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Obama, Congress Face Budget Showdown

Cindy Saine

November 12, 2012

Newly re-elected President Barack Obama appears to be headed toward another clash over taxes and government spending with the House of Representatives, where Republicans held on to their majority after the election and Democrats expanded their majority in the Senate.

In grueling negotiations on the level of government spending, taxes and how to reduce the national deficit, House Republicans have refused to consider any tax increases for anyone. Democrats have insisted that if they agree to cuts in government programs they strongly support, Republicans need to give in and let taxes increase for the wealthiest Americans.


​​With the elections over, President Obama has invited congressional leaders to the White House to start negotiating a deal to prevent sharp tax increases and spending cuts - often referred to as the "fiscal cliff" - and says that he is open to compromise on the stubborn fiscal issues that have paralyzed Washington. But he also made clear that Republicans are going to have accept tax increases for top earners or expect a presidential veto.

"But, I refuse to accept any approach this is not balanced," he said. "I am not going to ask students and seniors and middle class families to pay down the entire deficit while people like me making over $250,000 are not asked to pay a dime [10 cents] more in taxes. I am not going to do that."

Tax burden

For his part, Republican House Speaker John Boehner also said he hopes productive conversations begin soon with the White house, but again drew a line at the issue of higher taxes for Americans earning the highest incomes.

​​"The Number One issue in the election was about the economy and jobs," he said. "Everyone wants to get our economy moving again, everyone wants to get more Americans back to work again. Raising tax rates will slow down our ability to create the jobs that everyone says they want."

On the tax issue, analysts point out that the cuts passed under former President George W. Bush are set to expire at the end of this year unless the president signs an extension, so the burden is on Republicans to seek a deal. Ronald Brownstein, editorial director of the National Journal, says Speaker Boehner does not seem to realize that he can no longer refuse to cooperate.

"With all due respect, it is not really his choice anymore," he said. "What is different about this environment is that the Bush tax cuts will expire and will revert to the rates under [former president Bill] Clinton for everybody unless President Obama signs an extension, and after this campaign that would be pretty shocking."

Avoiding "fiscal cliff"

Former U.S. secretary of agriculture and former Democratic congressman Dan Glickman says he is optimistic that Congress and the president will take action over the next 45 days to avoid going over the "fiscal cliff."

"But since we have a reelected president, I am hopeful that they can work out some sort of a deal," he said. "I suspect that it will be a short-term deal rather than a long-term deal to get us over this imminent cliff or crisis, so that we can go into next year with a little more time to think through these things. But that way, I think the markets will be fairly calm and there will not be people thinking the United States cannot get its act together at all."

David Wasserman, an analyst with the Cook Political Report, says the chances are better for the current Congress to tackle budget challenges than the newly-elected Congress, which he says is likely to be even more polarized, and with even fewer members who call themselves moderates.

"I have been warning people that it is going to be harder to get something big passed when Congress is sworn in in January than it is in these next 45 days, because we have so many people who do have an incentive to reach across the aisle who are leaving after January," he said.

Sequestration threat

Analysts point out that the president and Congress also agreed more than a year ago on a mechanism known as sequestration - severe across the board cuts on government programs, including defense spending. They would automatically take effect in January 2013 unless the Democratic-controlled Senate and the Republican-controlled House reach an agreement on taxes and spending.

Neither Democrats nor Republicans wants those dramatic spending cuts, so that may give them the incentive they need to try to find common ground with President Obama when they are meeting with him at the White House.

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