Cliff averted, it's on to the next fiscal crisis

January 2, 2013 @ 9:34 pm


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Associated Press

WASHINGTON (AP) - Onward to the next fiscal crisis. Actually, several of them, potentially. The New Year's Day deal averting the "fiscal cliff" lays the groundwork for more combustible struggles in Washington over taxes, spending and debt in the next few months.

President Barack Obama's victory on taxes this week was the second, grudging round of piecemeal successes in as many years in chipping away at the nation's mountainous deficits. Despite the length and intensity of the debate, the deal to raise the top income tax rate on families earning over $450,000 a year _ about 1 percent of households _ and including only $12 billion in spending cuts turned out to be a relatively easy vote for many. This was particularly so because the alternative was to raise taxes on everyone.

But in banking $620 billion in higher taxes over the coming decade from wealthier earners, Obama and his Republican rivals have barely touched deficits still expected to be in the $650 billion range by the end of his second term. And those back-of-the-envelope calculations assume policymakers can find more than $1 trillion over 10 years to replace automatic across-the-board spending cuts known as a sequester.

"They didn't do any of the tough stuff," said Erskine Bowles, chairman of Obama's 2010 deficit commission. "We've taken two steps now, but those two steps combined aren't enough to put our fiscal house in order."

In 2011, the government adopted tighter caps on day-to-day operating budgets of the Pentagon and other cabinet agencies to save $1.1 trillion over 10 years.

The measure passed Tuesday and signed Wednesday by Obama prevents middle-class taxes from going up while raising rates on higher incomes. It also blocks severe across-the-board spending cuts for two months, extends unemployment benefits for the long-term jobless for a year, stops a 27 percent cut in Medicare fees paid to doctors and prevents a possible doubling of milk prices.

The alternative was going over the cliff, an economy-punching half-trillion-dollar combination of sweeping tax increases and spending cuts. Despite the deal, the government partially went over the brink anyway with the expiration of a two-year cut in Social Security payroll taxes of two percentage points.

Action inside a dysfunctional Washington now only comes with binding deadlines. So, naturally, this week's hard-fought bargain sets up another crisis in two months, when painful across-the-board spending cuts to the Pentagon and domestic programs are set to kick in and the government runs out of the ability to juggle its $16.4 trillion debt without having to borrow more money.

Unless Congress increases or allows Obama to increase that borrowing cap, the government risks a first-ever default on U.S. obligations. Republicans will use this as an opportunity to leverage more spending cuts from Obama, just like they did in the summer of 2011.

House Speaker John Boehner, R-Ohio, vows that any increase in the debt limit _ which needs to be enacted by Congress by the end of February or sometime in March _ must be accompanied by an equal amount in cuts to federal spending. That puts him on yet another collision course with Obama, who has vowed anew that he won't let haggling over spending cuts complicate the debate over the debt limit.

The cliff compromise represented the first time since 1990 that Republicans condoned a tax increase. That has whipped up a fury among tea party conservatives and increased the pressure on Boehner to adopt a hard line in coming confrontations over the borrowing cap and the spending cuts that won only a two-month reprieve in this weeks' deal.

Put simply, House Republicans are demanding new spending cuts _ possibly through changes in Social Security and Medicare benefit formulas _ as a scalp, and they're dead set against raising more revenues through anything less than an overhaul of the tax code now that Obama has won higher taxes on the wealthy.

"Now the focus turns to spending," Boehner said after Tuesday's vote, promising that future budget battles will center on "significant spending cuts and reforms to the entitlement programs that are driving our country deeper and deeper into debt."

Obama is just as adamant on the other side, saying higher revenues have to be part of any formula for further diverting the automatic spending cuts.

While conservative activist Grover Norquist gave Republicans a pass on violating his anti-tax pledge with this week's vote, he and other forces on the right won't be so forgiving on any future effort to increase revenues.

The refusal of Republicans to consider additional new taxes is sure to stir up resistance among Democrats when they're asked to consider politically painful cuts to so-called entitlement programs like Medicare. Democratic protests led Obama and Boehner to take a proposal to increase the Medicare eligibility age off the table in the recent round of talks.

The upshot? More scorched-earth politics on the budget will probably dominate the initial few months of Obama's second term, when the president would prefer to focus on legacy accomplishments like fixing the immigration problem and implementing his overhaul of health care.

