WASHINGTON (CBSMiami) – President Barack Obama is set to meet with Congressional leaders at the White House Friday to try and reach a compromise to steer the country clear of the looming fiscal cliff.
According to TalkingPointsMemo.com, the meeting will include leaders of both houses of Congress and Vice-President Joe Biden will also be in attendance.
But, both sides seem to be edging closer to the reality that intransigence in the House of Representatives is likely to send the country over the fiscal cliff into a full-fledged austerity crisis starting January 1.
Senate Majority Leader Harry Reid said the House should consider the Senate passed proposal of extending current tax rates for all but those who make more than $250,000 a year. The House, led by Speaker John Boehner, has refused to even bring the bill to the floor of the House.
Speaker Boehner has tried to push the blame and responsibility onto the Senate after he failed to garner enough votes for his “Plan B” last week.
The House has previously passed legislation to avert the cliff which was anathema to Democrats in the Senate. The Senate didn’t bring the bill to a vote. Boehner said Senator should now try to amend that bill and send it back to the House after it’s approved in the Senate.
President Obama and Congressional Democrats have seen little reason to compromise more than they already have. Obama has backed off his original offers, given up on stimulus measures, and placed Medicare and Social Security on the table.
Republicans have steadfastly refused any deal that includes raising tax rates on anyone. Obama continues to insist that the richest Americans must see their tax rates revert to Clinton-era rates, which were in place during record growth in the country.
Obama made the same vow on the campaign trail and it helped propel him to a second term, but so far, Republicans have not given any ground on tax rates to the President.
President Obama may not have much reason to negotiate further. He’s polled in the mid-50’s for the last few weeks and a majority of voters have said the GOP will be more responsible if the nation plunges off the fiscal cliff next Tuesday.
For Republicans facing re-election next year in the House, partnering with President Obama will earn them a primary challenger from someone claiming to be more conservative. So, even going over the cliff is a better option from the standpoint of political self-interest.
Republicans can also see the country go over the cliff and then vote to cut taxes on most Americans in the 113th Congress and avoid having to ever vote for a tax increase on anyone. That would satisfy their anti-tax zealots and likely avoid a primary challenge.
For President Obama, he stands to gain either way from the fiscal cliff. If the country avoids the fiscal cliff, he will be lauded for compromising. If the country goes over the fiscal cliff, Obama will score most of what he sought originally.
After the tax rates reset, Obama could push for a massive tax cut for most Americans back to the Bush-era tax rates. He could set a level of $250,000 and below for the tax cut and dare Republicans to oppose the tax cuts.
But, that will only answer part of the fiscal cliff.
Both sides will have to act quickly to avert the sequestration, which will shave $1.2 trillion off of domestic spending over the next decade. It will impact the military and all other domestic spending with a few exceptions.
The fiscal cliff also includes an extension to the payroll tax cut and unemployment insurance. If those two elements aren’t addressed, the payroll tax will be a tax increase on a majority of working Americans and the loss of unemployment insurance could cripple consumer spending further.
Finally, neither side has talked about the looming debt ceiling crisis, but it’s likely to set in motion a similar problem to 2011’s debt ceiling debacle. The country will reach it’s debt ceiling on December 31 and Congress must approve raising the debt ceiling to keep the country from defaulting.
However, Republicans held the debt ceiling hostage in 2011 and refused to pass it unless massive spending cuts were agreed to by the Senate and the President. It was the first time in recent memory the debt ceiling wasn’t simply increased without much of a problem from Congress.
Obama said after his re-election he would not negotiate over the debt ceiling again. That sets up another battle that could hurt the nation’s credit rating in the world.
Both sides have just days to settle some of the issues before the nation goes over the cliff. Friday’s meeting may be the start of serious movement on a deal, or a publicity stunt to give both sides cover for not getting a deal done.