Monday, Dec. 31, 2012 | 2:13 p.m.
President Barack Obama looked loose, relaxed and spoke jovially Monday as he announced that Congress was nearing a deal to extend tax cuts for the middle class even though lawmakers will miss their self-imposed Jan. 1 deadline for avoiding the fiscal cliff.
“Today it appears that an agreement to prevent this New Year’s tax hike is within sight,” Obama said. “We’re hopeful that Congress can get it done.”
Senate Minority Leader Mitch McConnell agreed.
“We’ve reached an agreement on all of the tax issues. We are very very close,” McConnell said. “The president said: ‘For now our most immediate priority is to stop taxes going up on middle class families tomorrow.’ I agree. Let’s pass the tax relief portion now. Let’s take what’s been agreed to and get moving.”
But Senate Majority Leader Harry Reid? Well, he’s not quite saying anything publicly yet about the deal McConnell and the White House appear to have struck.
And that may all be part of the plan.
Reid and McConnell began the weekend as the pair tasked with saving fiscal cliff negotiations that for the last several weeks, centered around Obama and House Speaker John Boehner, until they ran aground over the Christmas holidays.
They negotiated for about 36 hours. And then Reid announced he couldn’t come up with a counteroffer to the Republicans’ latest proposal.
So on Sunday, a worried McConnell called his old friend in the White House, Vice President Joe Biden.
And a good cop, bad cop drama has been playing out ever since.
The good cop in this scenario is Biden. The former senator has a storied working relationship with McConnell, and since going to the White House, has helped to mediate other stalemates between the minority and the majority in the Senate, such as the 2011 debt ceiling deal that got the fiscal cliff crisis rolling.
Biden and McConnell have been on the phone all but constantly over the last 24 hours, according to McConnell, having spoken as late as 12:45 a.m. today and as early as 6:30 a.m. this morning to fine-tune the details of a deal.
Bad cop Reid has been keeping a comparatively low profile on the sidelines. On Sunday, he shrugged at the McConnell-Biden talks by saying, “I wish them well.” On Monday he quite simply noted that serious differences remained between the two sides and though he was hopeful, “we really are running out of time.”
But that doesn’t mean Reid is sitting it out—as evidenced by the phone calls between Reid’s office and both the White House and McConnell’s office. Reid and McConnell haven’t been talking directly for the last 24 hours, according to a McConnell aide.
It is comparatively easier for McConnell and the White House to rubber-stamp a deal than it is for Reid or House Speaker John Boehner, who have to drum up the votes to carry a deal through Congress.
Right now, both Reid and Boehner are facing a bit of a revolt from inside their own caucuses over the presumed terms of the budding deal.
The deal, as it appears now, would extend tax rates on incomes up to $400,000 for individuals, and $450,000 for couples. Tax rates and capital gains rates would increase for those earning higher incomes.
The deal would also, according to Obama, include an extension of unemployment insurance benefits at their current levels. It would also preserve other expiring tax provisions, including the child-care tax credit, tuition tax breaks, tax breaks for energy companies, and a permanent patch for the alternative minimum tax.
In the Senate, some Democrats are balking at the idea of allowing an extension of tax rates up to $450,000. Democrats had been angling for months to make the ceiling for such an extension $250,000, and argued that they had a mandate after the 2012 elections to hold fast to that threshold.
“We’re going to lock in forever the idea that $450,000 a year is middle class in America,” said Iowa Democratic Sen. Tom Harkin. “The direction they are heading in is absolutely the wrong direction for our country.”
Meanwhile in the House, Republicans have long objected to raising tax rates at any income level, and in the days before Christmas, objected to a Boehner-backed bill to raise taxes only on incomes over $1 million.
House Republicans are waiting for the Senate to make the first move. And with less than nine hours remaining until tax rates are scheduled to rise, that chronology may make striking a deal much easier.
This afternoon, House leaders announced they would not schedule any votes before midnight, guaranteeing that the country will miss the fiscal cliff deadline.
After midnight, the proposals on the table technically would not raise taxes on anyone. Instead, lawmakers would be reducing tax rates that jumped when the calendar reached 2013—a more politically palatable option for some lawmakers.
The effects of the fiscal cliff, should the country go off of it for a few days, will be too slight in the immediate term to be felt by most. The current Congress has until 11:59:59 a.m. on January 3 to vote on a compromise before it becomes the 113th Congress’ problem.
Certain Democrats in the House, and certain Republicans in the Senate – including Nevada Rep. Shelley Berkley and Sen. Dean Heller – have already said they would seriously consider voting for a fiscal cliff deal that allowed tax rates on incomes above about $500,000 to rise.
A tax-rate bill alone will not avert the fiscal cliff, the brunt of which is due to scheduled government spending cuts. Obama suggested action on those cuts would be deferred to another day, a few months down the road.
“We’re going to solve this problem instead in several steps,” Obama said. “The threat of tax hikes going up is only one part of this fiscal cliff that everyone’s been talking about…I’m willing to do more but it’s going to have to be balanced.”
Republicans in both the House and Senate expressed frustration with Obama after he spoke Monday, arguing that new tax hikes were a “slap in the face” and couldn’t pass the House.
That all but guarantees another fight over these well-worn topics of taxes and spending cuts lurks down the road.