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After Boehner Tax Plan Fails, Next Move Is Obama’s After Boehner Tax Plan Fails, Next Move Is Obama’s
(about 5 hours later)
WASHINGTON — With House Republicans’ revolt over their leader’s tax plan the evening before, President Obama on Friday faced the challenge of finding a new tax-and-spending solution — perhaps working now with Senate Republicans — to prevent a looming fiscal crisis in January. WASHINGTON — President Obama, conceding that a “grand bargain” for deficit reduction with Speaker John A. Boehner is unlikely, called Friday for Congress to approve a stripped-down measure by year’s end to prevent a tax increase for all but the richest taxpayers and to extend aid for two million unemployed Americans.
Yet as the day dawned, officials at the White House remained as incredulous and bewildered as the rest of Washington after Speaker John A. Boehner, short of votes from his Republican majority, was forced to cancel Thursday’s vote on what he called his “Plan B.” It would have extended the soon-to-expire Bush-era tax cuts for all income up to $1 million to avert a tax increase for more than 99 percent of Americans but also, to the anger of the anti-tax conservative mutineers, would have raised the top tax rate for higher income to the level of the Clinton years. “That’s an achievable goal; that can get done in 10 days,” Mr. Obama said to reporters during a hastily scheduled evening appearance in the White House briefing room. “Call me a hopeless optimist,” he added, “but I actually think we can get this done.”
Now Mr. Obama is looking for his own Plan B, just four days before Christmas and 10 days before a deadline for a deal to avoid the tax increases and deep, across-the-board cuts in military and domestic programs scheduled after Dec. 31. The president, who took no questions, read his statement just after a brief phone conversation with Mr. Boehner and a separate meeting at the White House with Senator Harry Reid, the Nevada Democrat and Senate majority leader. It was Mr. Boehner’s stinging defeat Thursday night — when rebellious antitax House Republicans blocked a vote on his tax plan, after he had suspended negotiations with Mr. Obama — that forced the president to reach for a fallback strategy with Senate help.
Officials in the administration and Congress, and in both parties, suggested the likeliest route was for Mr. Obama to seek a bipartisan accord with Senator Harry Reid, the Nevada Democrat who is the Senate majority leader, and Senator Mitch McConnell of Kentucky, the Senate Republican minority leader, and hope that it could get through the House under deadline pressure. Last year, when the president and Mr. Boehner were at an impasse over getting Congress to approve the essential increase in the nation’s borrowing limit, it was the wily Mr. McConnell who first suggested the legislative way out of the mess. But Mr. McConnell faces re-election in 2014 and will be very reluctant to engage in any deal-making that could draw him a primary challenge in his conservative state. By Friday, both the House and the Senate had closed for the Christmas break, and soon after his statement Mr. Obama left with his family for their annual holiday trip to Hawaii, his native state. His return date is dependent on events, aides said.
Mr. McConnell has given no indication of his next move, but a spokesman, Don Stewart, offered no hint on Friday morning of an immediate helping hand. “I sure hope they have a plan of their own,” said Mr. Stewart, referring to Democrats Mr. Obama, Mr. Reid and the House minority leader, Representative Nancy Pelosi. But as he and Democrats in Congress envision the coming days, the Senate would reconvene on Thursday to pass a compromise bill with commitments of cooperation from both Mr. Boehner and Senator Mitch McConnell of Kentucky, the Republican minority leader, to keep the process moving.
A number of Senate Republicans, unlike most party colleagues in the House, say they could support a deficit-reduction plan raising tax rates on high incomes, if Democrats agree to significant reductions in the growth of Medicare and Social Security. But both Republicans and Democrats are being assailed by party allies — groups on the right against any tax increases and on the left against cuts in entitlement-program spending. Facing the Dec. 31 deadline for the expiration of all Bush-era tax cuts, Mr. McConnell would need to promise not to filibuster and Mr. Boehner would have to agree to a House vote on the Senate-passed bill.
