Fiscal cliff talks turn into a game of chicken

With time running out on negotiations over ways to avert the fiscal cliff, Democrats and Republicans are engaging in a game of political chicken.

By The Fiscal Times Nov 30, 2012 5:40PM
By Eric PianinThe Fiscal Times logo

The critical negotiations over a way to avoid the fiscal cliff are fast turning into a game of chicken.

Shedding his optimistic disposition, House Speaker John Boehner, R-Ohio, summoned reporters Thursday afternoon to declare it was time that President Obama and the Democrats revealed how they intended to cut spending and slow the rate of growth of Medicare and other costly entitlements as part of a Grand Bargain of deficit reduction. “I’ve got to tell you, I’m disappointed in where we are and what has happened in the last couple of weeks,” Boehner said.

Far from seeking common ground to avert a year end calamity of automatic tax hikes and spending cuts that could trigger another recession, the Democrats and Republicans appear to be trying to escort each other over the fiscal cliff. Senior administration officials had a testy meeting yesterday with Boehner and other Republicans that further soured the negotiations, and Obama is hitting the road today for Philadelphia to try to rally voters to his side in the negotiations.

While both sides fear being blamed if a deal isn’t reached before the end of the year, a new poll from CNN/ORC shows that 45 percent of the public would blame congressional Republicans – even though the Democrats control the Senate – while just 34 percent would blame the president.

“Look, the White House clearly realizes that the longer they wait, the more pressure there’s going to be on the Republicans,” said Stan Collender, a budget analyst and expert. “So they’re not rushing to get anything done. And the White House learned from the negotiations over the debt ceiling in August 2011 not to negotiate with itself. So this is a definite change in tactics that seems to be frustrating Republicans to no end.”

There is general agreement that the government should commit to about $4 trillion in savings over the coming decade, which would be achieved through a combination of spending cuts, tax increases and reforms of the federal tax code and entitlement programs. But there is almost no unanimity on how to get there.

Obama’s road map would include $1.6 trillion of new tax revenue and roughly $350 billion to $400 billion of additional savings from Medicare and other health insurance programs. The rest of the savings  would largely be achieved by taking credit for the $2.1 trillion of long term savings agreed to in August 2011 as part of a deal to raise the federal debt ceiling by $2.1 trillion to its current $16.4 trillion level, according to Van Hollen. “The president’s plan has that combination of revenue and cuts,” he said. “Speaker Boehner keeps talking about revenues. We’ve never seen a proposal on revenues. Have you?”

Republicans have signaled that they might go along with $800 billion of additional revenue – the amount that Boehner and Obama discussed as part of their secret debt ceiling talks in 2011 – while insisting that the Democrats commit to far greater spending cuts.

The differences flared up yesterday after administration officials conferred behind closed doors with Boehner and Democratic congressional leaders on Capitol Hill. Treasury Secretary Timothy F. Geithner and White House congressional liaison Rob Nabors signaled to the Republicans that the president still intended to seek $1.6 trillion in new taxes over the coming decade, starting with an immediate increase in the rates for the wealthiest 2 percent of Americans, The Washington Post reported.

While the Republicans have indicated they might go along with half that amount of new revenue, they refuse to raise the top rates. Instead, they insist they could generate the revenue by capping the amount taxpayers can claim in deductions and overhauling and simplifying the tax code to make it more efficient, an assertion the Democrats don’t buy.

Moreover, the administration demanded that Congress relinquish control over federal debt levels and approve at least $50 billion in new spending to boost the economy next year as part of an agreement to avert the year-end fiscal cliff, according to the Post.

In return, the president offered to find $400 billion over 10-years in savings from federal health and retirement programs.  But those savings would be wiped out, the Republican aides said, by Obama’s proposal to extend a slew of expensive policies, including emergency unemployment benefits and a temporary payroll tax holiday that is now set to expire at the end of the year.

Republicans apparently viewed the offer as a slap in the face, and Boehner at his news conference sharply criticized Democrats for not outlining possible expenditure cuts. Republican leaders stipulated these reductions as part of a “grand bargain,” including additional tax revenues to shrink the deficit over the long term.

With only a few more weeks before the lame duck Congress runs out of time, some lawmakers said yesterday they were dismayed the negotiations aren’t further along. Sen. Jeff B. Sessions of Alabama, the ranking Republican on the Senate Budget Committee, said, “I can’t imagine the president of the United States at this late date isn’t willing to say what he thinks and what his vision for America is. He has not discussed the $16 trillion debt. He will not tell the American people they’re on an unsustainable path.”

Senate Finance Committee Chairman Max Baucus, D-Mont., said, “We’re going to have to get together. There isn’t a lot of time left. It’s negotiating time, it’s good faith time, it’s getting this done time, that’s number one. Because that’s what the American people want, the markets want some predictability and certainty. This is a no brainer. People have got to get together.”

Eric Pianin is the Washington Editor at The Fiscal Times. Subscribe to The Fiscal Times' FREE newsletter.

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228Comments
Nov 30, 2012 11:10PM
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If we are putting it all on the table,Why don't we start with all  lawmakers excessive benefits, lifetime healthcare, lifetime pensions these Cadillac plans payed with tax dollars have to be a big chunk of tax money  over their lifetimes. Not to mention salaries of $179,000 for nine days of work per month. Lets start there.
Nov 30, 2012 9:16PM
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Screw it, lets go off the cliff!
It raises revenues dramatically, and slashes spending on the military and entitlements just as drastically. 
Someone has to pay for the mess the Bush and Obama got us into. Why should it have to be our kids and grandkids. Lets tighten out belts and suck it up and get it done now.
Nov 30, 2012 10:27PM
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Quoting from another Forum.

 We will not truly be free until the last politician is strangled with the entrails of the last banker.

