The fiscal cliff deal comes clearer: a 37% top tax rate and a higher Medicare eligibility age

December 7, 2012

Something hilarious happened in the Senate on Thursday.

The White House has been pushing a plan to transfer authority for the debt ceiling to the executive. They call it the McConnell plan, because it's based on an idea Senate Minority Leader Mitch McConnell proposed in July 2011.


Negotiators in chief: President Obama talks with House Speaker John Boehner.

McConnell doesn't support the McConnell plan. And he didn't think the Democrats did, either. So he decided to prove it. On Thursday, he asked that the Senate move to an immediate vote on the McConnell plan, figuring that Majority Leader Harry Reid would block the idea. But Reid didn't block the idea. He doubled down on it. He asked that the Senate move to an immediate up-or-down vote on the proposal that would allow it to pass with a simple majority, rather than the three-fifths majority required to evade a filibuster.

At which point, McConnell, seemingly taken aback, filibustered. He insisted on a 60-vote threshold or nothing. So, in the space of a few minutes, McConnell had moved to vote on the plan, gotten his wish, and then launched a filibuster against the vote he'd asked for. That, ladies and gentleman, is the world's greatest deliberative body in action.

Right now, the fiscal cliff negotiations are proceeding on two tracks.

One track includes the press releases, public statements and legislative tactics the two parties are deploying to prove the purity of their faith and their commitment to beating the other side to a bloody pulp. Watch these closely and it's easy to get depressed. The parties are, by turns, angry, disappointed, petty, inane and vengeful. "There isn't a progress report," Republican House Speaker John Boehner sighed Friday, "because there's no progress to report."

The other track includes the offers, counteroffers and red lines proposed by Boehner and President Obama. If you look at these closely, a deal is taking shape.

Recall the core fight on taxes: Republicans say they're open to more revenue, but they want to find it by closing deductions and loopholes. Democrats say that any deal needs to include more revenue, and they want to find it by letting the George W. Bush tax cuts expire for the wealthy, which would mean the top tax rate snaps back up to 39.6 percent.

But what if you do a bit of both?

REPORTER: Speaker, you did speak with the president earlier this week. Can you characterize that call? I mean, did he call -- did he have any kind of counteroffer? And also, we understand that he's just -- is making clear that it's got to be increase in rates for the wealthy or no deal. Are you willing to give a little bit, maybe just not all the way to 39.6 (percent)?

SPEAKER BOEHNER: It was -- the phone call was pleasant but was just more of the same. Even the conversations that the staff had yesterday -- just more of the same. It's time for the president, if he's serious, to come back to us with a counteroffer.

That's from Boehner's press conference Friday. Notice what he doesn't say: He doesn't say that any increase in tax rates is off the table. And Boehner is not the only one who's gotten this question:

REPORTER: Is there no deal at the end of the year if tax rates for the top 2 percent aren’t the Clinton tax rates, period?  No ifs, ands or buts? Any room in negotiating on that specific aspect of the fiscal cliff?

THE PRESIDENT:  ...With respect to the tax rates, I just want to emphasize I am open to new ideas.  If Republican counterparts or some Democrats have a great idea for us to raise revenue, maintain progressivity, make sure the middle class isn’t getting hit, reduces our deficit, encourages growth, I’m not going to just slam the door in their face.  I want to hear ideas from everybody.

You see the deal that's becoming clear here?

Talk to smart folks in Washington, and here's what they think will happen: The final tax deal will raise rates a bit, giving Democrats a win, but not all the way back to 39.6 percent, giving Republicans a win. That won't raise enough revenue on its own, so it will be combined with some policy to cap tax deductions, perhaps at $25,000 or $50,000, with a substantial phase-in and an exemption for charitable contributions. 

The harder question is what Republicans will get on the spending side of the deal. But even that's not such a mystery. There will be a variety of nips and tucks to Medicare, including more cost-sharing and decreases in provider payments, and the headline Democratic concession is likely to be that the Medicare eligibility age rises from 65 to 67.

That's not a policy I like much, but New York magazine's Jonathan Chait accurately conveys the White House thinking here: They see it as having "weirdly disproportionate symbolic power," as it's not a huge (or smart) cut to Medicare benefits, and most of the pain will be blunted by the Affordable Care Act. But Republicans and self-styled deficit hawks see it as a big win. And Democratic House Minority Leader Nancy Pelosi, who staunchly opposes raising the retirement age, has stopped well short of ruling it out.

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Suzy Khimm · December 7, 2012