spending. It's not like a government shutdown. They just have to, if the cuts were to stay in place, have to ensure that they, by the end of the year, have not spent more money than they are allowed to spend.
RAZ: OK. The headline of your article is - I mean, you don't write the headlines, but it is called "To Save His Second Term, Obama Must Go Over the Fiscal Cliff." Why does he have to do that to save his second term?
SCHEIBER: Well, the problem is if you look back to 2011 and some of the previous interactions between Obama and the House Republicans, even when Obama wins a victory, a sort of tactical victory, it often turns out that the Republicans believe that they've been out maneuvered, that he's pulled the wool over their eyes, that he's just played his hand a little better and that they have the cause of righteousness. The public is behind them. They are morally in the right spot.
And so I think if Obama were to do a deal that they regarded as unfair to them, they would not be cured of this sort of righteousness and would want to get even down the road. And unfortunately, for all of us, there are lots of opportunities for them to get even.
The flip side is if you go over the cliff and they suffer a fairly stunning repudiation in the court of public opinion, I think they are going to be much more tempered and understand that it is the public that has rejected their agenda. I think that's a very important precedent to set as we go into the second four years of this president's administration.
RAZ: So if they do come to a deal on averting the fiscal cliff, how are they going to avoid problems down the line?
SCHEIBER: Yeah. I think it's going to be very difficult. If they do a deal that a lot of House Republicans consider illegitimate - and they are already saying that they consider basically any deal that would get done illegitimate - I think they are going to be absolutely determined to fight this out, demand austere cuts to Medicare and Social Security when it comes time to raising the debt limit in February.
And as the president himself has said and a lot of people in the business community say - it's not just Democrats - there's really no way to run a government to have this risk of default on your debt obligations looming over you at any moment.
RAZ: That's Noam Scheiber. He is a senior editor at The New Republic. Noam, thanks.
SCHEIBER: Thanks for having me.
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