With negotiations on how to address the fiscal cliff apparently stalled, congressional Republicans are reportedly floating a fallback plan in both chambers of Congress to avert financial crisis if a deal is not reached. That plan would include ceding to President Obama on letting tax cuts expire for the top two percent of earners, but would also take a more hostile approach to other Democratic proposals.
Just over two weeks remain until the January 1 deadline, when simultaneous tax hikes and drastic spending cuts are set to kick in. While Obama and House Speaker John Boehner (R-Ohio) have met in person twice this week to discuss the looming crisis, the ongoing negotiations appear to have yielded very little in the way of progress. On Wednesday, Boehner warned House Republicans to not make plans for the upcoming holiday, signaling that there may not be a deal by the end of the year.
According to the New York Times and the Washington Post, Republican leaders are gearing up for that possibility and proposing an alternate strategy to pursue if a deal does not go through. The Times reports:
If no deal is reached, Republicans are increasingly talking about a more hostile outcome in which the House passes legislation that extends tax cuts for the middle class, sets relatively low tax rates on dividends, capital gains and inherited estates, and cancels the across-the-board defense cuts, but leaves in place across-the-board domestic cuts. Then House Republicans would engage in what Mr. Boehner, in a private meeting last week, called “trench warfare,” a running battle with the president on spending, first as the government approaches its statutory borrowing limit early next year, then in late March, when a stopgap government spending bill runs out. But such legislation might not be able to pass the Senate, leaving the country no closer to a resolution.
This strategy would result in significantly less new tax revenue than even Boehner's initial offer of $800 billion. Republicans could then declare victory on taxes while also appearing to compromise on extending middle class tax cuts, thus putting them in a position to pressure Democrats on spending cuts.
According to the Washington Post, one proponent of this strategy is Senate Minority Leader Mitch McConnell (R-Ky.), who earlier this week pressed Obama to get specific on how to cut federal spending.
"[Obama] seems to think if all he talks about is taxes -- and that’s all reporters write about -- somehow the rest of us will magically forget that government spending is completely out of control and that he himself has been insisting on balance," McConnell said Tuesday.
According to the Post, Boehner and other House Republicans have rejected the strategy reportedly floated by McConnell and other Republican leaders.
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