U.S. President Barack Obama and congressional Republicans apparently are engaged in another game of chicken, one that will affect every taxpayer and could send the economy back into recession.
With the first of the year less than a month away, negotiators have reported little progress in averting the "fiscal cliff," that confluence of tax increases and spending cuts Congress imposed 18 months ago with the promise it would do something to avert them in plenty of time. Democrats keep insisting they're still optimistic a deal can be struck by Christmas; Republicans, not so much.
Bush-era tax cuts are on schedule to expire Jan. 1 and draconian spending cuts, especially those involving defense, are poised to kick in -- a one-two punch Federal Reserve Board Chairman Ben Bernanke said last month would provide "a fiscal shock ... that ... would send the economy toppling back into recession."
Obama's position has remained constant: Raise taxes $1 for every $2.50 in spending cuts. The easiest way to do that is to allow the Bush-era tax cuts to expire for incomes above $250,000, going from the current 35 percent to the 39.6 percent in effect when Bill Clinton was president, a time when the economy experienced its longest peace-time expansion.
Obama spokesman Jay Carney said that's the president's opening volley, that he's flexible as long as the math works out.
"The president has been very clear about his proposal and the revenues that would be part of that proposal that would result from and flow from extending tax cuts to the middle class and allowing rates to go back up to the Clinton levels for top earners, and then ... coupled with other changes that would produce additional revenue -- changes to the tax code on capping deductions and closing loopholes for top earners," Carney told a news briefing last week.
"We haven't seen any kind of proposal from the Republicans on rates -- there has not even been an acknowledgement from Republican leaders of the fundamental fact that rates have to go up."
Treasury Secretary Timothy Geithner made the rounds on Capitol Hill Thursday, presenting a package calling for a $1.6 trillion tax increase, a $50 billion economic-stimulus program and executive power to raise the federal debt limit without congressional approval. The package immediately was rejected by Republican leaders.
Obama also has proposed capping itemized deductions for the wealthiest at 28 percent of gross income, compared with the 35 percent currently allowed.
The key, the administration says, is not to hurt the middle class further.
"The president will not sign any legislation that extends the Bush-era tax cuts for top earners in this country," Carney said repeatedly during the week.
"This should not be news to anyone on Capitol Hill. It is certainly not news to anyone in America who was not in a coma during the campaign season because this was an explicit, repeated and high-profile debate throughout the campaign."
"I've got to tell you, I'm disappointed in where we are and disappointed in what's happened over the last several weeks," said House Speaker John Boehner, R-Ohio, who called on Obama to propose more spending cuts.
Republicans say they don't want to hurt the middle class either, nor do they want to raise taxes on the 2 percent of Americans who earn more than $250,000 annually. The top 1 percent of taxpayers -- those earning more than $350,000 a year -- already pay 37 percent of all taxes. The next tier, the 2 percent to 5 percent of taxpayers earning $150,000 to $350,000, pay 22 percent of taxes, Heritage Foundation figures indicate. Republicans have said they're open to maybe limiting deductions and closing loopholes.
