POLITICS

Fiscal Cliff Talks: Wheels Closer To Coming Off Deal Bus

12/18/2012 08:40 pm ET | Updated Dec 19, 2012

WASHINGTON -- Negotiations to resolve forthcoming tax hikes and spending cuts had their bleakest day in weeks on Tuesday, aides from both sides told The Huffington Post. Still, those involved in talks between President Barack Obama and House Speaker John Boehner (R-Ohio) said they held hope that the snag was simply the usual negotiation histrionics and won't prevent a deal before the so-called fiscal cliff.

Boehner and Obama remain in talks, aides in the House and in the Obama administration said. But bickering and acrimony was on the rise. A flurry of new proposals, hastily offered press releases, and emotional caucus meetings on Tuesday had folks on Capitol Hill legitimately worried that they will burn through Congress's traditional Christmas deadline for resolving legislative standoffs without reaching an agreement.

"Today was a step back," said one top Senate Democratic aide. "There are two schools of thought. Either the wheels are totally coming off or one wheel has come off and can still be put back on. I'm more towards the former."

The snarl started with a step that, under normal political circumstances, would have brought both sides closer. The White House on Monday night made its third offer to Boehner, raising the income level for tax increases to $400,000 from $250,000. It called for $800 billion in savings, including $290 billion in interest savings, $100 billion in defense cuts, and $130 billion in savings that would come from adjusting the inflation index for Social Security benefits.

It had some progressive priorities as well -- money for unemployment benefits and infrastructure spending, and preservation of Medicare's eligibility age. Mostly, however, the offer was an attempt to lure both the speaker and moderates in his GOP caucus closer to the dotted line.

The administration received the expected pushback from congressional Democrats during caucus meetings on Tuesday. But aides were heartened when House Minority Leader Nancy Pelosi (D-Calif.) suggested she could get the latest proposal approved by House Democrats if need be.

But even before Pelosi could make that pronouncement, Boehner's office had rejected the offer. The speaker's aides stressed that the revenue targets were too high and the cuts too low and too manufactured (they didn't want to count savings from interest). But instead of hitting the pause button and coming back with a counter-proposal, Boehner came back with a Plan B, calling for tax rates on income above $1 million to lapse to pre-Bush levels. Nothing else was touched -- not the unemployment insurance of infrastructure money the White House wants, nor the $1 trillion in sequester-related cuts that House Republicans have decried for months.

A Republican leadership aide stressed that Boehner wasn't closing the door on larger talks with the White House. "This is a dual track thing," the aide said.

But Boehner clearly didn't like the state of negotiations. So he chose to roll the dice.

"We are in a much better place leverage-wise if the issue isn't about holding hostage tax rates for highest income earners," the aide said. "We are going to keep talking to them to try and get a bigger deal, but if we can't we will do something to make sure people's taxes don't go up." The caucus could deal with sequestration "before or after" it took place, the aide added. "People are prepared to go into the New Year hitting the sequester."

Several Republican senators cheered Boehner's Plan B.

“I’m convinced the president has decided to take us off the cliff, and I think we have a responsibility to people who would be hurt by that to try to come up with an alternative," said Sen. John Cornyn (R-Texas). "So I commend him for doing that. But it’s hard to negotiate when you don’t have a negotiating partner who’s willing to negotiate to get things fixed.”

But beneath the surface, it was easy to see skepticism or confusion. The National Review on Tuesday afternoon reported that several Republican senators thought the ploy would "ultimately die in the Senate." Sen. Marco Rubio (R-Fla.) didn't go so far, but his response to Plan B underscored how unlikely it was to become law.

"I continue to know that raising taxes on anybody is not a good way to generate economic growth," said the Florida Republican. "I understand what he’s doing. I’m not going to sit here and criticize what he’s trying to do to avoid the country going off the fiscal cliff, but by the same token I’m deeply committed to the idea that economic growth is the only way forward for our country and I think tax increases hurt economic growth.”

What happens next is now a topic of theorizing among reporters and pundits. The House will likely hold two votes. The first will be to extend tax rates for those with income below $250,000. It will fail. The second would be on Boehner's Plan B. House Democrats weren't willing to concede that it would pass. House Minority Whip Steny Hoyer (D-Md.) told reporters he would “strongly urge” members of his caucus to vote against it. Even if it did pass, a Senate Democratic aide said that Majority Leader Harry Reid (D-Nev.) would kill it in the Senate.

Boehner will have scored himself a good talking point (having shown flexibility for raising rates that Democrats rejected), but at a cost.

"It is House Republicans being forced by the speaker to vote to increase taxes on the rich on a bill that is going nowhere, with nothing on the spending cuts side," said the top Democratic aide. "You can't be a little bit pregnant. The headlines tomorrow are going to be: Republicans voted to increase taxes on millionaires."

The aide, who like all others would speak on the state of negotiations only on condition of anonymity, remained optimistic that Tuesday's developments weren't crippling to the negotiating process. "You always have to have one hiccup like that before a deal is cut," the aide said.

Boehner and Obama do seem to have a broad agreement that any final deal will have about $1 in revenue hikes for every $1 in spending cuts, though major differences remain in the details and, additionally, what to do about an impending need to raise the nation's debt ceiling.

But Boehner's gambit will reshuffle the deck with the fiscal cliff talks, either hardening Republican resolve to not negotiate or convincing moderate members that a comprehensive deal with the president is the only path forward.

"I believe that Speaker Boehner wants to get a big deal, period," said Hoyer in his weekly briefing. "I have no doubt. He’s said that to me. We’ve had discussions about it. I absolutely believe his good faith. I also believe he has a challenge in his side trying to figure out how he gets to where I think he needs to be. Now, it’s not going to be exactly what the president wants, it’s not going to be exactly what I want, perhaps not exactly what Speaker Boehner wants. But I think he knows we need to get to an agreement."

The top Republican House aide concurred that a big deal was still possible. But Boehner's Plan B had elongated an already tightly jammed legislative calendar.

"I haven't bought a flight home yet for Christmas," the aide said. "So take that for what it is worth."

CORRECTION: A previous version of this article understated the proposed cuts to the defense budget as $100, rather than $100 billion. Also, due to an editorial error, Boehner was incorrectly listed initially as a Democrat.

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