Fiscal Cliff Talks Show Divided Timeline and Other Issues

November 20, 2012 11:30 PM
 

via a special arrangement with Informa Economics, Inc.

Second meeting expected  next week


NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.


The upbeat assessments given by congressional leaders from both parties last Friday have given way to what is a clearly different approaches taken by both parties and President Obama regarding the timeline of a hoped-for agreement, including major differences in the timing and the scope of the solutions.

Most concede a two-step process is likely to replace budget cuts and tax increases set for 2013 with enforced spending cuts and a longer-term plan to increase revenue via tax reform.

The two sides have sharp differences over how much can be done in a lame-duck session of Congress and what should be pushed off into 2013.

The fate of whether the new farm bill will be completed this calendar year will likely be known shortly after the sides meet for their second meeting sometime next week -- staff aides have been meeting this week to work on various proposals.

Democrats think a deficit reduction "down payment" worth up to 1.6 trillion over 10 years is possible in the lame duck. They propose raising $800 billion by making individuals earning more than $200,000 and couples earning more than $250,000 pay higher tax rates on their ordinary and investment income above that threshold. Most Republicans would prefer to take more modest steps.

Republicans oppose any increase in income tax rates, but they are open to the general idea of a down payment and say they are open to raising revenue by scaling back tax preferences for high-income earners if Democrats agree to what they would consider substantive and enforceable changes that would reduce the growth of Medicare and Medicaid.

There appears to be major differences among some Democratic lawmakers regarding any restructuring of Medicare and Medicaid – a development that is leading to some uncertainty in putting proposals down on paper for next week's meeting among congressional leaders and President Obama and other White House officials.

Democrats want more details from Republicans on how they could reduce the deficit by a similar amount through entitlement changes and spending cuts. But Republicans to date have not accepted the up to $1.6 trillion marker unveiled by President Obama – most believe that final tally will be closer to $1 trillion.

While some observers say Republicans have recently offered to raise tax revenue via scaling back tax breaks, that option was put on the table last summer by House Speaker John Boehner (R-Ohio), only to have the apparent agreement between him and President Obama fall apart when the president upped the amount of revenue needed from the then $800 billion level to $1.2 trillion.

Democrats are not giving up on trying to get the Republicans to agree on a tax rate increase – even if it a small one. One idea is to Another idea put forward by Democrats is that Republicans eventually could agree to raise the top income tax rate by a percentage point or two above 35 percent.

Republican officials have stressed the need for enforceable spending cuts, with Boehner said to favor the creation of "simple mechanisms" that would kick in later next year to achieve the revenue and spending goals if Congress does not pass a larger plan. Boehner has asked the Joint Committee on Taxation to estimate the revenue that would be raised from a proposal that he has submitted that is similar to a plan Sen. Patrick Toomey (R-Pa. ) offered during deficit reduction discussions last year – including raising $250 billion in conventionally scored revenue by limiting deductions for taxpayers in the upper two income brackets.


 

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.


 


 

 

 

 

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