President Barack Obama and his aides are dismissing, downplaying and denying various fiscal compromises, setting the stage for a high-stakes clash at the end of December, and potentially the mid-term elections in 2014.
On Wednesday, White House spokesman Jay Carney slashed at a GOP proposal to reduce tax breaks — such as deductions for mortgages interest and charitable donations — available to the 20 percent of Americans who file itemized taxes.
Such “changes to our tax code… are unrealistic politically, that Democrats and Republicans will not vote for,” Carney said. “The right way to do it, because it is mathematically sound and it is the simplest way, is to… not extend tax cuts for the top 2 percent,” he insisted.
Carney’s dismissal was a direct challenge to House Speaker John Boehner, the Republican’s leader, who is negotiating with Obama’s deputies solution to the so-called “fiscal cliff.”
The cliff refers to the synchronized arrival of tax-increase and spending cuts that would remove an extra $500 billion from the economy in 2013, and could shock the weak economy into another recession.
Under pressure from Obama and his allies — including many D.C.-media outlets — Boehner has rallied his House members with a counterproposal that would raise tax revenues by cutting tax breaks without changing current tax rates.
But he president is “not open to pie-in-the-sky proposals that aren’t realistic,” Carney countered.
In closed-door meetings with progressive leaders, Obama and his aides have reassured progressive’s constituency groups — such as La Raza and the Services Employees International Union — they will insist on increases to upper-income tax rates.
The latest signals came Thursday, when CNN reported that Obama privately told Boehner there would be no deal unless Republicans agree to give up their ideological opposition to a tax-rate increase.
There was no mention of offsetting Democratic ideological concessions, such as greater use of market incentives to reduce the cost of federal health care programs.
Raising top-level rates by 2 points will boost federal income by only $60 billion a year, according to some estimates. That is only six percent of the annual deficit, which is now more than $1 trillion.
Obama’s public message is very different from his closed door message.
In public, he’s all about political compromise, cutting taxes for middle class Americans and finding “savings” in future entitlement spending.
He’s taking that pitch to the suburban districts around Philadelphia on Friday, where he’s schedule to give a speech at a toymaker familiar to many swing-voting, middle-income moms around the country.
“There is no reason why taxes on middle class families should go up,” he told reporters invited to photograph the start of a Nov. 28 cabinet meeting.
“It would be bad for the economy… bad for those families… bad for the world economy,” he said. “I am very open to a fair and balanced approach to reduce our deficit and provide the kind of certainty that businesses and consumers need so that we can keep this recovery going,” he insisted.
Since the November election, Democrats have promised to preserve Obama’s huge election machine for use in future disputes, including the budget negotiations. But that machinery can also be used in the 2014 election, when Obama and his allies will try to regain the House majority.
To win that 2014 campaign, Obama and his deputies are also portraying the Republicans as willing to aid the rich by raising taxes on middle-class Americans.
In contrast, “we’re trying to lock in tax cuts,” Carney said Nov. 28.
Boehner pushed back Nov. 29.
“I’m disappointed by what has happened over the last couple of weeks… I’m seriously trying to resolve it, and I would hope the president would get serious as well,” he told reporters on Capitol Hill.
“I’m going to do everything I can to avoid putting the American economy, the American people through the disaster of going over the fiscal cliff,” he said.
That disaster, say political and economic forecasters, could include renewed doubts over the federal government’s ability to pay its huge $11.5 trillion debt.
Lenders’ worries could spike historically low interest rates, and so enormously increase the federal government’s interest payments, which are now roughly $220 billion in 2012. It could also burst several economic “bubbles”, including the bond-market bubble, the $1 trillion student-loan bubble, and the Federal Housing Administration’s housing bubble.
Boehner wants Obama to compromise on taxes and agree to reform high-spending entitlement programs and the tax system by the end of 2013.
“It’s the spending that’s out of control,” Boehner said. He’s got leverage, including the White House’s need to raise its debt limit, which is set by Congress.
In early 2013, Obama will have pushed the nation’s debt up against government’s debt limit, and he’ll need Boehner’s agreement to raise that limit.
“There’s going to be some price tag associated with it… any increase in the debt limit has to be accompanied by spending limitations that meet of exceed it,” Boehner said.
The Huffington Post reported Thursday that Obama has made it “abundantly clear” to Boehner that he wants the debt limit raised as a part of the deal to avert the fiscal cliff.