Analysis: Obama could risk going over 'cliff'

It may be just a bluff or a bargaining ploy, but the White House is signaling that President Barack Obama is willing to let the country go over the "fiscal cliff," a hard-line negotiating strategy aimed at winning concessions from Republicans on taxes.
Associated Press
Dec 5, 2012

If Washington really does fail to avert the looming series of tax hikes and spending cuts, the White House will portray Republicans as the culprits for insisting on protecting tax cuts for the wealthy, an effort the administration is laying the groundwork for now.

"This is a choice of the Republican Party," said Dan Pfeiffer, White House communications director. "If they are willing to do higher rates on the wealthy, there's a lot we can talk about. And if they are not, then they'll push us over the cliff."

But going over the cliff also would be full of risk for a president fresh off re-election and facing at least two more years of divided government.

Ending the year without a deal could roil financial markets and dent consumer confidence just as the economy is strengthening. It could make it harder for Obama to get Republican help on his second-term priorities like overhauling the immigration system and the nation's tax code, or in getting potential Cabinet replacements confirmed.

And it would signal to the country that the president's campaign prediction that the GOP "fever" would break following his re-election was a pipe dream.

House Speaker John Boehner says Obama is playing a risky game. "If the president really wants to avoid sending the economy over the fiscal cliff, he has done nothing to demonstrate it," the speaker said.

White House advisers say the president wants to avoid going into next year without a tax and spending deal, a scenario they say would hurt the economy. Obama, addressing business leaders Wednesday, said the White House and Republicans could reach an agreement "in about a week" if the GOP drops its opposition to raising taxes on families making more than $250,000 a year.

"If we can get the leadership on the Republican side to take that framework, to acknowledge that reality, than the numbers actually aren't that far apart," Obama said.

But with few public signs that Republicans are close to taking that step, administration officials are hardening their warning that Obama willing to risk going over the cliff.

Of course, the White House warning could be a bluff, offered in the belief that Republicans are unlikely to back down on taxes unless they believe Obama is willing to go over the cliff.

The White House says Obama's firm stand on tax rate increases for the wealthiest 2 percent of Americans is driven by economics. The debt-saddled country can't afford to continue with the George W. Bush-era tax cuts, the president and his advisers argue.

Obama has made that case to Republicans before only to back down in the final stages of negotiations. But this time around, the president and his team believe they hold the political leverage.

There is some evidence to bolster that notion. Taxes were a centerpiece of the presidential campaign, with Obama running on a pledge to end the Bush tax cuts for the wealthiest Americans and return their rates to where they were in the 1990s, when the economy was thriving.

Exit polls showed that 60 percent of voters supported that position, an even higher percentage than backed Obama's re-election.

A new poll also suggests a majority of Americans would blame Republicans if the government goes over the fiscal cliff. Just 27 percent of those surveyed said they would blame Obama, compared with 53 percent who said they would point the finger at the GOP, according to the Washington Post-Pew Research Center Poll.

Seeking to cement those impressions, the White House is casting Republicans as willing to forgo tax cuts for the middle class in order to protect lower rates for wealthier Americans. Rates for all income earners will go up at the end of the year if both sides can't reach a deal.

In turn, Republicans say Obama is acting like a stubborn partisan who will put the economy in peril in order to get his way.

"My sense is the White House wants to go over the cliff," said Tony Fratto, a former Treasury and White House official under President George W. Bush. "That may be the only way they get rates they want."

Going over the cliff could mark a new low in the relationship between the president and congressional Republicans. While the contentious debates earlier in Obama's first term over funding the government and raising the nation's borrowing limit went right up to the edge, both sides were always able to reach a deal.

As Obama ran for re-election, he sought to assure voters weary of Washington's bickering that things would be better if he won a second term.

Speaking to supporters in June, he said, "I believe that if we're successful in this election — when we're successful in this election — that the fever may break."

"My hope, my expectation, is that after the election, now that it turns out that the goal of beating Obama doesn't make much sense because I'm not running again, that we can start getting some cooperation again," he added optimistically.

(This is an AP News analysis.)

Comments

deertracker

This is what you can do when you win. He is doing what he said he was going to do. The Cons act as though they won. THEY DIDN'T!!!!

Licorice Schtick

Correct.

But it ain't over.

Most of Washington is still beholden to Big Money, thanks to payoffs in the form of perfectly-legal "campaign contributions." With this sort of corruption, economic justice will not be possible until ordinary Americans learn the truth, that the deck is stacked against them and only the few that are both exceptionally able and very lucky will ever get ahead.

Check out the movie at Hulu.com, PARK AVENUE: MONEY, POWER & THE AMERICAN DREAM (2012)

http://www.hulu.com/watch/417228

Contango

@ Licorice Schtick:

Why do 10 of the 15 richest counties in the U.S. surround Washington, DC?

They shoulda been filming around Fairfax Co., Loudoun Co., et al and see all the wealthy politicos and lobbyists in their true habitat.

Washington and Wall St. are revolving doors.

See the "real" American Ruling Class:

http://www.youtube.com/watch?v=Z...

http://www.forbes.com/2010/03/04...

