Obama to Leave Hawaii Early for Fiscal Cliff Work on Thursday

December 26, 2012 03:49 AM
 

via a special arrangement with Informa Economics, Inc.

Legislators await Senate Democratic leader's plan, but eyes are also on House Speaker Boehner


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


President Obama will return to Washington on Thursday, cutting his Christmas vacation in Hawaii short, and will be in place on Thursday to talk to Senate Democratic leaders about the next step regarding fiscal cliff issues.

The White House said Tuesday that the president would leave Wednesday night. His family, however, will stay behind in Hawaii. Obama is scheduled to leave Hawaii at 10 p.m. local time Wednesday, arriving in Washington by midday Thursday.

While the Senate will return on Thursday, House lawmakers have yet to receive the traditional 48-hour notice that they are needed back in Washington. "We will take a look at whatever Senate Democrats produce," said a spokesman for House Speaker John Boehner (R-Ohio).

Obama late last week called for a scaled-back approach to avoid tax increases on 98 percent of American taxpayers – lawmakers could pass a measure that extends current tax rates on the first $250,000 of household income, as Democrats have endorsed. The president did not detail what would be in the coming Democratic-pushed plan, but possibilities include unemployment benefits for 2 million Americans, and at least a six-month plan to avoid automatic budget cuts that will go into effect if Congress and the White House cannot come up with another plan.

Senate Majority Leader Harry Reid (D-Nev.) is reportedly working on a fiscal cliff package, but Senate Republican leader, Mitch McConnell of Kentucky, has given no indication that his members would not seek to block a deal that includes tax increases.

However, the big hurdle is the Republican-led House, where a bloc of conservatives has ruled out any tax increases whatsoever. "If we get down to the end of this year and the only choice we have is to save taxes going up on the middle class, then I would support that," Republican Sen. Johnny Isakson of Georgia said during an appearance on ABC News' "This Week" over the weekend.

Some Senate Republicans, like Sen. Lindsey Graham of South Carolina, say they would be willing to vote for higher taxes on top earners, as Democrats demand. "I would vote for revenues, including tax rate hikes, even though I do not like them, to save the country from becoming [like] Greece," he said. Graham spoke on NBC’s Meet the Press program.  Meanwhile, some Democratic Senators, like Amy Klobuchar of Minnesota, advocate a large-scale deal that addresses taxes as well as federal spending, including reforms to costly programs that provide health care and other benefits to retirees. "I would love to see a bigger deal.  I would like nothing more, and there are always miracles," she said. "It is Christmas."

Absent a fiscal cliff accord by early January, the combined $500 billion in tax increases and spending cuts are set to begin. Those cuts were triggered by the failure of a congressional "Super Committee" to identify an alternative deficit-reduction deal.

A possible package will likely surface by the end of the week, congressional aides signal. But any package will likely be a minimum and will not include some items that Obama and House Speaker John Boehner (R-Ohio) talked about before their negotiations faltered.

If not reversed or altered, they would likely send the economy into recession next year, the Congressional Budget Office said earlier this year.

Other fiscal cliff issues besides expiring tax cuts and unemployment benefits include the $100 billion in spending cuts, with half hitting defense and half affecting other federal programs, a scheduled increase in the payroll-tax rate (which would leave 160 million workers with smaller paychecks), estate tax issues, and the need to prevent the alternative minimum tax, known as the AMT, from hitting an additional 30 million households for the 2012 tax year. Regarding estate taxes, if the matter is not resolved, gift and estate tax rates are slated to soar to 55 percent for anything worth $1 million or more next year -- up from the current 35 percent tax and exemption of $5.12 million (double for spouse). President Obama and some other Democrats are pushing a $3.5 million exemption and a tax rate of 45 percent. 

Some observers believe fiscal cliff discussions could linger into early January, with lawmakers and Obama revisiting the issues after tax rates have increased. Congress could then find it easier to lower tax rates for some households and address the spending cuts and other components, such as the AMT and jobless benefits.

By early March there will be a need to increase the federal debt limit from its current level of about $16.4 trillion if this is not included in any cliff deal, as most expect it will not be. Republicans have said they are eager to use debt-ceiling approval again to win concessions that are hard to get via the current fiscal cliff talks.

Only 50 percent of Americans think it is likely a deal will be struck, while 48 percent think it is unlikely, according to a Gallup poll conducted Dec. 21 and 22. The same poll conducted Dec. 15 and 16 found 57 percent of Americans were confident in the abilities of Boehner and President Obama to come to an agreement, while 40 percent believed a deal was unlikely.

A look at some key fiscal cliff dates:

– Jan. 1, 2013: New provisions take effect including higher payroll taxes, income taxes and investment taxes.

– Jan. 2: $110 billion in spending cuts scheduled to begin, hitting domestic and military spending.

– Late February, early March: The U.S. is expected to reach its congressionally mandated borrowing limit.

– March 27: A deal to fund the federal government expires.

– Mid-April to August 2013 : If Congress crafts a two-step deal to avert the fiscal cliff, this could be the deadline for tackling part two, including any unresolved tax and entitlement issues.


 

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


 


 

 

 

 

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