The fiscal-cliff fix: Winners and losers
At 11 p.m. on New Year's Day, the House cleared a Senate compromise to pull the American economy back onto the ledge of the fiscal cliff, raising marginal tax rates for households earning $450,000 or more, extending unemployment benefits and a series of tax breaks for low-income and middle-class workers, and pushing back a scheduled series of deliberately punitive spending cuts for two months. It wasn't a pretty resolution to an ugly fight, but it likely kept the country from careening into another recession and prevented a big tax increase for more than 98 percent of taxpayers. Miffed House Republicans almost sunk the deal, and some liberals are upset that President Obama didn't use his leverage to exact more concessions from the GOP, but almost everyone agrees that another big fight is looming in the wings. Technically, "the question of who 'won' the fiscal cliff won't be answered till we know what happens when Congress reaches the debt ceiling" in a month or two, says Ezra Klein at The Washington Post. But it's not too early to look at who won Round 1 of the fiscal cliff fight. Here, a look at who came out smiling and who is grimacing after the fiscal cliff battle:
Obama welcomed the House's passage of the compromise bill, said he hoped the next bipartisan deal could be hammered out "with a little bit less drama, a little less brinksmanship, and not scare the heck out of folks quite as much," then boarded Air Force One for Hawaii to finish his Christmas vacation. By forcing Republicans to support raising taxes on the wealthy, "despite years of fervent promises," says Howard Kurtz at The Daily Beast, "Obama clearly won the fiscal cliff skirmish." It isn't the "grand bargain" Obama was hoping for, says Andrew Sullivan at The Daily Beast, but "what he's getting — which is a gradual shift toward more fiscal responsibility, with key protections for the working poor and the unemployed in place — is all he really wants right now." He faces some big fights with the "rabid Republican House," but this was an important step in the right direction, and "sometimes, the little advances are preferable under certain circumstances to big breakthroughs."
Biden certainly "emerges with enhanced stature from the budget mess," says The Daily Beast's Kurtz. He was "called off the bench" on Sunday, then "showed a deft hand — and the experience of growing up in [the Senate] — in quickly hammering out a deal with Minority Leader Mitch McConnell." If the 70-year-old vice president "decides to run for Obama's job in 2016, such performances could more than offset his reputation for shooting from the lip." Of course if Democrats end up hating the deal, this could actually "bite Biden down the line," says Chris Cillizza at The Washington Post. But he clearly ranks among the winners for negotiating the deal and persuading Democrats to support it. The vice president is often underestimated by the political press, but "the 'Biden as major White House asset' storyline writes itself" now.
The Senate minority leader "stayed behind the scenes (as is his preference) for almost the entirety of the fiscal cliff debate but after House Republicans proved unable to move the needle, he stepped in to save the party," says Cillizza. The GOP would have shouldered the blame for sending us over the cliff, a sure "political loser." As a bonus, everybody now knows that the Republican who can get things done is in the upper chamber of Congress, but McConnell's dealmaking may not endear him to his House GOP colleagues. While he and other Senate Republicans rather presciently "became convinced that House conservatives would sink the economy and their party" rather than support a bipartisan compromise, says Politico, "some House Republicans mistrust McConnell more than they do Obama or [Senate Majority Leader Harry] Reid." They aren't wild about the deal, or sure of McConnell's fiscal conservatism, but "they are confident they always know where Democrats stand."
The rich and elderly
Obama's decision to raise the threshold for higher taxes from $250,000 to $450,000 makes for "a big tax cut for all kinds of rich people, not just those with adjusted gross incomes between the two figures," says Matthew Yglesias at Slate. Because our tax rates are marginal, meaning that only income above $450,000 is taxed at the higher rate, "if you make $600,000 or even $1 million a year you still have a very large share of your income that's taxed at a lower rate thanks to this deal." The deal also didn't have any of the expected cuts to Social Security and other federal retirement security programs, so at least for now, "old people are the winners," too.
