Republicans, Democrats debate the fiscal cliff - Montgomery Alabama news.

Fiscal cliff: Partisan divide prevents deal

(RNN) – Taxes will increase for about 90 percent of the country. Defense and other spending will be cut by more than $100 billion. The country will almost certainly fall back into recession, and hundreds of thousands will lose their jobs.

The combination of spending cuts and expiring tax cuts known as the "fiscal cliff" could cause dire circumstances for the recovering U.S. economy, according to the Congressional Budget Office.

Publicly, Democrats and Republicans agree on the larger points: All are in favor of a deal that avoids most of the measures. But a bargain to avoid the fiscal cliff remains undone with only three weeks till the effects of the cliff begin.

In place of a real dialogue between the two sides, the American public has gotten a heavy dose of rhetoric.

"If the president doesn't agree with our approach, he has an obligation to put forward a plan that can pass both chambers of the Congress," House Speaker John Boehner said Tuesday. "Because right now Americans have to be scratching their heads wondering when is the president going to get serious?"

The negotiating checklist in recent years starts with opposing sides demanding everything they want, then speaking badly about the other's ideas and – eventually – reaching some kind of agreement. So far, they have the first two parts covered.

Boehner and President Barack Obama are leading the talks on behalf of their parties. Boehner called Obama's original plan a "La-La Land" offer on Dec. 3, while the president said the Republican's first counter was "still out of balance."

Obama also has hit the road, making campaign-style stops to rally public support for his strategy.

"What you need is a package that keeps taxes where they are for middle class families; we make some tough spending cuts on things that we don't need and then we ask the wealthiest Americans to pay a slightly higher tax rate," he said at an event in Redford, MI, on Monday.

The two have continued talking this week, with each reportedly making a second, revised offer.

The plans

Comprehensive details on the Obama plan presented Monday and the Boehner reply Tuesday have not been released. The Associated Press reported the president decreased the amount of new revenue requested, from $1.6 trillion to $1.4 trillion.

Obama's initial offer in late November – delivered to House Republicans by Treasury Secretary Tim Geithner – stayed nearly identical to the proposal he put forward in the fiscal year 2013 budget.

He requested the revenue increases from taxes in the next 10 years, $50 billion in infrastructure spending and an extension of the 2 percent reduction on the payroll tax. Also, he asked for a permanent increase in the federal debt ceiling, to prevent another crisis like the one during summer of 2011 that resulted in the U.S. credit rating being downgraded.

Obama put forth nearly $580 billion in cuts and reforms, with more than half coming from Medicare and Medicaid.

The House Republicans plan called for $800 billion in new revenue – through the closing of "special interest loopholes" and other deductions. They refused to agree to raising income tax rates.

On the cuts side, they called for reductions of $900 billion within 10 years in mandatory spending. That would include money-saving changes to Medicare like changing the qualifying age from 65 to 67 years old.

Another proposal to cut costs was a decrease in the rate of inflation, which would decrease Social Security and other government benefits over time.

The sticking point

There are several, but the most discussed is a tax hike for the top 2 percent of earners – people making more than $203,600 per year for single filers, $227,300 for head of household or $247,000 for families.

Obama has made it clear he would not back any deal without restoring the pre-2001 marginal tax rates for the top income brackets.

His proposal would keep the current cuts in place for everyone's yearly income up to those thresholds. The rate on money made from that amount to $398,350 would be 36 percent, a 3 percent increase.

The rate would go from 35 to 39.6 percent on any annual salary made in excess of that. Those changes would raise approximately $44 billion in revenue in 2013.

That plan passed the Democrat-majority Senate in a 51-48 vote in July. The Republican-led House also passed a bill in August by a 256-171 vote that would extend the lower tax rates for everyone.

The right has argued against raising taxes on anyone, claiming it could negatively affect the economy. Also, many congressional conservatives signed the Grover Norquist pledge to never vote to raise taxes. Norquist is the president of Americans for Tax Reform.

For months, Boehner has repeated a study by accounting firm Ernst and Young that stated the rate increase would kill about 710,000 jobs. However, stated the study makes assumptions on government spending counter to what the president has stated and tries to predict effects beyond 10 years.

Playing loose and fast with facts

Geithner and Boehner hit the Sunday talk show circuits to push their respective sides' blueprints. Not unlike any other public debate, there were a few missteps with the details.

According to

  • Geithner said the proposals for Medicare would not shift costs to seniors. However, the Obama plan would cost some seniors an additional $32.9 billion in fees and higher premiums across 10 years beginning in 2017.
  • Boehner said Obama only proposed $400 billion in "unspecified cuts." As previously stated, the deal has about $580 billion in specific reforms – although some would come through increased fees.

The biggest dispute has come down to whether the reductions in spending already agreed to should count toward Obama's "balanced approach."

The administration counts savings of about $2.5 trillion from the debt ceiling deal, the end of the Iraq and Afghanistan wars as part of its overall efforts, along with future savings in debt repayment. House Republicans said they believed the balance should be found in entirely new cuts, since those were already done or were happening anyway.

Progress has been made

Despite all of this, there have been some steps in the right direction.

The House Republicans offer of $800 billion from closing loopholes is the first proposal offering any type of revenue increase in fiscal cliff discussions. Previously, conservatives would only discuss additional government funding through measures they said would increase economic growth, thereby taking in more taxes.

From Democrats, Obama's initial offer changed little from the fiscal year budget proposal. But, he said he would be willing to compromise on some of the measures, as well as the difference in rate increases, provided that money was made up through loophole closings of equal value.

In addition, Rep. Tom Cole, R-OK, said Nov. 27 he would be in favor of retaining the tax cuts for the middle class now while fighting for upper class tax breaks later.

Perhaps the most hopeful message on the topic came from someone who has experience working with a House Speaker form the opposite party: former President Bill Clinton. The Sacramento Bee reported he described the ongoing fiscal cliff negotiations as "a Kabuki dance."

"They're sort of like two dogs that meet each other over a piece of meat," Clinton said. "They're sniffing each other out. They are moving toward a deal. That's what's going on."

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