The relationship between Boehner and Obama has never been especially close and seemed to have suffered a setback last month after the speaker withdrew from negotiations on a broader deficit deal. The two get along personally, but politically, a series of collapsed negotiations has bred mistrust. The White House has the view that Boehner cannot deliver while the speaker is frustrated that matters brought up in his talks with the president are not followed through by White House staff.

And on the debt limit, Boehner and Obama at this point are simply talking past each other.

"While I will negotiate over many things, I will not have another debate with this Congress over whether or not they should pay the bills that they've already racked up through the laws that they passed," Obama said after the deal was approved.

Said Boehner spokesman Michael Steel: "The speaker's position is clear. Any increase in the debt limit must be matched by spending cuts or reforms that exceed the increase."


(Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)
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Comments (190)


  • Add A Comment

  • Frogsplash wrote...
    Odd thing with Plan B is
    December 20, 2012 12:28 pm
    Everyone, every income level except those earning between $200K - $1 million see their taxes go UP. Lower income, middle income, and the over $1 million will pay MORE in taxes. Oddly those in the $200K - 1 million range actually will pay less. I am not at all saying Plan B is a bad plan, in fact, I think it's pretty good, but it should be tweaked a bit more.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • It's me! Ha ha! wrote...
    Reed threatening to kill any bill from the house!
    December 20, 2012 1:51 pm
    The Dear Leader or in this case the White House threatening to veto anything that does not include raising taxes on the so called "Rich people"! Obama will let taxes increase on everyone simply as revenge!
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • cigarfan wrote...
    @Lord Ha ha!
    December 20, 2012 3:40 pm
    Quit crying (unless you make over a quarter of million per year.)
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • HLC wrote...
    cigarfan?
    December 20, 2012 2:12 pm
    Have you read the Obozo book? Have an adult read it to you real slow and you may by some freak of nature get a clue of what the Fool In Charge is trying to do.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • HikerACE wrote...
    HLC
    December 20, 2012 3:42 pm
    I presume you don't really expect an intelligent response from somebody mesmerized by the left wing media do you?
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • cigarfan wrote...
    @HLC
    December 20, 2012 3:44 pm
    I'm not a Democrat... Why don't you explain his ideas or claims? (most right wing conservatives don't explain)..... instead of name calling?
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • Cigarillo wrote...
    Cig-in-da-hoo-hah
    January 1, 2013 8:52 pm
    How do we know "Cigarfan" is not some sort of code talk for "Big Time Democrat" after the Clinton/Lewinsky tryst (and wouldn't a cigar hurt like a mo-fo down there?) ?
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • CH wrote...
    * House GOP puts off vote on 'Plan B' . . . .
    December 20, 2012 4:39 pm
    who will be the new House leader? lol could not happen to a bigger fool. Lets just call him the fool on the hill, right munchkins?
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • CH wrote...
    Confronted with a revolt among the rank and file, House Republicans . . . .
    December 20, 2012 5:28 pm
    hope they bring their guns to the party.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • CupofJoe wrote...
    I'm ready for the cliff now..
    December 20, 2012 6:05 pm
    Let's get on with it already. The Driver in Chief never intended a compromise to happen. At least he's got some conviction in his loony ideas for the country. Which is more than I can say for his weak minded disciples. Those that are self reliant will find a way to get by. Those with their hand out will default to a mob mentality. All right, let's see...guns, check..ammo, check..food/water, check...country music, check..Fox news, check..I think I'm good to go. God Bless the troops!
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • CH wrote...
    had to pass this along . . . .
    December 20, 2012 5:49 pm
    Now that the Boehner's nuts are in the clothes wringer, I hope that Nancy raffles-off the opportunity to give the crank its first full turn and gives the money to charity. Democracy at work!
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • wsualumn wrote...
    The Republican party...
    December 20, 2012 5:58 pm
    Continues to self implode. They will somehow try to continue blaming Obama, while the majority of the public wants nothing to do with The GOP. Keep up the good work and become more and more irrelevant.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • CH wrote...
    The Christmas story starring House Speaker Rep. John Bonehner . . . .
    December 20, 2012 6:11 pm
    he get nailed to the cross by his teapublican circus clowns. Johnny is going to hit the bottle hard tonight.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • maplefish wrote...
