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

January 2, 2013 @ 9:34 pm


President Barack Obama waves as he gets off Air Force One upon his arrival at Joint Base Pearl Harbor-Hickam, Honolulu, Hawaii, Wednesday, Jan. 2, 2013. The president is back in Hawaii for vacation after a tense, end-of-the-new-year standoff with Congress over the fiscal cliff. (AP Photo/Carolyn Kaster) | Zoom
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)


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  • CH wrote...
    house republicans will take us off it . . . .
    November 8, 2012 3:14 pm
    if they don't .... do higher tax rates for upper-income earners.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • MittensRomney wrote...
    The problem I have with the fisco cliff...
    January 1, 2013 10:23 am
    if America falls off the fisco cliff, they will land in the bay itself, and then all the gays living there will be watching from the golden gate bridge as we all float out to sea...
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • when reality hits you wrote...
    The 747-400 is 231 feet long. If the fiscal cliff meant making a shorter 747-400, the company would have to make an airplane 1.6 inches shorter.
    January 1, 2013 11:19 am
    The military SHOULD reduce its spending. If We spend 51% of the GDP on Military we only use in the conflicts we manufacture, why cut care for the disabled to stop the cliff? For some people, those living in poverty are the real enemy.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • logical open mind wrote...
    where did u get the 51% of GDP figure?
    January 1, 2013 5:31 pm
    source please cause that number is quite wrong.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • longwayhome wrote...
    If I made $250,000 a yr.
    November 9, 2012 6:51 pm
    Even if I were a business owner, I would be willing to pay more in taxes to improve the economy. That's what the republicans don't get. Better economy, more revenue for business owners. Homer Simpson could figure that one out.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • maplefish wrote...
    Thats why your Stupid
    December 21, 2012 9:25 am
    If a Business owner has to give More to the government, that takes away revenue that the business owner could use to hire more employee's, open new facilitys and expand the businss. PAying MORE Taxes Takes that money away. BTW- Samll business already pay their FAIR SHARE of taxes. And $250,000 is NOT RICH. It's comfortable but its NOT RICH. Wrongway - You are part of the problem with this country. You're too stupid to understand how the economy works. You are a FOOL if you think the government has a revenue problem. It's a SPENDING PROBLEM!
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • MittensRomney wrote...
    Maplefish, exactly right, you are so brilliant!
    January 1, 2013 10:15 am
    Everyone knows that people who make 250,000 a year are actually worse off than those making 45K a year!
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • FormerMarineSgt wrote...
    @maplefish
    January 1, 2013 2:59 pm
    Your comment betrays something there Maplefish. And that is your hatred of anyone who disagrees with you. While you have the right to disagree with someone - showing it as a near hatred by telling them how stupid they are, and that they are part of the problem simply because they disagree with you is pretty extreme. This is one of the largest problems this country AND our right wing politicians have. They cannot abide that someone dares have a different opinion or plan, and they would rather damm them than try to cooperate.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • FormerMarineSgt wrote...
    Excuse me Maplefish. I left out one word.
    January 1, 2013 3:01 pm
    Excuse me Maplefish. I left out one word that signficantly changes what I meant. The sentence "And that is your hatred of anyone who disagrees with you." Should have had the word 'apparent' in it - I revise it as "And that is your apparent hatred of anyone who disagrees with you." I meant to convey that you come across that way - not that you actually hate.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • maplefish wrote...
    Sarg
    January 1, 2013 3:55 pm
    It's still a spending problem. & thank you, because I really don't hate anyone. However, I cannot understand why those on the Left buy into this "Tax the Rich" BS. Also, the Democrats have the Senate, they have NOT PASSED A BUDGET in over 1000 Days. It's not the Republicans that are pissing away my children's and their children's future. If you make $50K a year and spend $100K , eventually you are going to go bankrupt. Obama demo nixing succeful people while he spends & spends & spends is flat out disgraceful.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • FormerMarineSgt wrote...
    @maplefish
    January 2, 2013 5:40 am
    It's not just the dems that are pissing away your childrens future - the republicans are sharing in that golden shower. CONGRESS (both sides) have had nearly a year and half to get this done and they waited until the day AFTER the deadline and still only did 1/2 of the deal. They gave themselves 2 months to get the budget cuts done OR the sequestration budget cuts happen anyway. I'll agree that Congress is pathetic and the extremism is a large part of why. I don't agree with your assesment of Obama, but then you likely don't enirely agree with my assement of the Congressional Republicans...
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • HPD 5-0 wrote...
    "IF"...."fair"...
    December 31, 2012 9:54 am
    You libs crack me up....
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • logical open mind wrote...
    longway- u dont understand capitalism nor business. Companies typicaly have small profit margins,
    January 1, 2013 5:28 pm
    the extra will be passed on to the customer or taken out of employees benefits.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • sonnetswan wrote...
    Okay Homer
    January 2, 2013 5:38 am
    The point is that the government has spent so much and continues to spend at such rates that it makes no difference: a drop in an ocean.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • ratrustle wrote...
    Truly an idiot who just gets a paycheck!
    January 2, 2013 6:50 am
    As small business owners, my wife and I have 50 + employees. We're going to purchase health care for all of our employees this year at a cost of well over $150k. This sounds great and makes a lot of you feel really great about improving employee morale and benefits. At what cost? No company to work for? We already pay great wages. All of our operating costs have drastically increased in the past 3-4 years (fuel, raw goods, taxes) so much so -- what was a profitable business looks more like a jobs program. We can't raise our prices because no one will purchase our products at the prices necessary to now make a profit. Let's say our business is now taxed at a higher rate? Why should we work 16 hours a day so that we actually take home less than many of our employees who work for us? There are more business owners just like us out here than you think in this situation and our options are to close our doors, move our business to a more friendly business climate, or sell the business.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • CH wrote...
    Don't blink House Teapublicans . . . .
    November 10, 2012 5:37 am
    we want the house back in 2014.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • FormerMarineSgt wrote...
    CH Wrote -- Don't blink House Teapublicans . . . . we want the house back in 2014.
    January 1, 2013 3:03 pm
    It's extremely likely that the dems will get it back then. The sabatoge from the tea party extremists is NOT what Americans want. They are on a path to destroy the economy in thier attempt to damage the President, and Americans are seeing through the masquerade of 'care' that they are using.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • maplefish wrote...
    Sarg
    January 1, 2013 4:06 pm
    You are 1000% WRONG! The Tea Party & the Republicans are trying to stop Obama from destroying this country by spending us into oblivion. Taxing the rich is simply NOT going to fix this country's spending problem.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • FormerMarineSgt wrote...
    @maplefish
    January 2, 2013 5:50 am
    Dude, you are ignoring that Obama has repeatedly said that taxing the rich is only PART of his solution. He is clearly aware that spending must be cut. This 'fiscal cliff' is only step 1 of 2. the second step is to actually cut budgets - they gave themselves 2 months or the sequestration cuts happen anyway, so it's still on the table. And the Republicans aren't willing to cut defense spending or anything else that is thier 'pet project', so they aren't any better than the dems when it comes to spending. The Tea Party (in my opinion) is a joke. Demanding and refusing to negotiate.... They are a significant part of why we got down to the last minute to get just this little part of the fiscal cliff fixed. They are a very large part of why this congress is the MOST do-nothing congress in history and why this Congress has the some of the lowest approval ratings in history.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • Cigarillo wrote...
    Dam& those "Teapublicans"....
    January 1, 2013 8:34 pm
    Spending cuts are an OUTRAGE! Spending cuts will surely destroy the economy. Spending more than we take in is what drives the economy and will not impact the economy when we default. Putting the bulk of our spending into interest on our debt (otherwise known as "thin air") is GOOD for the economy and will generate good paying jobs for all of us, except those Mexicans I pay to hang wallboard in my basement. Screw those sick Tea Party monsters and their psychotic urge to keep us from plunging headlong into "fiscal restraint"!
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • maplefish wrote...
    Cigarillo
    January 2, 2013 12:23 am
    OK, now that was funny! Happy New Year!
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • Howdy wrote...
    11-13-12 'some dems want to drive over fiscal cliff, then bargain'
    November 13, 2012 3:38 pm
    That's like intentionally wrecking your car and reporting it stolen just so you can get a new one. Hey all of you Washingtonians that keep voting for Murray, are you paying attention?

