From Boehner and Obama, good news for those who want a ‘fiscal cliff’ deal
By Editorial Board,
TUESDAY’S “fiscal-cliff” kerfuffle came with its own handy shorthand: Plan B is House Speaker John A. Boehner’s fallback position to counter what he said was President Obama’s failure to offer a “balanced approach” in the two men’s negotiations over a broad budget-and-tax deal.
Specifically, Mr. Boehner could present the House with two bills as early as Thursday, one of which would allow tax rates to rise on income above $250,000 (the president's original position) and the other of which would let them go up only on households earning more than $1 million (Mr. Boehner’s offer to the president). The bill would also address some elements of the pending fiscal cliff, such as the alternative minimum tax and the estate tax, but leave sweeping spending cuts — “sequestration” — in place, to be bargained over next year as the nation approaches the debt limit and GOP leverage waxes.
The White House promptly dismissed the moves, as did Capitol Hill Democratic leaders — though, as Mr. Boehner no doubt intended, this was awkward for them since his Plan B bears more than a passing resemblance to legislation the Democrats floated as a political ploy against Republicans only a few months ago.
We are inclined to interpret all of this as good news for those, like us, who want to see the two parties reach an agreement — so as to avoid a major economic contraction and to demonstrate that the country is, indeed, governable. The great show of Republican umbrage may be genuine, but it is also what you’d expect from leaders of a party trying to convince their followers that they don’t intend to compromise on principle without standing up for them first.
Certainly Mr. Boehner has traveled a great distance from his initial, no-rate-increase position on taxes. Now he has conceded that point and is haggling with the White House over the precise amount of revenue that will be raised, and at what point in the income scale the higher tax rates will begin. The two sides also disagree over how, and for how long, to raise the federal debt ceiling.
Other points, meanwhile, seem to have been nearly settled: The ultimate deal must be divided evenly between tax increases and spending cuts. A temporary Social Security payroll-tax holiday would probably lapse, saving $115 billion next year. And the government would adopt a more accurate measure of inflation, saving $225 billion from Social Security and other programs, as well as from the adjustment of tax brackets, over a decade. The latter measure would require Mr. Obama to face down opposition from within his own party. If you include about $1 trillion in cuts, over 10 years, to discretionary spending already legislated, and savings on interest payments, a deal worth $4 trillion over the next decade looks doable.
This would be far from an ideal result. Four trillion dollars in savings, padded out with obviated interest, is not enough money to solve the country’s structural budget deficit, the fundamental causes of which — an aging population and rising medical costs — would remain after Mr. Obama and Mr. Boehner finish.
But $4 trillion would be a large down payment on a solution. And it would shrink the contractionary impact next year from 4.3 percent of gross domestic product, if the country goes over the fiscal cliff, to a manageable 1.5 percent, according to a JPMorgan Chase analysis.
Tuesday’s fireworks notwithstanding, the two sides’ concessions to date make such an outcome likelier than it has seemed before, and well worth perservering to achieve.