DBDBDB

Obama was FOR closing tax loopholes before he was AGAINST them. Typical Liberal/Progressive. Don't forget he only won the election by 3% of the vote, and he won by promising to provide more FREE stuff!

http://www.lohud.com/usatoday/ar...

2cents

http://www.youtube.com/watch_pop...

LOL, I was sent this today by a over seas friend, FREE STUFF UK style!

jon491

Now that is funny..........................Just to bad it's true.

2cents

I posted this a few weeks ago!

https://www.youtube.com/watch?v=...

jon491

WOW, I hope she did send that to CONGRESS. How did he make it out of grade school ?

Contango

@ 2cents:

Funny, sad and oh so true.

My favorite UK import is Max Keiser.

http://maxkeiser.com/

2cents

@C

Real world last night!

(I was in a Cleveland jewelry store with a friend who is planning to get married, while he was looking at rings for her I was talking to the owner of the store. Of course the economy came up and I asked how business was, he said ok, I said mine was not too good. He went on to say that small business owners like you are not coming in like they used to. They have companies with 5-50 employees and would buy jewelry around Christmas, we would see their employees come in too because they would recommend us. These were the people manufacturing things for automotive and other larger companies but the smaller companies are just going away at a fast rate. The comment was typically offshore completion, too much government regulation and it was just too hard to do business. Some said it was just not worth it! I felt the same way.)

So tax the small business owner some more and there will be nobody to pay the taxes to give to those who choose not to do anything for a living I guess!!!

Contango

@ 2cents:

"Small Business Optimism Ticks Up Slightly

But Uncertainty About Future Business Conditions Reaches Record High":

http://www.nfib.com/press-media/...

Recently read where a number of sm. businesses are selling before the first - too much uncertainty over taxes.

Tax what you want less of, subsidize what you want more of.

I've essentially "gone Galt" as much as I can. It's no longer worth it helping to prop up the takers.

the office cat

Point?

the office cat

point?

verdict

@DBDBDB I read the article you posted. It can be summed up with the following excerpts:

Congressional Republicans are flagging this Obama comment from 2011: "What we said was give us $1.2 trillion in additional revenues, which could be accomplished without hiking taxes -- tax rates -- but could simply be accomplished by eliminating loopholes, eliminating some deductions and engaging in a tax reform process that could have lowered rates generally while broadening the base."
Said a statement from Boehner's office: "It's a solution President Obama himself once supported. If the math worked in 2011, why doesn't it work today?"
White House spokesperson Amy Brundage responded:
"As you saw Erskine Bowles say this week, a lot has changed since we were negotiating with Speaker Boehner in 2011, including an election in which the American people spoke on the need for a balanced approach that protects the middle class and asks the wealthiest Americans to pay slightly higher tax rates.

So, MY response would be: Mr. President. Is that your final answer? The math has somehow changed simply because you convinced voters to demand the wealthy pay more? I wasn't aware that math could be changed by way of a vote. 1 + 1 = 2, unless we vote to rewrite that it actually = 1?

the office cat

Why don't you - all you - understand the ONE major change since 2011?
2011 - Obama faced re-election and Boehner was riding a Tea Wave while Mitch was honing his 'one-term' pledge.
2012 - Obama won re-election. Obama won a larger majority in both houses. Obama doesn't need Boehner (who won't be an issue if he loses 2% cuts this time). Obama won four years to get things on track.
1+1=10 in Base One... It all depends on the BASE.

verdict

@the office cat
You leave the question unanswered. How does anything that you just said..change the math on matters related to the economy? I am uncertain as to how your explanation of Obama's flip-flops actually addresses the question.

The Big Dog's back

51% to 47% is only 3%? How about 5 million more votes.

the office cat

Ya gotta do it in 'R-math' = Romney, Rove, Republican.

Swamp Fox

Give Obama what he wants, when it fails and it will he has no one to blame and the democratic party as we know it will cease to be a political force for the next decade. Lose the battle but win the bigger war...

the office cat

Swamp.... what's in YOUR milk?
Again... how dare you use the moniker of a Revolutionary War hero?

wiredmama222

Let them go over the cliff. Obama wants them to. The loopholes for the rich will not get closed and for the first time since Bush let them get away with not paying their far share of taxes, the rich will now pay. THANK GOD.

The Republicans do not want the rich to pay. They cannot see how Obama will not consider letting the loopholes stand but Obama said he would never allow that. He campaigned on it. Those loopholes will close and that is it.

So the Republicans will take a HUGE hit if they do not let the loopholes close. Obama will not concede that point and the Senate knows it. He was clear about it.

The cliff is coming and it will go as far as Obama is concerned if the Senate does not change their position on this. I hope they go over the cliff because they will automatically close on January 1.

Justme...

Wired, read the article. Taxes for EVERYONE (not just the "rich") will go up if they don't strike a deal.

the office cat

wired and just.... be ready. Congress is sworn in January 3. Before inauguration day Jan 21, the 'cliff' will have been bulldozed into the molehill it truly is, Cantor will be Speaker and the Republicans will sink into The Whig Empire.

wiredmama222

Long before December 31, this congress will have made a deal with Obama. You mark my words. On January 1, the fiscal cliff will be over with. That is the day of reconnning. They cannot wait until the new congress is in place. They have to make a decision before January 1.

