To a far greater extent than in previous negotiations with Congress, President Obama has been very explicit about his non-negotiables in fiscal cliff discussions with John Boehner. The biggest two are that marginal tax rates on high earners must rise, and the debt limit must be increased — and ideally removed altogether from the realm of legislative brinksmanship.More recently, he’s made extending emergency unemployment benefits a similar predicate for any deal.
That came as a shock to House Republicans, who just weeks ago believed Obama would lose the presidency, and they could begin making headway on a vastly different approach to fiscal and social policy. A deal has seemed so unlikely in the month since the election because Boehner wasn’t really speaking Obama’s language. He wasn’t treating the negotiations as if Obama had the upper hand — or perhaps he was holding out in the hope that Obama would soften his demands as the deadline neared.
But in the past week, Boehner’s come to grips with the new paradigm, and he’s now acceding — in part, not in whole — two of Obama’s three demands.
He’s offered to raise tax rates on income over $1 million — well above Obama’s $250,000 threshold — and to make up the revenue difference by limiting tax expenditure benefits for high income earners. A grand total of $1 trillion in revenue. And he’s offered to raise the debt limit by a concomitant amount of deficit reduction (not just spending cuts, but new tax revenues, too) — enough to stave off another potential fight over U.S. credit for about a year.
That’s not quite enough for Obama. Boehner’s demanding entitlement benefit cuts that Democrats are under immense pressure to reject. And what’s the point of cutting a deal that concedes anything at all to Republicans if they’re openly planning to take the country to the brink of default again in 2014? But all along White House officials have insisted that negotiations couldn’t really begin in earnest until Boehner abandoned the notion that higher tax rates don’t have to be a part of the final agreement. Now he has.
So although a deal isn’t exactly close at hand, we’re in a very different place than we were a week ago when the principals couldn’t even agree on terms. Conditions have changed enough that one might actually materialize. Perhaps very rapidly.