Analysis: Obama could risk going over 'fiscal cliff'
WASHINGTON (AP) - It may be just a bluff or a bargaining ploy, but the White House is signaling that President Barack Obama is willing to let the country go over the "fiscal cliff," a hard-line negotiating strategy aimed at winning concessions from Republicans on taxes.
If Washington really does fail to avert the looming series of tax hikes and spending cuts, the White House will portray Republicans as the culprits for insisting on protecting tax cuts for the wealthy, an effort the administration is laying the groundwork for now.
"This is a choice of the Republican Party," said Dan Pfeiffer, White House communications director. "If they are willing to do higher rates on the wealthy, there's a lot we can talk about. And if they are not, then they'll push us over the cliff."
But going over the cliff also would be full of risk for a president fresh off re-election and facing at least two more years of divided government.
Ending the year without a deal could roil financial markets and dent consumer confidence just as the economy is strengthening. It could make it harder for Obama to get Republican help on his second-term priorities like overhauling the immigration system and the nation's tax code, or in getting potential Cabinet replacements confirmed.
And it would signal to the country that the president's campaign prediction that the GOP "fever" would break following his re-election was a pipe dream.
House Speaker John Boehner says Obama is playing a risky game. "If the president really wants to avoid sending the economy over the fiscal cliff, he has done nothing to demonstrate it," the speaker said.
White House advisers say the president wants to avoid going into next year without a tax and spending deal, a scenario they say would hurt the economy. But with few signs of progress in postelection negotiations with Republicans, administration officials are hardening their warning that Obama will take that risk if the GOP refuses to drop its opposition to raising tax rates on families making more than $250,000 a year.
Of course, the White House warning could be a bluff, offered in the belief that Republicans are unlikely to back down on taxes unless they believe Obama is willing to go over the cliff.
The White House says Obama's firm stand on tax rate increases for the wealthiest 2 percent of Americans is driven by economics. The debt-saddled country can't afford to continue with the George W. Bush-era tax cuts, the president and his advisers argue.
Obama has made that case to Republicans before only to back down in the final stages of negotiations. But this time around, the president and his team believe they hold the political leverage.
There is some evidence to bolster that notion. Taxes were a centerpiece of the presidential campaign, with Obama running on a pledge to end the Bush tax cuts for the wealthiest Americans and return their rates to where they were in the 1990s, when the economy was thriving.
Exit polls showed that 60 percent of voters supported that position, an even higher percentage than backed Obama's re-election.
A new poll also suggests a majority of Americans would blame Republicans if the government goes over the fiscal cliff. Just 27 percent of those surveyed said they would blame Obama, compared with 53 percent who said they would point the finger at the GOP, according to the Washington Post-Pew Research Center Poll.
Seeking to cement those impressions, the White House is casting Republicans as willing to forgo tax cuts for the middle class in order to protect lower rates for wealthier Americans. Rates for all income earners will go up at the end of the year if both sides can't reach a deal.
In turn, Republicans say Obama is acting like a stubborn partisan who will put the economy in peril in order to get his way.
"My sense is the White House wants to go over the cliff," said Tony Fratto, a former Treasury and White House official under President George W. Bush. "That may be the only way they get rates they want."
Going over the cliff could mark a new low in the relationship between the president and congressional Republicans. While the contentious debates earlier in Obama's first term over funding the government and raising the nation's borrowing limit went right up to the edge, both sides were always able to reach a deal.
As Obama ran for re-election, he sought to assure voters weary of Washington's bickering that things would be better if he won a second term.
Speaking to supporters in June, he said, "I believe that if we're successful in this election - when we're successful in this election - that the fever may break."
"My hope, my expectation, is that after the election, now that it turns out that the goal of beating Obama doesn't make much sense because I'm not running again, that we can start getting some cooperation again," he added optimistically.
If Washington really does fail to avert the looming series of tax hikes and spending cuts, the White House will portray Republicans as the culprits for insisting on protecting tax cuts for the wealthy, an effort the administration is laying the groundwork for now.
"This is a choice of the Republican Party," said Dan Pfeiffer, White House communications director. "If they are willing to do higher rates on the wealthy, there's a lot we can talk about. And if they are not, then they'll push us over the cliff."
But going over the cliff also would be full of risk for a president fresh off re-election and facing at least two more years of divided government.
Ending the year without a deal could roil financial markets and dent consumer confidence just as the economy is strengthening. It could make it harder for Obama to get Republican help on his second-term priorities like overhauling the immigration system and the nation's tax code, or in getting potential Cabinet replacements confirmed.