Remember, "Congress engineered the fiscal cliff to force ambitious budget reform" to shrink America's yawning budget deficit, says The Washington Post in an editorial. Instead, the "small, imperfect package" that lawmakers eked out "will do too little to address the nation's long-term debt problem." In fact, according to the Congressional Budget Office, the deal adds $3.9 trillion to the deficit over the next decade. To be fair, the $4 trillion price tag "is against the baseline (which assumed the expiry of all tax cuts) so naturally undoing those tax increases was going to add a lot to the deficit," says Joe Wiesenthal at Business Insider. But "creating an artificial political crisis" like this was the "best chance yet to secure a grand bargain of big tax hikes and major spending cuts" to tackle the deficit, says Slate's Yglesias. It flopped, handing "a catastrophic defeat for the grand bargain."
"The fiscal cliff talks were cast as a moment for [John] Boehner to cement his legacy as speaker," negotiating a grand bargain that would "set the country on the right financial course through the Republican-controlled House," says Cillizza at The Washington Post. "The exact opposite happened." The Ohio Republican dropped negotiations with Obama to pass his own "Plan B" — raising taxes on only people earning $1 million a year — but that plan failed to even get a vote, raising questions about "how much — if any — control he had over his fellow House Republicans." That idea was reinforced when Boehner couldn't get more than half of his caucus, or even his top lieutenants, to back the final compromise, says Daniel Newhauser at Roll Call. Boehner "now slumps into the 113th Congress with gavel firmly in hand but with scant ability to wield its power."
Tea Partiers and conservatives
If the deal was bad for Boehner, it was worse for the conservative members of his caucus, who failed to derail it. The 153-page bill "was written only the day before, by Washington insiders working in the dark of night," and "crammed with giveaways and legislative spare parts," say David A. Fahrenthold, Rosalind S. Helderman, and Ed O'Keefe at The Washington Post. It was "too rushed, too bloated, too secretive, too expensive," and it "will raise taxes but do relatively little to cut government spending or the massive federal deficit." In other words, for the "Tea Party–influenced crop of House Republicans," this bill is "everything they had wanted to change about the way Washington worked." And it's not their first disappointment, says David Weigel at Slate. "Time and again, Washington is shocked" by this well-known fact, but House Republicans "believe all of that stuff they tell their conservative audiences." And they did win their majority in 2010 by "promising never to raise taxes and to take a samurai sword to the budget." Neither goal has panned out. "This is a complete surrender on everything" for conservatives, columnist Charles Krauthammer said on Fox News.
Hurricane Sandy victims
After the messy fight over the fiscal cliff bill, House GOP leaders canceled a scheduled vote on a supplemental spending bill for areas ravaged by Hurricane Sandy, mostly in New York and New Jersey. The House Appropriations Committee had even teed up a $60 billion package, matching the Sandy relief bill that passed the Senate last week. "Absent a change of heart, the upshot now is that the Senate bill will die with this Congress on Thursday at noon," says David Rogers at Politico. "I assume there is as tactical consideration here, that the Republican leadership didn't want to be anywhere near a big spending bill after the fiasco of their handling the tax debate," says Rep. Rob Andrews (D.N.J.). "I understand the tactics but there is a real human need here that is being ignored."
The fiscal cliff deal has to be a hard pill to swallow for Norquist, the influential head of anti-tax group Americans for Tax Reform. Norquist isn't the tax-squelching svengali some pundits have painted him to be, but "his particular gimmick, a 'pledge' to never cast an affirmative vote for higher taxes, had become influential on its own terms," says Slate's Yglesias. "The White House and other pro-deal Democrats see breaking this taboo as an important precedent-setter in its own right." Norquist did take to Twitter to give his blessing to the deal, saying every Republican "voting for Senate bill is cutting taxes and keeping his/her pledge." But not everyone is convinced of Norquist's sincerity. Here's Obama's political guru, David Axelrod:
Halfway through a vote he was going to lose, @grovernorquist sprints out in front to keep from being trampled by the parade.
— David Axelrod (@davidaxelrod) January 2, 2013