Wonkbook: Fiscal cliff deal moves to the Senate

December 24, 2012

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Mitch McConnell insisted on looking thoughtful. (Alex Wong - GETTY IMAGES)

Wonkbook's Number of the Day: October 1990. That's when Sen. Pete Domenici "turned from a conversation on the Senate floor, caught the eye of a clerk by raising his right hand and voted in favor of a huge and contentious bill to reduce federal deficits." It was, writes Binyamin Appelbaum, "the last time any Congressional Republican has voted for higher income taxes."

Wonkblog's graph of the day: On an average salary, paying for your health care takes 58.3 days of work.

Top story: All eyes on Senate for fiscal-cliff deal

Search for solution to fiscal cliff turns to Senate. "With little more than a week for lawmakers to avert huge tax increases and spending cuts, attention is turning from the gridlocked House to the Senate, where some Republicans on Sunday endorsed President Obama’s call for a partial deal to insulate most Americans from the tax increases but defer a resolution on spending." Jonathan Weisman in The New York Times.

@blakehounshell: probably a dumb question but is there any way dems get enough votes to pass a Senate-friendly cliff bill without Boehner's help?

Obama’s 'small deal' could lead to bigger tax increases. "[I]f Boehner had taken the White House’s deal in 2011, he could’ve stopped the tax increase at $800 billion. If he took their most recent deal, he could stop it at $1.2 trillion. But if he insists on adding another round to the negotiations — one that will likely come after the White House pockets $700 billion in tax increases — then any deal in which gets the entitlement cuts he wants is going to mean a deal in which he accepts even more tax increases than the White House is currently demanding." Ezra Klein in The Washington Post.

@JohnJHarwood: What's harder: Boehner leading his caucus in plain sight, or McConnell (w/threat of '14 primary) godfathering solution w/no fingerprints?

Despite cliff hype, government agencies plan few significant immediate changes. "The so-called fiscal cliff is a combination of automatic tax hikes and spending cuts scheduled to go into effect Jan. 1. But the agencies responsible for implementing those changes, including the IRS and the Pentagon, are well aware that congressional and White House negotiators will most likely come to some sort of deal within weeks or months -- and so they are planning to carry on as usual, according to a broad review of private and public government plans." Ryan Grim in The Huffington Post.

@hillhulse: Basic fiscal cliff problem: Pres Obama "hopeless optimist." Spkr Boehner "glass half-full" guy. Do those relationships ever work out?

How the fiscal-cliff negotiations hit the wall. "In truth, talks to secure a big deficit-reduction deal had already broken down Monday afternoon in the office of Mr. Boehner (R., Ohio), a Wall Street Journal reconstruction shows. Mr. Boehner had been negotiating a deal with the White House to let tax rates rise for upper-income people." Patrick O'Connor and Peter Nicholas in The Wall Street Journal.

@petersuderman: I'll be sad for a few seconds if no one does an oral history of the fiscal cliff and calls it Cliff Notes.

Why Obama isn't caving. "President Barack Obama’s stiffening resolve during the fight over the fiscal cliff can be traced directly to the lessons he drew from his hard-won triumph of the 2012 campaign…With that outcome now in the history books, the people around the president now see him as a Democratic Reagan, a resilient and popular figure who can unify the country -- if only the dead-enders will give him a chance."Glenn Thrush in Politico.

How the party of budget restraint became the party of 'no new taxes,' ever. "On a Saturday afternoon in October 1990, Senator Pete V. Domenici turned from a conversation on the Senate floor, caught the eye of a clerk by raising his right hand and voted in favor of a huge and contentious bill to reduce federal deficits. Then he put his hand back into his pocket and returned to the conversation. It was the end of an era, although no one knew it then. It was the last time any Congressional Republican has voted for higher income taxes." Binyamin Appelbaum in The New York Times.

Congress is waiting to see if Sen. McConnell will play ball. "The public collapse of talks between President Obama and House Speaker John A. Boehner (R-Ohio) has in the past been the signal for Mitch McConnell to step into the spotlight…So far, the Senate minority leader has remained in the shadows. That has led some lawmakers to wonder if he will play the dealmaker this time." Paul Kane in The Washington Post.

Some lawmakers say there's still time to prevent the fiscal cliff. "U.S. lawmakers said Sunday it isn't too late to avert the so-called fiscal cliff, though they acknowledged that time has all but run out for a comprehensive bargain on taxes and spending before year-end." Jeffrey Sparshott in The Wall Street Journal.

Fiscal cliff would strike low incomes hard. "If the U.S. goes over the 'fiscal cliff,' some Americans may fall harder than others. The biggest impact in sheer dollars would land on relatively affluent households, particularly when it comes to the tax increases that make up the bulk of the cliff. But in terms of percentage of tax increases, low- and moderate-income taxpayers will face the biggest burden -- an often overlooked part of the budget debate that's now getting attention as the year-end deadline nears." John D. McKinnon in The Wall Street Journal.

Tea party stays on the sidelines as Obama, Republicans in Congress tackle fiscal cliff. "The tea party movement has been nearly invisible in the intensive lobbying campaign over the 'fiscal cliff,' even as Congress and the White House debate the issues of government spending and national debt that are at the core of the movement’s identity." Jerry Markon in The Washington Post.

Maya MacGuiness, the woman behind 'Fix the Debt.' "Maya MacGuineas has been ringing alarms about the nation’s growing debt for 15 years, imagining a day when a president and a Congress might finally work together to tackle the country’s long-term debt problem. After watching President Obama and Speaker John A. Boehner once again come close to agreeing on a plan, only to see a deal slip away, she is troubled but undeterred." Annie Lowrey in The New York Times.

