Victory for Obama: Boehner Gives in on Tax Rates
It was inevitable, given Boehner's poor negotiating position and his increasingly nervous caucus, that the speaker would give in and give Obama an increase in tax rates on upper-income Americans.
His defenders will point out he wants the tax increase to hit only those whose incomes are in excess of $1 million. And if he was negotiating with a reasonable and honest man, this might set the stage for a deal on avoiding the fiscal cliff.
But the president is neither reasonable nor honest. Boehner has opened the door to higher tax rates and Obama will likely insist on raising them for those who earn more than $250,000 -- just as he has advocated for a year or more.
Speaker John Boehner has proposed allowing tax rates to rise for the wealthiest Americans if President Barack Obama agrees to major entitlement cuts, according to several sources close to the talks.
It is the first time Boehner has offered any boost in marginal tax rates for any income group, and it would represent a major concession for the Ohio Republican. Boehner suggested hiking the Bush-era tax rates for top wage earners, including those with annual incomes of $1 million or more annually, beginning Jan. 1, two sources said.
Obama and Boehner spoke by phone Friday after a lengthy face-to-face session at the White House on Thursday. The quickening pace of private conversations between the two key players in the fiscal-cliff talks shows progress is being made in the negotiations, although they are not close to a deal yet, sources said.
Boehner also wants to use a new method of calculating benefits for entitlement programs known as “chained CPI,” which would slow the growth of Medicare and other federal health programs and save hundreds of billions over the next decade.
The speaker’s offer would not include extending federal unemployment benefits, and it is unclear how it would address sequestration — the tens of billions in spending cuts scheduled to go into effect for the Pentagon and other federal agencies starting Jan. 2.
And Republicans remain unyielding on agreeing to raise the U.S. debt limit as part of any agreement to avoid the fiscal cliff.
Boehner’s offer on tax rates was a significant move toward Obama’s position. But the proposal, as a whole, still isn’t acceptable to Democrats because of the level of revenue, the changes to entitlement programs that would hit beneficiaries and the absence of an extension for unemployment insurance benefits, according to a source familiar with the talks. The president has also been adamant that any deal include an increase in the debt ceiling.
Obama has Boehner on the run and is positioning himself to nearly run the table on the speaker. The president has some red lines on entitlements that most Democrats won't cross. They include fiddling with Middle Class entitlement benefits, raising the age of eligibility for Medicare, and the inclusion of extended unemployment benefits. If Boehner expects anything remotely specific when it comes to entitlement reforms, he's not going to get it. And there will be no deal without the unemployment benefits extension. There may even be some kind of stimulus, if Democrats on the Hill can be believed.
In short, Boehner holds a pair of deuces while Obama is showing three Ladies. With the deadline looming -- Obama goes on vacation starting Tuesday -- the speaker must decide: Deal or no deal? He may conclude that the deal that is shaping up would be unacceptable to many House Republicans in which case he may be forced to walk away. But there are just as many -- perhaps more -- GOP members who are worried about the consequences of being blamed if the country goes over the fiscal cliff and might accept most of what Obama is selling.
There are no red lines anymore for Boehner, He just opened the door to total capitulation by agreeing to a rate increase. If he has caved on taxes, there is no other issue that anyone will believe he will go to the mat on.
A weak hand played poorly by the speaker.