With another dangerous deadline for the economy approaching, Tuesday’s election returned to power the same men who have battled for two years over the nation’s budget problems: President Obama and House Speaker John A. Boehner (Ohio).
The president and the most powerful Republican in Washington hold the keys to any deal to tame the national debt. And as they prepare to go another round, the political winds have shifted in Obama’s favor.
A look at likely key players in the fiscal cliff negotiations.
Where the voters of 2010 wanted to block Obama’s agenda, the voters of 2012 gave him a second term, as well as Democratic reinforcements in the House and the Senate. Chastened Republican leaders have lined up behind Boehner to offer a compromise on taxes, until now a major stumbling block. And triumphant Democrats are demanding even more concessions — although former top White House aides say the president recognizes that he must not overplay his hand.
On Thursday, hopes were high that Obama and Boehner would be able to break the two-year stalemate and reach a year-end agreement to replace nearly $500 billion in automatic tax increases and budget cuts that economists warn would knock the nation back into recession.
Questions remain about Boehner’s ability to rally his fractious caucus — still packed with strong-willed conservatives — behind a deal that would increase federal tax revenue and about Obama’s willingness to ask Democrats to bend on their key priorities, such as preserving retirement benefits and raising tax rates for the wealthy.
Boehner warned Thursday that higher tax rates couldn’t win House approval. But in an interview with ABC “World News” anchor Diane Sawyer, he said, “I’m the most reasonable, responsible person here in Washington. The president knows it. He knows that he and I can work together. The election’s over. Now it’s time to get to work.”
Obama is scheduled to respond in a statement Friday “about the action we need to take to keep our economy growing and reduce our deficit,” White House officials said.
In Boehner’s view, aides said, the starting point should be the deficit-reduction deal that he and Obama were close to sealing in secret talks during the summer of 2011. With Congress locked in a bitter battle over the federal debt limit, the two tentatively agreed to slice $2.4 trillion from future borrowing in part by trimming Medicare and Social Security benefits and generating $800 billion in new revenue by overhauling the tax code.
Under the terms of the emerging agreement, the rewrite would reduce the top tax rate paid by the highest earners from the current 35 percent, although a precise target was not specified. In return, Republicans agreed to drop demands to preserve preferential rates for investment income such as capital gains and dividends — by far the most lucrative break in the tax code for the very wealthy.
Details were never nailed down, however, and one of the sticking points remains relevant: Although Democrats wanted to increase the tab for taxpayers by $800 billion, Republicans wanted at least some of the money to come from economic growth, which they argue would result from a simplified tax code with lower rates.
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