And it would signal to the country that the president's campaign prediction that the GOP "fever" would break following his re-election was a pipe dream.
House Speaker John Boehner says Obama is playing a risky game. "If the president really wants to avoid sending the economy over the fiscal cliff, he has done nothing to demonstrate it," the speaker said.
White House advisers say the president wants to avoid going into next year without a tax and spending deal, a scenario they say would hurt the economy. But with few signs of progress in postelection negotiations with Republicans, administration officials are hardening their warning that Obama will take that risk if the GOP refuses to drop its opposition to raising tax rates on families making more than $250,000 a year.
Of course, the White House warning could be a bluff, offered in the belief that Republicans are unlikely to back down on taxes unless they believe Obama is willing to go over the cliff.
The White House says Obama's firm stand on tax rate increases for the wealthiest 2 percent of Americans is driven by economics. The debt-saddled country can't afford to continue with the George W. Bush-era tax cuts, the president and his advisers argue.
Obama has made that case to Republicans before only to back down in the final stages of negotiations. But this time around, the president and his team believe they hold the political leverage.
There is some evidence to bolster that notion. Taxes were a centerpiece of the presidential campaign, with Obama running on a pledge to end the Bush tax cuts for the wealthiest Americans and return their rates to where they were in the 1990s, when the economy was thriving.
Exit polls showed that 60 percent of voters supported that position, an even higher percentage than backed Obama's re-election.
A new poll also suggests a majority of Americans would blame Republicans if the government goes over the fiscal cliff. Just 27 percent of those surveyed said they would blame Obama, compared with 53 percent who said they would point the finger at the GOP, according to the Washington Post-Pew Research Center Poll.
Seeking to cement those impressions, the White House is casting Republicans as willing to forgo tax cuts for the middle class in order to protect lower rates for wealthier Americans. Rates for all income earners will go up at the end of the year if both sides can't reach a deal.
In turn, Republicans say Obama is acting like a stubborn partisan who will put the economy in peril in order to get his way.
"My sense is the White House wants to go over the cliff," said Tony Fratto, a former Treasury and White House official under President George W. Bush. "That may be the only way they get rates they want."
Going over the cliff could mark a new low in the relationship between the president and congressional Republicans. While the contentious debates earlier in Obama's first term over funding the government and raising the nation's borrowing limit went right up to the edge, both sides were always able to reach a deal.
As Obama ran for re-election, he sought to assure voters weary of Washington's bickering that things would be better if he won a second term.
Speaking to supporters in June, he said, "I believe that if we're successful in this election - when we're successful in this election - that the fever may break."
"My hope, my expectation, is that after the election, now that it turns out that the goal of beating Obama doesn't make much sense because I'm not running again, that we can start getting some cooperation again," he added optimistically.
Our government is so caught up on what they want that they are screwing it up for the people.  Quite frankly, I want to do my taxes on January 5th.  The government screwed that up last year and their doing it again this year.  I want to claim my mortgage interest and charitable donations.  Government wants to take those deductions away thinking it only hurts the rich.  Well, I'm not rich.  As a matter of fact, I'm broke and my refund helps me play catch-up on the things I've been going without for the year (like tires or new clothes for the kids).  We make too much money to be on state assistance (thank heavens), but we're the ones that pay the most.  I haven't had a late payment in ten years, but the government doesn't care, because I'm considered "middle class".  I'm in the middle all right.  Stuck and squeezed like a sandwich.
Obama, for whom the word compromise means "my way or not at all."
BOTH the Dems and the Reps are akin to a couple of 2 year olds who want things THEIR way or NO way. Â They BOTH need discipline.
I can tell you right now that this tax season will be a mess. IRS is not accepting e-filed returns until Jan 22nd. Usually the 15th. They have always said 8 to 15 days to process returns this year is 15 to 21 days. Now add all the taxes that may change the AMT patch that expired at the end of 2011 and it will be a mess. I for one will not enjoy explaining to taxpayers why their refund is taking so long. The government had all year to fix this and chose not to. Now we pay the price. I already have a tax rate that is double Mitt Romneys and trust me I dont make that much. Tell little kids that don't get to go to head start in January that there is something called a fiscal cliff. They won't care. This will cut border patrol and the DEA so we can have more illegals and drugs in our cities. Not every program is an entitlement program. We have to fund our educuation. I blame the republicans because they have control of the house and there is only so much the executive branch can do. The legislative branch has to step up and take responsibilty for their constituents who elected them.    Â
Obama see himself as a European lefist who wants to trade our international power for a large social entitlement framework here in the US. When Europe abandoned its international responsibilties after the war, the US was there to take over. Without the US the Europeans would have been crushed by the communist. Who does Obama think will step in when we have withdrawn from managing world order to fund our entitlements? The UN? Without the US it will be a disaster, these chumps (China, Russia, Muslim Brotherhood) are power-hungry wolves. Obama doesn't have to be a villain to be a danger to our country and to the world.