If Mr. Obama were to reach some agreement that passes in the Senate, it still must get through the House. That, people in both parties say, could confront Mr. Boehner — who controls the Republican Party’s one lever of power — with a decision about whether to allow a vote on a measure that presumably could not pass with Republican votes but would have to be carried over the line with Democrats’ votes. Presumably, the sort of fallback measure that Mr. Obama seeks could pass in the House only with strong support from Democrats’ votes, since conservative Republicans, by their revolt against Mr. Boehner this week, have signaled that they would not approve even legislation that raises tax rates for fewer than 1 percent of Americans.
That prospect in turn gives rise to the question of whether Mr. Boehner can survive the House vote for speaker on Jan. 3, when the new Congress will include fewer Republicans given party losses in November. While many in both parties believe that Mr. Boehner will permit the vote on a compromise under the intense pressure, with public opinion on the newly re-elected president’s side, doing so could threaten his already weakened speakership among conservatives.
Adam Jentleson, spokesman for Mr. Reid said in a statement, “It is now clear that to protect the middle class from the fiscal cliff, Speaker Boehner must allow a bill to pass with a combination of Democratic and Republican votes.” Without such action, taxes would increase on Jan. 1 for every taxpayer. National polls have shown that most Americans would blame Republicans.
The House, at Mr. Boehner’s direction, closed down until after Christmas and members dispersed. The president, who once had planned to leave on Friday with his family for its traditional Christmas vacation in Hawaii, will stay at the White House pending “the next moves,” said a senior administration official, who, like most others interviewed, would not be identified given the uncertainty about the next step. “If there is action this weekend, he will be here.” Mr. Obama, backed by Congressional Democrats, is proposing as he has for four years that the Bush tax rates be extended permanently for all income below $250,000 a year. In negotiations with Mr. Boehner he had tentatively agreed to raise that threshold to $400,000, and Congressional Democrats on Friday said they would go as high as $500,000 if it would seal a deal with Republicans.
On Thursday night, the White House press secretary, Jay Carney, said in a statement, “The president’s main priority is to ensure that taxes don’t go up on 98 percent of Americans and 97 percent of small businesses in just a few short days. The president will work with Congress to get this done, and we are hopeful that we will be able to find a bipartisan solution quickly that protects the middle class and our economy.” But the Republicans’ rejection of Mr. Boehner’s bill on Thursday indicated that such a concession by Democrats would not sway the antitax absolutists among them. The speaker’s so-called Plan B would have extended the Bush tax cuts for income up to $1 million, meaning a tax increase for only an estimated 0.3 percent of households, yet that was too much for many of his members.
Events on Friday morning added to the drama. First, Mr. Obama observed a moment of silence for the victims of the school massacre one week ago in Newtown, Conn., a slaughter of innocents that people in both parties had suggested might melt some partisan divisions; last weekend it had seemed to foster negotiating progress between Mr. Obama and Mr. Boehner. While the strategy that Mr. Obama and Mr. Reid are now pursuing requires the acquiescence of both REpbulican leaders, Mr. McConnell has given no public indication whether he would give it. Asked at the Capitol before Mr. Obama’s statement whether he would agree not to filibuster the stripped-down bill, he stepped onto an elevator and said “Merry Christmas.”
Then he was to speak at the funeral of longtime Senator Daniel K. Inouye, Democrat of Hawaii, where he would be thrown together with Mr. Reid and Mr. McConnell, leading the bipartisan Senate delegation. Mr. Boehner has not said when or whether he would call the House back in session, but a spokesman said late Friday that the speaker would return to Washington from his Ohio home after the holiday “ready to find a solution that can pass both houses of Congress.”
While Mr. Obama had threatened a veto of the Boehner bill, and called the speaker’s pursuit of it a waste of time, the administration had hoped that once the House passed it — as Mr. Boehner had forcefully predicted on Wednesday — the speaker would return to the negotiating table. But now people in both parties express pessimism. Given Mr. Boehner’s inability to pass his own bill, which Republicans say he pursued only after he realized he did not have support in his caucus for the last offer he had made to the president a week ago, the speaker is a much-weakened figure, his own future in his job under a cloud. “It is time for the Democratic-run Senate to act, and that is what the speaker told the president tonight,” said Mr. Boehner’s spokesman, Brendan Buck.
