As I’ve pointed out this week, the resolution of the fiscal cliff showdown was only the first of a series of battles over taxes and spending that will shape the first year of President Obama’s second term.
That was guaranteed when for the second time, the president and House Speaker John Boehner couldn’t agree on a “grand bargain” for a long-term fix of the debt problem.
Instead, Senate Minority Leader Mitch McConnell and Vice-President Joe Biden struck a deal that raised taxes on top earners less than the president wanted to, but more than Republicans have done in a generation.
This relatively modest bill hiked capital gains and dividend taxes a bit, preserved a low estate tax and kicked the can down the road on automatic spending cuts scheduled to kick in on January 1st. It will produce an estimated $620 billion in new revenue over the next decade, far short of the president’s initial $1.6 trillion request, negotiated down to $1.3 trillion.
And that’s where the next standoff will be: The president wants more revenue, i.e., still higher taxes through fewer deductions for high income Americans and corporations. After the fiscal cliff deal had passed the House, he said:
Cutting spending has to go hand in hand with further reforms to our tax code so that the wealthiest corporations and individuals can’t take advantage of loopholes and deductions that aren’t available to most Americans.
Not so fast, say Republican leaders. “As far as we’re concerned, the tax issue is off the table,” a Boehner aide told The Hill.
And in an op-ed Thursday in Yahoo News, Sen. McConnell wrote:
…The moment that [President Obama] and virtually every elected Democrat in Washington signed off on the terms of the current arrangement, it was the last word on taxes. That debate is over. Now the conversation turns to cutting spending… And the upcoming debate on the debt limit is the perfect time to have that discussion.
Leader McConnell laid down two markers in that one paragraph: He would not agree to more revenue in the next round of negotiations, and he threatened to use the debt limit the same way Republicans did in 2011—extract spending cuts by holding the economy hostage, a tactic he explicitly endorsed at the time.
Meanwhile, another Senate Republican leader, Sen. Jon Cornyn of Texas, stated in an op-ed Friday:
It may be necessary to partially shut down the government in order to secure the long-term fiscal well being of our country, rather than plod along the path of Greece, Italy and Spain.
Them’s fighting words, especially since the president has said repeatedly he won’t negotiate with the debt limit hanging over his head.
He doesn’t have a negotiating partner in the House, anyway, as Boehner has told his caucus the days of one-on-one talks with the president are over.
So, with positions hardening, the president may be hunkering down for a big fight. He very quietly played a round of golf with former President Bill Clinton in December and no doubt got some tips on how to handle a government shutdown from a president who’s been through it.
Both sides are drawing lines in the sand. Let’s hope they’re keeping back channels open, because otherwise the dysfunction in Washington is going to get worse before it gets better.