I predict that the Congress will make a deal with Obama before they leave for Christmas break. I won't be a total "what everyone wanted" but it will be a deal. You can bet the high ups in the Republican party are telling the republicans in congress to make the deal right now. You can count on it. They are telling them to do everything they can to fix this before they get blamed. Obama knows it. That is why he isn't doing a thing right now.

Before next week ends, you will see a rough draft of a compromise be on Obama's desk laying out something. Obama will return it with changes. The week after that, they will send it back to him with more changes. They next week, just before they leave for break, they will vote it through. Problem solved. You watch. I will bet you that is exactly what happens.

There will be NO raise on the middle class taxes. There WILL be a raise on the rich and on capital gains taxes. There will be NO raise on business taxes. They will try to cut spending .. there will be some major cuts to States and to some of the "junk spending" of the US government grants, etc.

The help to funds like Sandy will go through. They will cut military funds and bring the troops back from Afgahnastan immediately. There will be major cuts from funds abroad.

You wstch.

rickross2

Too bad for the democraps. As soon as the loopholes close up, So will all the businesses that employ the republicans that pay for everything. Live it up now, because as soon as Barry lets us go over the cliff, its lights out for America. Can you say Impeached???????????????????????

wiredmama222

Rick...people like you live in a dream world...impeachment is your dream and is about as likely to happen as you and people like you are to fly around the room. Get over it already. The election is over and your and your friends lost. You are not going to get the President impeached.

Let me explain. The Republican party lost for many reasons, none of which they have fixed. Until they do, they are in a lot of trouble.

The Republican congress is going to find a way to NOT go over the cliff...don't you realize that. The main powers of the republican party will not let that happen....they cannot afford to take another huge hit. Right now they are telling the republican Congress memembers to play ball with the president. Give him what he wants and fix things before the cliff hits. EXCEPT don't give too much.

I am telling you, they will fix it before the cliff....mark my words. They will make a deal. So just sit down, sip whatever you drink and watch and learn what you do not yet understand. Just see what 62 years of life has taught me.

rickross2

After three years of Obama ...

Here's your change!

Jan '09 Today % Chg Source
Avg. Retail price/gallon gas in U.S. $1.83 $3.85 84% 1
Crude oil, European Brent (barrel) $43.48 $99.02 127.7% 2
Crude oil, West TX Inter. (barrel) $38.74 $91.38 135.9% 2

Corn, No.2 yellow, Central IL $3.56 $6.33 78.1% 2
Soybeans, No. 1 yellow, IL $9.66 $13..75 42.3% 2
Sugar, cane, raw, world, lb. Fob $13.37 $35.39 164.7% 2
Unemployment rate, non-farm, overall 7.6% 9.4% 23.7% 3
Unemployment rate, blacks 12.6% 15.8% 25.4% 3
Number of unemployed 11,616,000 14,485,000 24.7% 3
Number of fed. Employees 2,779,000 2,840,000 2.2% 3
Real median household income $50,112 $49,777 -0.7% 4
Number of food stamp recipients 31,983,716 43,200,878 35.1% 5
Number of unemployment benefit recipients 7,526,598 9,193,838 22.2% 6
Number of long-term unemployed 2,600,000 6,400,000 146.2% 3
Poverty rate, individuals 13.2% 14.3% 8.3% 4
People in poverty in U.S. 39,800,000 43,600,000 9.5% 4
U.S. Rank in Economic Freedom World Rankings 5 9 n/a 10
Present Situation Index 29.9 23.5 -21.4% 11
Failed banks 140 164 17.1% 12
U.S. Dollar versus Japanese yen exchange rate 89.76 82.03 -8.6% 2
U.S. Money supply, M1, in billions 1,575.1 1,865.7 18.4% 13
U.S. Money supply, M2, in billions 8,310.9 8,852.3 6.5% 13
National debt, in trillions $10.627 $16.052 32.2% 14

verdict

@wiredmama I may have missed something here but it was my understanding that the Republican plan IS to close loopholes INSTEAD of raising taxes.
There is an article posted above, by DBDBDB, which notes how Obama supported this plan in 2011, but he now claims the math has changed (somehow).
I refer you to my reply under DBDBDB's comment. EDIT: And now our good friend Randy Marsh has elaborated on this matter even further, below.

I don't think people understand or perhaps they have forgotten. The math shows that even if you tax everyone who makes over $250k/yr at 100% of their income (taking all of their money and thereby bankrupting all business in totality), you would still only pay for ONE YEAR of spending under Obama and just barely (but only if you make everyone else kick in $38 as well).

I would think we should ignore this sideshow and focus on how to actually fix the problem. Two things, particularly. Stop the Fed from crashing the dollar (printing money out of thin air). Root out those who abuse the aid programs..and all forms of wasteful spending, for that matter.
If people focus on this, instead of half of the country being at the throats of the other half, we might make it thru any collapse that may occur.

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