    didn't think so

    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • sonnetswan wrote...
    The real battle
    January 2, 2013 5:43 am
    with these brainwashed leftists is going to be the 2nd ammendment. They cannot think logically, but repeat the misinformation broadcasted by the msm.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • longwayhome wrote...
    If you don't like Sen Murray
    November 13, 2012 6:28 pm
    Then you haven't lived here long and need to do some homework.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • maplefish wrote...
    Murray ?
    December 20, 2012 2:00 pm
    Stupidest most vapid woman in politics next to Nancy Polosi & Chris Gregiore....
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • SickofSeattleite wrote...
    @maplefish
    December 22, 2012 7:45 am
    and Harry Reid he's a woman too...
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • MittensRomney wrote...
    ..for a second there I thought I was going to hear the names Bachman and Palin.
    January 1, 2013 10:26 am
    Then I realized you meant IN politics, not just dancing around the edges like baboons.....by this I mean no disrespect to my two sweethearts, ahme!
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • 2112 wrote...
    Palin and Bachman
    January 1, 2013 7:06 pm
    Are dumber than door nails. But that doesn't make your argument any less than that of a blood sucking parasite. Sheesh. How about this, We all pay more taxes and accept even more in cuts to save this country? We are 16 trillion in debt due to BOTH parties. This will be our undoing.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • logical open mind wrote...
    what Murray is a good senator? get real
    January 1, 2013 5:31 pm
    what ru reading?
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • CH wrote...
    'some dems want to drive over fiscal cliff, then bargain' . . . .
    November 13, 2012 6:48 pm
    'the repubs are behind the wheel. Will they drive us over fiscal cliff? Bargain now or over we go'
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • CH wrote...
    Speaker Boner needs a trip to the . . . .
    November 29, 2012 5:44 am
    Betty Ford Center for treatment. How long has Boner been on a tequila bender?
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • CH wrote...
    Correction . . . .
    November 29, 2012 5:50 am
    House Speaker John Boneher Ohio. Had my spell check off. xkop is now awake. Awake v. , awoke , or awaked , awaked , or awoken , awaking , awakes . v.tr. To "rouse" from sleep; waken
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • It's me! Ha ha! wrote...
    Obsturctionist LIberals demand House Republicans cave on the Dear Leaders tax increases,
    November 29, 2012 3:40 pm
    and will not offer we Americans anything in return.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • HPD 5-0 wrote...
    Last week, the White House delivered to Capitol Hill...hundreds of billions of dollars in new spending...and enhancing the president's power to raise the national debt limit.
    December 2, 2012 2:14 pm
    So Owebama's and the Dim's "ideas". More spending ergo more national debt and more power to Barry to spend w/ no regard for the future. Just what I said would happen if he got re-elected. Idiots.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
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