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

Contango

@ Sitting In The ...:

The projected revenue gained from raising the marginal taxes on the "rich" will operate the govt. for 8.5 days. It's totally symbolic and political pandering.

http://www.politisite.com/2012/1...

Question: What spending cuts has Mr. Obama proposed?

BTW: Go back to tax rates under Clinton?

Remember when Bill Clinton said that he raised taxes too much?

http://www.americanthinker.com/v...

the office cat

Point?

mikel

the united nations is raping the american taxpayer and has been for a long time. it is time that the gov't kicks the united nations out of america and cuts their funding!

the office cat

The 2% get the same cut on the first $250,000....

mikel

the problem is that for every $1 in cuts that the libs have presented there is also an additional $4 in increased spending! the gop wants to see that reduced. how can we ever close the deficit gap with that kind of spending? the libs own math that they have presented to increase taxes shows that there is no way the additional revenue will come come close to closing that gap. apparently, many people have no problem with this country never ever being a financially balanced country. it is sad.

kURTje

Once again facts spoken. Just as Chaney is a non-veterean. So someone hates the truth. They even stated their past.Typical of many Americans, hide from facts. That's ok, my Marine Corps affords you the right to speak freely. Again S.R. this is why you weren't granted an interview.

Contango

"The Bernank" has been practicing a never before done experiment on loading up the Fed Reserve balance sheet with mortgage backed securities and U.S. Treasuries (quantitative easing).

However, this practice is about the only thing that has been keeping the U.S. economy on life support.

Now, the problem comes in on how at some future date to sell all of those securities without crashing the economy. This also has never been done.

http://www.bloomberg.com/news/20...

The fools in DC have been playing fast and loose with the national till for far too many decades. A gold standard is not out of the question.

No country in the history of the world has ever used debt and spent it's way to prosperity - the U.S. will not be the first.

Contango

There are 66 million people receiving food stamps and/or Medicaid and 21 million govt. employees, all supported by 109 million private sector workers.

87 million supported by 109 million? Unsustainable.

http://www.foxnews.com/on-air/or...

mikel

how dare you suggest that some of these people get jobs! (sarcasim) don't you know that the dems agenda is to reverse those numbers? they want ALL people to be totally dependant upon the gov't so the masses can be controlled.

OSUBuckeye59

O'Reilly is correct in his numbers. But let's look at some other information and numbers:
The gap between the richest and poorest Americans continues to grow, as it has every year. Weekly earnings gains have been much stronger at the 90th percentile than at the 10th. At the very top, the chiefs of S&P 500 companies have seen bigger percentage pay gains (20 percent) than workers earning the minimum wage (11 percent). Example #1: David Simon of Simon Property Group saw his income rise from $5.4 million in '08 to $137.2 million in '11. Example #2: Leslie Moonves of CBS saw his income rise from $20.8 million in '08 to $68.4 million in '11. By contrast, the last minimum wage increase passed by Congress was $7.25 in '07, and it went into effect in '09. Corporate profits are at record highs. The stock market is up 61% since President Obama took office and is within 6% of its all time record high. The federal tax burden as a percentage of GDP is at a 60 year low. Pretty odd results for a supposedly socialist President, yes? If corporate profits are at an all-time high, and the average compensation of S&P 500 execs has increased from $9.9 million in '08 to $11.9 million in '11, why has job growth pretty much remained static? Simply put, our federally-elected officials in both parties are merely the puppets of corporate lobbyists. Congress & the President are financially immune to the effects of their lack of domestic economic stimulus and job growth. If anything, Congress & the POTUS are being rewarded for not raising personal income taxes. We do need to provide incentives to businesses in the way of lower biz taxes, but do so with a carrot and stick approach: tax their cash assets until they start reinvesting those assets with actual jobs creation, then delete those taxes + reduce their corporate biz tax.

Contango

@ OSUBuckeye59:

Go ahead, steal the cash from stockholders and watch capital flee the U.S.

Corp. taxes are a pass-through anyway. The proper marginal corp. tax rate is 0%.

OSUBuckeye59

@Contango,

The marginal corporate tax rate in the U.S. for at least the last 7 years has been 40%. Where did you find it to be 0%?

Where else do you propose capital will be spent other than the U.S.?

Contango

@ OSUBuckeye59:

Read my two sentences again: I wrote that it "should" be 0%, since all corp. taxes are ultimately a pass-through to the end user.

The unnecessary complexity of the U.S. tax code costs several hundred billions annually in lost productivity (economic growth).

No other country in the world taxes their multi-nationals when they repatriate their overseas profits.

Cos. need to be closer to their customers, we can't export everything. Production and labor costs would be prohibitive.

As part of a diversified investment portfolio, one needs to include foreign stocks.

Approx. 55% of the world market is outside the U.S. and growing.

https://personal.vanguard.com/us...

the office cat

Contango. Since you're such a whiz at figures... what is the current rate of taxpayer-supported Congressional pensions being paid? And since the Republicans controlled both houses 12 years... how much ARE we paying? Add to that, please, that any member of Congress who serves five years is vested... and tell us how much of that we will be sustaining into the future?

goofus

Point, since the dems enjoy the protection also! Seriously lame!!!

CAST THE FIRST STONE

raising taxes on everyone has always been the plan. Only the public union people are going to be suprised. obama wants to make the government rich so he can be an employer. Union people welcome to our world

4shizzle

nonsense

goofus

Nonsense!!!!!

goofus

Obozo will raise everybody's taxes, so the Republicans should just walk away and let the bellyaching begin LOL

goofus

A little off topic, but how ya doing Big Dog since Michigan voted to be a right to work state today!!!!! I thought re-electing Obozo was going to solve all your problems. I'm truly sorry for your loss porch puppy!!!!!!

The Big Dog's back

I can't wait for the new filibuster rules to take effect. The next election in Michigan Repubs will go the way of the Dinosaurs.

goofus

It's good to see you are still active LOL

The Big Dog's back

I was wondering where you were.

The Big Dog's back

You doing alright?

goofus

Yeah, not too bad, golfing alot here in Florida, just warming in the sun!!! And how are you up in the cold north

The Big Dog's back

The "inheritance babies" must be shaking in their boots at the thought of their taxes going up. Ahahaahahahaha.

Contango

"Inheritance babies"?

Yep! Would love to see the Pelosis, the Reids, the Kennedys, the Rockefellers, the Kerrys, the Soroses, the Buffetts, the Gores and many other rich liberal snots taxed out of their estates.

------------------

Guess what? One of the architects of ObamaCare is heading for the Wall St.-Washington revolving door and goin' to J&J:

http://www.zerohedge.com/news/20...

Gotta love the hypocrisy of the American Ruling Class.

Randy_Marsh

http://www.nytimes.com/2012/12/0...
For only 250,000 you to can get the million dollar package, Congrats Libs. HA!

kURTje

oldsters might know now

mikel

well, it appears that the man in the oval office has decided to take his dog and pony act on the road again. it would be nice if he actually sat down for an extended period of time with the people that will actually make the decision on the upcoming "fiscal cliff" he can go sit with as many people as he wants and talk with them but HE is wasting precious time. he then has the nads to blame the gop for not spending enough time in negoiations?

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