Economy & Budget

Fiscal cliff update Dec. 21: Boehner claims Plan B was not a tax hike

Fiscal cliff update Dec. 21: Boehner claims Plan B was not a tax hike

Plan B has failed, so what’s next? 10 days to go and both chambers of Congress have recessed for a brief Christmas holiday. Speaker John Boehner (R-Ohio) stated Thursday that the onus for finding a fiscal cliff deal is now upon Senate Majority Leader Harry Reid (D-Nev.) and the Obama White House.

Before the rather dramatic failure of the vote, the House did manage to pass another measure — legislation to prevent the sequestration cuts to the defense budget that are scheduled for Jan. 1, 2013. The plan would have offset that spending with reductions in other areas. This bill, however, only passed by a slim margin of six votes (215 to 209), leaving confidence low among leadership that congressional conservatives would vote yea on Plan B.

Friday, Speaker Boehner addressed the failure of his plan to stave off the fiscal cliff. It turns out that his proposal to raise taxes was actually not going to raise taxes, and that those conservative Republicans who abandoned the plan did not “want to be perceived as raising taxes, that was the real issue.” The circular reasoning in the Speaker’s explanation belies the root problem with the fight between conservatives and the establishment: the latter is unable to poignantly and persuasively articulate the message of lower taxes and economic growth.

Congress will return to Washington on Thursday of next week, so stay tuned for the latest update to negotiations as the country tries to swerve away from the cliff.

Some important reads from around the web:

WSJ: Lawmakers Call for Return to Cliff Talks
House and Senate leaders called for a return to negotiations to resolve the fiscal cliff before the year ends, but they continued to blame each other for the lingering impasse.  The posturing came a day after House Speaker John Boehner (R., Ohio) saw his “Plan B” alternative to avoid tax increases collapse in the House due to opposition in his own party.  “Instead of making hard choices or compromising, as President [Barack] Obama has been willing to do, Speaker Boehner retreated to his corner and resorted to political stunts,” Senate Majority Leader Harry Reid (D., Nev.) said in a Senate floor speech. Mr. Boehner, meanwhile, at a press briefing earlier Friday said while he was ready to continue negotiations it was up to Mr. Obama and the Senate to come up with a plan.

WSJ: What House Failure Has Shown About the Cliff
The grim reality in Washington is that nobody really knows whether or where there’s a path to avoid the fiscal cliff, in the aftermath of House Republicans’ stunning failure to pass Speaker John Boehner’s Plan B extending tax cuts for all with incomes under $1 million. So maybe the better question is: What have we learned?  Here are a few things:  – The Plan B vote was supposed to be a combination of a confidence-building and fallback option for Mr. Boehner. Its success was to send a message to the White House that he could deliver his caucus, thereby strengthening his hand in negotiation and constructing a fallback so his members wouldn’t take the blame for pushing the country off the cliff. Now there is no confidence he can deliver his caucus, and no obvious fallback plan in the House.

Human Events: Boehner blames failure of Plan B on GOP defection
House Speaker John Boehner on Friday morning blamed a Republican Party defection over his “Plan B” tax proposal on a misconception that the measure was a tax increase that could be used against the members.  “That impression was out there and a number of members didn’t want to be perceived as raising taxes, that was the real issue,” Boehner said. “A lot of our members didn’t want to deal with it.”  The bill was pulled just minutes before floor debate was to begin last night. It would have extended Bush era tax cuts on families making less than $1 million, but by omission, it would have allowed taxes to increase on those making more than $1 million annually.

MarketWatch: Cutting corporate taxes would stimulate economy
President Obama and the House Republicans have both proposed lowering corporate tax rates. Last week the White House told Republicans that corporate tax reform was on the table, based on the president’s February proposal, which would lower the corporate tax rate to 28%.  While some call for eliminating corporate tax deductions to solve America’s fiscal problems, reducing corporate taxes would bring in more investment from abroad — together with additional revenue. Read Rex Nutting’s column “Why isn’t Obama demanding corporate welfare cuts?”  America’s corporate tax rates are far higher than our Organisation for Economic Co-operation and Development, or OECD, competitors, and we tax income on a worldwide rather than territorial basis. Corporations are holding $1.7 trillion offshore, and some would come back with a more competitive tax structure.

Forbes: On the Fiscal Cliff, Republican Rebels are Right: No Deal is Better Than a Bad Deal
Last night, House Speaker John Boehner (R., Ohio) pulled his “Plan B” off the House floor because it lacked support from the House Republican caucus. The media is atwitter about Boehner’s failure to control his troops, because they believe that President Obama has gained a tactical victory from it. But as a policy matter, it’s far better that Republicans pass nothing, than pass a tax increase without any accompanying reform of our runaway spending on health-care entitlements. Indeed, despite all of the dramatic hyperbole about the “fiscal cliff,” it’s important to remember that going over the fiscal cliff will reduce the budget deficit by $503 billion in 2013, and $682 billion in 2014, relative to the “solutions” being bandied about on Capitol Hill. What’s so terrible about that?  First, let’s review the key components of what will happen in 2013 if Congress passes nothing this month.

WaPo: Plans C, D, E and F
The House Republicans have joined the White House and Senate Democrats in the “don’t know how to govern” department, none of them coming up with a plan that can pass either body, let alone both. GOP aides on Capitol Hill seem genuinely baffled as to what comes next. Here are some possible scenarios.  Plan C: The White House and Senate Majority Leader Harry Reid (D-Nev.) cook up a putrid bill (from conservatives’ standpoint), including tax hikes (in excess of Clinton-era rate hikes for the rich) and phony cuts. Reid jams it through the Senate. House Democrats announce they will support it unanimously, and the House Republicans are forced to swallow it or allow everyone’s taxes to go up.

The Atlantic: Why a Fiscal-Cliff Deal Is Still Possible
With only days to go before Christmas, goodwill toward men is in short supply in Washington as Democrats and Republicans blame each other for driving the country toward economic calamity.  Gloom has settled over the prospect of reaching a deal to keep the country from diving off a fiscal cliff in 11 days when automatic tax increases and spending cuts start to kick in, increasing the chances of another recession.  And why shouldn’t pessimism reign? Negotiations between President Obama and Republican House Speaker John Boehner have broken down almost completely; the two men have not talked in days.

ConservativeHQ: We Won A Battle On Plan B, Not The War
Thursday night conservatives were jubilant when establishment Republican Speaker of the House John Boehner postponed consideration of his “Plan B’ bill to raise taxes when it appeared enough conservatives were prepared to stick to their principles, defy his threats of retaliation, and defeat the bill. This is cause for optimism, but it doesn’t mean we’ve won the war.  First, we predict the Speaker and his establishment Republican leadership team will not be idle over the Christmas break. Any conservative who indicated he or she was opposed to Plan B can expect to have their arm twisted by everyone who would like the federal Santa Claus to keep spending.

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