Nov 30, 2012 9:51PM
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This "hyped up fiscal cliff" comming at the end of December is important, but it is like a mosquito biting an elephants back compared to what is comming shortly, The U.S. dollar has been trusted as the worlds currency,  our dollar is the gold standard which allows us to print as much money as we want and not have to "pay the piper",  this will be comming to an end, Watch the bond market, which allows forgien countries to buy our debt. What is not being reported to the American people is that these countries are cutting way back on their purchases, because they know we are printing "worthless money" fresh off the presses, and if nobody buys our bonds the bond market will crash, but, but, a saviour has has swooped in and saved us,  the feds printing presses,  If the world wont buy our bonds, the U.S. will print fake money and buy them back ourselves which is happenning as we speak, Do your math and be prepared people
Nov 30, 2012 10:02PM
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Here,here I agree.Lets go off the cliff.The economy needs it,inherent value is way overblown and it is time for a major correction.What happened in 08 was peanuts.Suffering now?...You wait :)
Dec 1, 2012 12:32AM
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Look, government can cut spending but then raise the debt ceiling to borrow more money....where is the logic behind this?  Even if they balanced the budget, there is still a matter of 16 trillion dollars of national debt that has to be paid back with interest.  Our government will always spend more than it earns in tax revenue because it can't control the massive spending that is out of control.

Dec 1, 2012 8:46AM
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I like how all the pundits refer to the fiscal cliff causing a new recession ! The old one never left !! Let the deadline come and go , nothing will change except Wall Street ! Do we really care ?
Dec 1, 2012 10:05AM
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Government Pensions are what needs to be addressed,local through federal.They should work to the same retirement age as the rest of us unless they have the means to retire earlier.This would save TRILLIONS!
Dec 1, 2012 9:08AM
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We would already be Greece if not for the dollar being the Worlds reserve currency.

Dec 1, 2012 8:25AM
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This is what you get when you put some guy that never had a real job in the real world that's nothing but a smooth talker first 4 yr's of bull and a bunch of fools to back him up now another 4 yr's of giving away the country to blood suckers, IF IT WAS ME I WOULD CUT EVERY THING, BIG BIRD WOULD HAVE TO WORK FOR SEED NOT 375,OOO A YR

Dec 1, 2012 10:12AM
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It's not a game of chicken, it's a game of political posturing, and the Dems are running circles around the Repubs.  Nobody in Washington is truly interested in doing what's best for the people, they are only interested in acquiring and maintaining power.  So you have a bunch of inept Repubs who are clearly incompetent at playing politics as evidenced by the fact that every time they turn around, they get their a$$es handed to them by the Dems, to the point that they look like a middle school basketball team taking on the Lakers.

And on the other side, truth be told, the Dems WANT us to go off the fiscal cliff, because they get most of what they want, namely higher taxes on EVERYBODY and defense cuts.  At the same time, with the cooperation of MSM, they'll be able to pretend they didn't want to go off the cliff, and lay the blame for all of it firmly at the feet of the House Repubs.  Howard Dean said it himself on MSNBC on Thurs night...

"I make the argument that going off the -- as you call it the curb, I call it the slope, the press calls it the cliff, is actually the best deal progressive Democrats are going to get. And here's why. One, we get the Clinton tax rates on everybody. Will it cause a problem? Yes. There will be a short recession, and it will be painful. But two, we get defense cuts. Republicans are never going to agree to that. And three, there are some human services cuts, which we're not going to like. But it's the least possible damage."

"So, I think the fiscal curb, as you call it, is the best deal that progressive Democrats are going to get. And I think it's the best deal in the long run, not the short run."

Dec 1, 2012 3:11AM
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The cliff is what Obama wanted all along. Big tax increase he can blame on repulicans. He is going on vacation in Maui from the 17th of Dec. to Jan. 6th and let his media machine atack the repulicans. while he does nothing but golf and check out paradise.
Dec 1, 2012 9:17AM
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This President wants desperately to be a Dictator.
This Congress is only slightly less arrogant.

Not a promising combination...........
Dec 1, 2012 12:24PM
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Who cares? Go "Over the cliff". It doesn't matter. At least we will have a baseline number for companies to budget from. Currently, there is not one. The companies don't know what to budget for.

All we are going to do is cause another rating cut because it will be shown we can not balance a budget.

 

Nov 30, 2012 10:36PM
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I wonder if the Hostess bakers will get 99 weeks unemployment?
Dec 1, 2012 12:22PM
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THESE AZZHOLES IN WASHINGTON NEED GROW THE FACK UP NOW
Dec 1, 2012 10:33AM
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It's time everyone realized that both parties are the problem. Until we decide to send a real message to our politicians and not reelect any of them nothing will change. The role of public servants is to serve the public not their parties or the special interests that paid for their election. We can and need to impose our own term limits. All it would take is a couple of election cycles where no one was
reelected and the cycle of abuse would be broken. 
Nov 30, 2012 10:18PM
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I don't remember the name of this movie, but a guy would challenge all the cool guys to play chicken at night, at the top of the cliff. He always won. No one could figure it out.  It turns out that the guy had a big mirror, he would put across the road and the other guy was playing chicken with his own headlights, and would turn and go off the cliff. So when you play chicken make sure you look for mirrors. LOL
Nov 30, 2012 8:54PM
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Frankly, I'd like to hear from the states whose elected Official in Congress signed the Norquist Pledge and won't increase taxes on the rich. If the majority thinks differently from their deadbeat Republican stonewaller, the impediment needs to go so adults can fashion repairs, remedies, reforms and public restitution for the adverse political pollution and confusion.
Nov 30, 2012 8:58PM
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I say give him everything he wants when it all fails then it will truely be on him.
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