The events in some ways could enhance Mr. Obama’s position politically. They force critics to rethink the widespread criticism of his negotiating skills in the 2011 debt-reduction talks, at least against evidence now that his negotiating partner, Mr. Boehner, could not deliver enough Republican votes for a deal with tax increases. And with polls already showing most Americans would blame Republicans for failure of the fiscal talks, House Republicans’ meltdown ensures that. As Democrats on Capitol Hill described the possible fallback plan, it would be similar to legislation already passed by the Senate to extend the Bush-era tax rates for income below $250,000, increase to 20 percent from 15 percent the tax rate for capital gains and dividends income, and extend some other tax breaks.
But from the White House’s view, the repercussions for the economy of a dysfunctional power structure in Washington — and for Mr. Obama’s larger agenda of gun control, immigration and more — are too dire for any gloating. But the new bill, they said, would also delay the so-called sequester in January — across-the-board spending cuts in military and domestic programs that Mr. Obama and Congress scheduled in mid-2011 as an incentive for the two sides to approve an alternative, more deliberate deficit-reduction compromise. And it would extend federal unemployment benefits for the estimated two million Americans who have been out of a job for long enough to exhaust their initial state aid.
For now, people in both parties say it is hard to imagine that the two sides can go beyond some fallback measure extending the Bush tax cuts for 98 percent of Americans and some other pending measures, to also achieve the hoped-for framework to limit entitlement spending and raise revenues enough to stabilize the mounting federal debt as the population ages and medical costs rise. A spokesman for Mr. Reid said in a statement: “As a fallback plan to protect the middle class, Republicans should support passing a bill that extends tax cuts for families up to $250,000, extends unemployment insurance, and delays the so-called sequester while we negotiate additional policies next year. But the bottom line is that moving forward on any solution will require cooperation from Speaker Boehner and Senator McConnell.”
The outcome also casts doubt on Mr. Obama’s hopes for help from the business community in swaying Republicans. While Mr. Obama said the bill also should provide “the groundwork” for Congress to achieve additional deficit reduction next year through overhauls of the tax code and spending for fast-growing entitlement programs, chiefly Medicare, Congressional Democrats said the likely measure by itself would do nothing to put such efforts in motion.
Despite its much-publicized mobilization for a deal along the lines he favors, a coalition of well-known corporate leaders apparently had little influence in a Republican Party that has grown increasing populist and small-business oriented as the party base has shifted South and West. Working against it are conservative groups like Club for Growth with a record of defeating Republicans who support taxes in party primaries. The upshot is that, for a second year, Mr. Obama has been unable to reach agreement with Mr. Boehner on a debt-reduction framework that would stabilize the nation’s debt, which is growing unsustainably as the population age and medical costs rise.
Nor, Democrats said, would the measure extend the nation’s borrowing limit, which the Treasury will hit early in 2013. Mr. Obama had hoped for a deal that would include a debt limit increase, to avert the short of showdown that damaged the economy — and both parties’ public approval ratings — last year.
By his resort to the stripped-down legislative option, Mr. Obama demonstrated that his and his party’s priority is to prevent the Bush tax cuts from expiring for most Americans. But he might be forfeiting some leverage in the coming fiscal battles early next year over extending the debt limit.
Many Republicans are threatening to withhold support for increasing that limit, as they did in 2011, without Mr. Obama’s agreement to deep reductions in spending for Medicare and Social Security. By both sides’ reckoning, Mr. Obama would have a strong hand in the debt limit debate if it remained tied to the tax issue, given Republicans’ zeal to avoid tax increases.
Mr. Obama, in his statement, pressed for conciliation.
“With their votes, the American people have determined that governing is a shared responsibility between both parties,” Mr. Obama said. “In this Congress, laws can only pass with support from Democrats and Republicans. And that means nobody gets 100 percent of what they want.”