DIONNE: It's our system on the cliff. "The United States faces a crisis in our political system because the Republican Party, particularly in the House of Representatives, is no longer a normal, governing party. The only way we will avoid a constitutional crackup is for a new, bipartisan majority to take effective control of the House and isolate those who would rather see the country fall into chaos than vote for anything that might offend their ideological sensibilities." E. J. Dionne in The Washington Post.

COWEN: How a little symbolism can go a long way in fiscal-cliff negotiations. "When it comes to income tax rates, we could raise them for virtually everyone, to send a clear message that the current fiscal situation is unsustainable. At the same time, we could limit those tax increases for most income classes to a relatively small percentage, much less than the full expiration of the Bush tax cuts would imply." Tyler Cowen in The New York Times.

KRUGMAN: When prophecy fails. "Back in the 1950s three social psychologists joined a cult that was predicting the imminent end of the world. Their purpose was to observe the cultists’ response when the world did not, in fact, end on schedule. What they discovered, and described in their classic book, 'When Prophecy Fails,' is that the irrefutable failure of a prophecy does not cause true believers — people who have committed themselves to a belief both emotionally and by their life choices — to reconsider. On the contrary, they become even more fervent, and proselytize even harder." Paul Krugman in The New York Times.

Music recommendations interlude: Bing Crosby, "White Christmas," 1954.

Top op-eds

PEARLSTEIN: Signing off. "What I knew was that my sharper pen was hardly the result of a conscious decision to throw off any pretense of objectivity and balance, but more a reflection of a lack of time to do more of the reporting that allows a columnist to add more shades of gray to the black and white of the opinion trade. A good newspaper columnist certainly has to be able to deliver a good zinger every once and a while. Doing it too often not only cheapens the experience but can easily turn into a substitute for fresh insight and reporting." Steven Pearlstein in The Washington Post.

DOUTHAT: Bloomberg, LaPierre, and the void. "Unfortunately for our country, the Bloomberg versus LaPierre contrast is basically all of American politics today. Our society is divided between an ascendant center-left that’s far too confident in its own rigor and righteousness and a conservatism that’s marched into an ideological cul-de-sac and is currently battering its head against the wall. The entire Obama era has been shaped by this conflict, and not for the good. On issue after issue, debate after debate, there is a near-unified establishment view of what the government should do, and then a furious right-wing reaction to this consensus that offers no real policy alternative at all." Ross Douthat in The New York Times.

TALEB: Stabilization won't save us. "Stabilization, of course, has long been the economic playbook of the United States government; it has kept interest rates low, shored up banks, purchased bad debts and printed money. But the effect is akin to treating metastatic cancer with painkillers. It has not only let deeper problems fester, but also aggravated inequality. Bankers have continued to get rich using taxpayer dollars as both fuel and backstop. And printing money tends to disproportionately benefit a certain class. The rise in asset prices made the superrich even richer, while the median family income has dropped. Overstabilization also corrects problems that ought not to be corrected and renders the economy more fragile; and in a fragile economy, even small errors can lead to crises and plunge the entire system into chaos." Nassim Nicholas Taleb in The New York Times.

FRIEDMAN: Send in the clowns. "Republican politicians today have a choice: either change your base by educating and leading G.O.P. voters back to the center-right from the far right, or start a new party that is more inclusive, focused on smaller but smarter government and market-based, fact-based solutions to our biggest problems. But if Republicans continue to be led around by, and live in fear of, a base that denies global warming after Hurricane Sandy and refuses to ban assault weapons after Sandy Hook — a base that would rather see every American’s taxes rise rather than increase taxes on millionaires — the party has no future. It can’t win with a base that is at war with math, physics, human biology, economics and common-sense gun laws all at the same time." Thomas Friedman in The New York Times.

SOLTAS: A carbon tax can't pass. But here are 4 ways to address climate change that can. "The federal government collects a 'gas-guzzler tax' on cars with fuel economy below 22.5 mpg. Neither the penalties nor the thresholds for the tax, however, have been updated since 1991. That means that the penalties have fallen 40 percent in inflation-adjusted terms. The gas-guzzler tax is also not scheduled to follow the increases in fuel-economy standards, meaning that this market incentive for fuel efficiency will become irrelevant without corrective action. The Obama administration could propose that the tax penalty be indexed to inflation and that the thresholds track the increases in fuel-economy standards. The most straightforward option is set the tax threshold at about 5 mpg below the fuel-economy standard, where it stood for over two decades." Evan Soltas in Bloomberg.

Lingo interlude: The words of 2012.

Et Cetera

Jason DeParle explains through the story of three daughters of Galveston, TX, how higher education ends up perpetuating class disparitites. The New York Times.

The Federal Reserve is running out of ways to make credit cheaper. Nick Timiraos in The Wall Street Journal.

Consumers are climbing out of debt. Ben Casselman in The Wall Street Journal.

The minimum wage is set to increase in 10 states on January 1, 2013. Melanie Trottman in The Wall Street Journal.

On gun control, Obama’s record shows an apparent lack of political will -- until now. Philip Rucker and Sari Horwitz in The Washington Post.

Gun owners vs. the NRA: What the polling shows. John Sides in The Washington Post.

Obama’s impact on federal judiciary. Robert Barnes in The Washington Post.

Earn an average salary? Covering your health spending will take 58.3 workdays. Sarah Kliff in The Washington Post.

Got tips, additions, or comments? E-mail me.

Wonkbook is produced with help from Michelle Williams.

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Neil Irwin · December 23, 2012