Fiscal Cliff Notes for Dec. 6, 2012
25 days to the fiscal cliff
Still no fiscal cliff deal....(but did you expect one so soon?)
The GOP House leaders sent members home on Wednesday, since in their view nothing much was going on... meanwhile President Barack Obama told the Business Roundtable on Wednesday the GOP is not going to use the debt ceiling to hold him hostage again...Obama and House Speaker John Boehner (R-Ohio) also talked over the phone.
Obama will head to Northern VIrginia to visit a middle class family to dramatize the impact on middle class families of letting tax breaks expire Dec. 31. To that end, the White House is generating state-specific impact studies, including for Illinois.
WHITE HOUSE RELEASES FISCAL CLIFF ILLINOIS IMPACT OVERVIEW
Read the PDF right Middle_Class_Report_-_Illinois.pdf.pdf
RUMBLINGS OF A DEAL
There are some Republicans urging colleagues to drop opposition to Obama's insistence on letting tax rates rise for top earners. For an overview, click to the Washington Post story HERE.
WHAT OBAMA TOLD THE BUSINESS ROUNDTABLE ABOUT THE FISCAL CLIFF
Now, the question I think on the minds of a lot of you is how do you get there -- because I know that, speaking to many of you privately, you agree with this approach. I've been struck by the number of CEOs who said, we're willing to pay slightly higher taxes if it means that we've got the kind of certainty and stability over the long term that allows us to invest and hire with confidence. So most of the folks in this room I think are onboard for a balanced plan.
The problem that we had up until fairly recently -- and this was extensively debated during the campaign -- was the belief that either, A, we could balance our budgets entirely on spending cuts, or a variation that has emerged is, is that we can do so while still lowering rates simply by closing loopholes and deductions. And you've heard from my team, but let me just repeat, we don't have any objection to tax reform, tax simplification, closing loopholes, closing deductions. But there is a bottom-line amount of revenue that is required in order for us to get a real, meaningful deficit reduction plan that hits the numbers that are required for us to stabilize our debt and deficits. And all the math that we've done -- and we analyzed this stuff pretty carefully -- shows that it is not possible for us to raise the amount of revenue that's required for a balanced package if all you are relying on is closing deductions and loopholes.
Let me amend that. It is possible to do, theoretically; it is not possible or wise to do as a practical matter. And the reason is, is that in order for us to raise the amount of revenue that's needed just by closing deductions and loopholes for high earners, we'd have to, for example, eliminate or severely cap the charitable deduction. And folks in this room, you guys are not only CEOs -- I can't imagine there's a person here who doesn't sit on a number of non-for-profit boards, university boards, hospital boards. In your respective communities, you are supporting an entire infrastructure that is the glue that holds our communities together. So the notion that somehow we're going to just eliminate charitable deductions is unlikely.
What that means is, is that any formula that says we can't increase tax rates probably only yields about $300-$400 billion, realistically. And that's well short of the amount of revenue that's needed for a balanced package.
So what we've said instead is let's allow higher rates to go up for the top 2 percent -- that includes all of you, yes, but not in any way that's going to affect your spending, your lifestyles, or the economy in any significant way; let's make sure that 98 percent of Americans don't see a single dime in tax increases next year, 97 percent of small businesses don't see a single dime in tax increases next year -- and by doing that alone we raise almost a trillion dollars without any adverse effects on the economy.
Let's combine that, then, with some additional spending cuts and some long-term entitlement reform that can get us to a number close to $4 trillion, which stabilizes our debt and our deficits relative to GDP for at least a decade, perhaps more.
That's our plan. That's what we've presented. The holdup right now is that Speaker Boehner took a position I think the day after the campaign that said we're willing to bring in revenue but we're not willing to increase rates. And I just explained to you why we don't think that works. We're not trying to -- we're not insisting on rates just out of spite or out of any kind of partisan bickering, but rather because we need to raise a certain amount of revenue.
McCONNELL ACCUSES OBAMA OF "POWER GRAB' ON THURSDAY MORNING
From the Senate floor, here is what Senate Minority Leader Mitch McConnell (R-Ky.) plans to say:
"Yesterday afternoon, I came to floor and offered President Obama's proposal on the fiscal cliff to show that neither he, nor Democrats in Congress, are acting in good faith in these negotiations.
"With just a few weeks to go before a potentially devastating and entirely avoidable blow to the economy, the President proposed a plan that the members of his own party won't even vote for.
"So I think it's safe to say at this point that the President isn't interested in a balanced agreement. He's not particularly interested in avoiding the fiscal cliff. And he's clearly not interested in cutting spending.
"What the President's really interested in, as we all learned yesterday, is getting as much taxpayer money as he can -- first by raising taxes on small businesses that he thinks make too much money, and then on everybody else-- not so he can lower the debt or the deficit, but so he can spend to his heart's content.
"For months, the President has been saying all he wants is to raise taxes on the top two percent so he can tackle the debt and the deficit. Yesterday, he finally revealed that's not really his true intent. By demanding the power to raise the debt limit whenever he wants by as much as he wants, he showed what he's really after is assuming unprecedented power to spend taxpayer dollars without any limit.
"This isn't about getting a handle on deficits or debt for him. It's about spending even more than he already is. Why else would he demand the power to raise the debt limit on his own?
"And by the way, why on earth would we even consider giving a President who's brought us 4 years of trillion dollar deficits unchecked authority to borrow - he's the last person who should have limitless borrowing power.
"Look: the only way we ever cut spending around here is by using the debate over the debt limit to do it. Now the President wants to remove that spur to cut altogether. It gets in the way of his spending plans.
"I assure you: it's not going to happen. The American people want Washington to get spending under control. And the debt limit is the best tool we have to make the President take that demand seriously.
"The American people want us to fight to cut spending. It's a fight they deserve. We're happy to have it."