The Times West Virginian

December 21, 2012

Fiscal cliff: Hot rhetoric, ‘tiny’ numbers

By Alan Fram
Associated Press

WASHINGTON — In their “fiscal cliff” standoff, President Barack Obama wants to raise taxes by about $20 billion a year more than House Speaker John Boehner. The president wants the government to spend about that much more yearly than Boehner does, too.

That’s real money by most measures. Yet such numbers are barely noticeable compared to the $2.6 trillion the government is projected to collect next year, and to the $3.6 trillion it’s expected to spend.

As the “cliff” approaches — economy-shaking tax increases and spending cuts that start hitting in early January unless lawmakers act first — each side says the other isn’t being serious enough about trimming federal deficits. But their inability so far to strike a compromise underscores that their problem is more than arithmetic — it’s also about the difficult politics that Democrat Obama and Republican Boehner face when it comes to lining up votes.

Chastened by Obama’s re-election, Boehner has violated a quarter-century of Republican dogma by offering to raise taxes, including boosting income tax rates on earnings exceeding $1 million annually. Eager for a budget deal that would let him move on to other issues, Obama in turn would cut the growth of Social Security benefits, usually off-limits to Democrats. He also would impose tax increases on a broader swath of people than millionaires — those with incomes over $400,000. But that figure, too, is a retreat from what he campaigned on: the $200,000 income ceiling on individuals and $250,000 on couples.

That means both men have angered lawmakers and staunch supporters of their respective parties, just when the need to retain that support is crucial.

“When you walk into a room and represent a group and you have to give ground to get a deal, you have to stay in that room as long as you can and you have to walk out with blood on your brow,” said Joseph Minarik, research director for the Committee for Economic Development and a veteran of grueling budget talks as a former Clinton White House and House Democratic aide. “Otherwise, the people outside the room don’t believe you’ve fought hard for them.”

Economists say the tens of billions of dollars separating the president and speaker are relatively minuscule, especially when compared to the size of the U.S. economy, which exceeds $15 trillion a year.

“It’s not vanishingly small, but it is minor,” said Alan D. Viard, a tax scholar at the conservative American Enterprise Institute. “It certainly would be a disappointment if that minor of a gap would end up blocking an agreement.”

Even though Obama’s and Boehner’s dollar differences are small, one hindrance to a deal could be the symbolic political consequence of retreating on their numbers, even just by a little.