Ezra Klein: The specifics of the emerging deal

[flpoljunkie]

Why the White House thinks it’s winning the ‘fiscal cliff’
Posted by Ezra Klein on December 31, 2012 at 12:56 pm

Consider the ongoing fiscal cliff negotiations from the White House’s perspective.

The specifics of the potential McConnell-Biden deal are fluid, but the bottom line, at the moment, seems to be this: It raises taxes by $600 billion over 10 years, secures important Democratic priorities like unemployment insurance and the stimulus tax credits, and doesn’t include any spending cuts of note.

Here are the details, as multiple sources close to the talks have described them to me: The top tax rate rises to 39.6 percent for individuals making more than $400,000 and families making more than $450,000. Capital gains and dividends will be taxed at 20 percent with the same income thresholds. The Personal Exemption Phaseout (PEP) is set at $250,000 and the itemized deduction limitation (Pease) kicks in at $300,000. The AMT is patched permanently. The estate tax would exempt estates up to $10 million and tax them at 40 percent above that.

The various business tax credits — R&D, wind, etc — would be extended through 2013, as would unemployment insurance. The stimulus tax credits — namely, the expansions of the Earned Income Tax Credit, the Child Tax Credit, and the college credit — would be extended for five years, which is hugely important to the White House. The scheduled cuts to doctors in Medicare would be averted through spending offsets that neither side considers injurious. The treatment of the sequester is still up in the air, as the president is refusing to offset it unless revenues are part of the mix.

The complaints frustrate White House officials. They argue that Senate Democrats are one reason they don’t have as much leverage on taxes as they’d like. The bill that Senate Democrats passed to let the Bush tax cuts lapse for income over $250,000 only lasted for a year. And even if it had been a 10-year bill, it only would’ve raised $700 billion. As the White House sees it, they’re getting 85 percent or 90 percent of the revenue from that bill plus unemployment insurance plus the stimulus tax credits plus the business extenders. And their bill is permanent, and it might actually be able to pass the House.

Assuming the details of this deal remains fairly similar to what I’ve outlined here, the question of whether the White House outfoxed the Republicans or capitulated too early won’t be answerable until we know the outlines of the next deal. If the White House is able to pocket this revenue and then extract a 1:1 match, or something close to it, for any further spending cuts, administration officials are liable to end up looking quite smart. But if, as Republicans believe and some Democrats fear, the White House folds when confronted with the debt ceiling and agrees to big entitlement cuts in return for few or no revenues, this deal will be seen as the moment when the White House blinked and traded away the guaranteed revenue of the fiscal cliff for a lowball offer from the GOP.

http://www.washingtonpost.com/blogs/wonkblog/wp/2012/12/31/why-the-white-house-thinks-its-winning-the-fiscal-cliff/

[Harmony Blue]

1. I am not opposed for going over the cliff

but I am willing to admit this would be a good deal if this holds true.

[flpoljunkie]

2. No one can seriously say that the president has not bent over backward to reach a compromise

Yet, the Republicans will.

[LoisB]

3. I can live with this "deal" if it holds.

[Harmony Blue]

4. I concur

It isn't ideal, but it is realistically the best that can be mustered.

[flpoljunkie]

6. TPM: McConnell: We Have A Fiscal Cliff Deal … Almost

Still at odds over whether to delay or turn off the sequester

McConnell: We Have A Fiscal Cliff Deal … Almost

BRIAN BEUTLER 3:15 PM EST, MONDAY DECEMBER 31, 2012

In remarks on the Senate floor Monday afternoon, Senate Minority Leader Mitch McConnell said a deal to avert the so-called fiscal cliff was extremely close at hand, and outlined a procedural path to prevent all of the Bush tax cuts from expiring at midnight.

With all the tax provisions agreed to, but the parties still at odds over how to turn off or delay sequestration -- automatic defense and domestic spending cuts -- McConnell called on the Senate to address the former today and return to the spending issue early next year.

"I can report that we’ve reached an agreement on the all the tax issues," McConnell said. "As the President just said, the most important piece, the piece that has to be done now, is preventing the tax hikes.... So I agree, let’s pass the tax relief portion now. Let’s take what’s been agreed to and get moving. Let me be clear: We will continue to work on finding smarter ways to cut spending, but let’s not let that hold up protecting Americans from the tax hike that will take place in about 10 hours."

Democrats and Republicans have been at odds over whether and how to turn off the sequester, at least temporarily. Democrats want to delay the sequester by a year, and cover the cost with a mix of spending cuts and tax revenue. Republicans want any sequester delay fully financed with cuts to domestic spending programs.

http://livewire.talkingpointsmemo.com/entry/mcconnell-we-have-fiscal-cliff-deal-almost

[AldoLeopold]

5. Its good, but I detest this brinkmanship

I know its how the game is played, but it smacks also of procrastination.

I used to work in mortgage/title, and every year, end of quarter, end of year, the loan officers who sat on their rear-ends all December struggled to play catch-up with their quota on December 24 and 31st. As a result, we all had to stay at the office until late, missing our families and the holiday season.

[politicaljunkie41910]

7. So you almost had us there, if not for the BUT, and a big BUT it is.

"...But if, as Republicans believe and some Democrats fear, the White House folds when confronted with the debt ceiling and agrees to big entitlement cuts in return for few or no revenues, this deal will be seen as the moment when the White House blinked and traded away the guaranteed revenue of the fiscal cliff for a lowball offer from the GOP. ..."