    Off the cliff we go
    December 20, 2012 6:44 pm
    Anybody who thinks that this country can continue to spend 1.5 $TRILLION more tax dollars EVERY YEAR than it Brings in is a complete and utter moron. Get ready for not only the biggest tax increase in history on everyone and the Obama care tax and you fools have pretty much given your selves over to the government. Nicely played you usefull idiots. Just wait til all the money runs out. Then what? Oh well. You get the government you derseve. Merry Chritmas .
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • wsualumn wrote...
    Maple
    December 20, 2012 7:12 pm
    Thank God you come to the realization that The GOP isn't faultless. Bush tax cuts and increased spending leads to huge deficits. Top economists say raise taxes and cut spending. The problem is the GOP refuses to raise any taxes. In fact, they want even more tax cuts. Grover Norquist is a major problem not for just your party, but for this country. Look at what The Ryan Budget Plan was going to do: nothing as far as reducing the deficit. Obama's plan calls for more deficit reduction than Boehner's Plan. Most of the public can figure out who the real idiots are and your party is going to be toast.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • maplefish wrote...
    WRONG
    December 21, 2012 1:21 pm
    Obama's Plan doesnt even cover cutting into the INTEREST on the Debt. We'll see and as I've said before, I'm fiscally Conservative and Socialy Liberal. I have NEVER, EVER claimed the GOP to be faultless. But Class WarFAre and demonizing successfull people is unforgivable! It's digraceful and you are a sheep if you actually believe that it's not a revenue problem. It is a SPENDING PROBLEM. If you make $100K a year and spend $160K a year, eventually you will go bankrupt. That is exactly where this country is going unless SOMEOBODY stops the Democrats from SPENDING US INTO OBLIVION!!!Do the Math. Surely this makes some sense to you WSU?
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • longwayhome wrote...
    Cutting into.....
    December 20, 2012 6:52 pm
    Boner's drinking schedule! No wonder nothing gets done! He's an alcoholic, at the helm of the worst run party in centuries. Hang in there bonehead, after 2014 you can drink yourself into a coma by 9:00 a.m. if you want, instead of waiting until noon like you do now.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • C"mon Man wrote...
    Free stuff
    December 20, 2012 7:12 pm
    For the first time government has accepted the notion to saddle our kids and grand kids with massive debt. Do not give me this :"two wars" diatribe, Sens, Kerry,Clinton,Edwards and others signed on to fund them. The hated war criminal W could have proposed to invade mars, but congress would have to write the check(s). I do not blame our current President, I do blame the voters for empowering him to carry out the ideal that his mentor ,Sal Alwinsky proposed. I searched that fact myself, and was met by a virus threat for my curiosity.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • wsualumn wrote...
    C'Mon
    December 20, 2012 8:22 pm
    For the first time? Are you serious? This thing has been going on for some time. Have you ever factored in not only Bush wars, but his expansion of government after 9/11 with Homeland security and The Patriot Act? How were those paid for? he created many new government programs without any payment plan. He cut taxes and proposed many programs that congress approved. A sane person would say that we have to figure out how to pay for these programs. These programs are still intact and some people refuse to acknowledge that we have to raise some taxes to deal with these expenditures.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • maplefish wrote...
    WSU
    December 21, 2012 1:20 pm
    Do you think you'll EVER stop blaming BUSH? I used to laugh at My daughter when she would blame her little bother for everything. You sound exactly like my daughter when she was 6 years old...GROW UP. This is Obama's mess. And aas usaula he's leading from behind.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • maplefish wrote...
    WSU
    December 21, 2012 1:26 pm
    Still waiting for your rebuttal on the HYPOCRITE OBAMA VIDEO....???? The guy is a total Fraud. Truth hurts don't it....
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • wsualumn wrote...
    Maple
    December 21, 2012 10:52 pm
    Couldn't respond when you wanted because I was at work. Yes, even liberals work. I am amazed that you seem to think that past policy has nothing to do with this and Obama owns it all. I wouldn't expect much different though from a RWNJ such as your self. Obama is a fraud? Can you tell me how? What was your take on the guy that you voted for not ONCE, but TWICE who claimed the following: "I am a uniter, not a divider." "We will be welcomed as liberators by The Iraqi people." "The Iraq War will be paid for by the Iraqi oil revenues." "I don't believe in big government getting involved in personal matters(Terry Schivo)." "I am a fiscal conservative." Who are you referring to when you talk about frauds Maple? Bush takes the cake in that department.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
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