 @Alltheway You are scared of China? A country that just this year got its first air craft carrier, which they bought used and couldn't figure out how to land a plane on until last month?Â
You have to ask yourself what the ultimate goal is here. Obama knows his hands are tied on many things unless the Dems can gain control of the House. He wants the power that he can only get through a united liberal majority in all branches of government. Considering the growing number of people whose lives are subsidized by the government who live in fear of reduced benefits, he may succeed. From the Dems, there will be no significant spending cuts in the next few years. There will be no effective reforms of failing social programs. The effects of the Affordable Healthcare act will stagger the economy and cripple our health care system. Yet when the dust settles and the history books are written, somehow the blame will fall to the Republicans.
@acepaul - Amen to that!
Obama has no intention of accepting any deal the republicans submit. He intends to go over the cliff because he will get his tax increase and significant cuts in defense. It's a dream come true in his book.
 @Alltheway Exactly...It's pretty simple. We are going the cliff and there is nothing the Republicans can do about it. Obama and the Democrat majority want to go off the cliff because that gives them everything they want and more.
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Obama wants to tax everyone who is not already on some kind of non social security tax funded entitlement program. Obama wants to cut defense spending, even the 10% Sequestration is not a deep enough cut for him. Obama wants to smear the Republicans so that they lose more seats in both the House and the Senate so he can roll right over everyone on his way to a European Utopia.
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Even if the Republicans cave and sign the Obama budget, you are still going to see the spending increase beyond any revenue increases. You won't get Entitlement Reform because the Republicans will take such a beating in the Midterms Obama won't have to deliver a compromise in any form.
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Obama does not care about the middle class unless to comes to getting their votes and their taxes. He already knows that the taxes he is asking for will not make a difference and the democrats once they are back in full control of the House and Senate will repeal the Bush tax cuts for everyone.
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If the Democrats are serious about taxes on the wealthy they can start in their own house first by example, rather than cheap class warfare rhetoric and lip service. They can do that be not taking advantage of tax loopholes and using deductions. On the line where it says to put you deductions, put the number zero.
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Live it before you legislate it!
 @Atomictoybox You can paint any picture that you want, the fact of the matter is that our deficit has gone down each year since 2009, and continues to go down. Obama's discretionary spending has been very low compared to other presidents. I realize that this is something that the Republicans cannot accept, but it's true. At some point you guys are going to have to face the reality that Bush was the big spender, and put us into a hole that we are slowly digging ourselves out of.Â
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 @lakeview  Looks like someonestarted early on the pot smoking thing.
 @lakeview  @AtomictoyboxÂ
In the EIGHT years Bush was in office, national debt went up under $5 trillion. That's still a huge number, but in the FOUR years that Obama has been in office, it has gone up $6 trillion. Â He still has four years to go... Â Who's the big spender?
@lakeview @Atomictoybox - OMG! What planet do you live on? Alltheway has in almost right . . . your head is somewhere, but I don't think it's in the sand.
Are you kidding me, wholly cow have you got your head in the sand. Truly try looking at other news agencies for a different view. You are being fed a bunch of lies and have swallowed the whole cow.
The GOP is already signaling today that it would be political suicide for them not to do the deal to extend the current rates for the 98% of Americans before Christmas. They will cave and do that deal and everyone will kick the can down the road regarding spending cuts and tax increases for the top 2%. Â
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Frankly if this happens, it's going to hurt a lot of investors. Capital gains will go to 20% from the existing 15% for at the very least, the top 2%, but what is really going to hurt some people is when qualified dividends begin being taxed as earned income instead of at the capital gains rate.Â
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Depending upon what the kick the can down the road plan turns out to be, it could really affect people with investments who are earning income from dividends.Â
 @lakeview If you are James Sinegal of Costco, you can get the company to borrow billions of dollars now in order to to pay out a $7 per share dividend to avoid paying higher taxes that JAMES SINEGAL has advocated  that everyone else pay. Bourgeois Hypocrites, where is Robespierre when you need him?
Let's see here: The Republicans want to cut spending by reducing funding on various programs and the Democrats want to raise taxes. Neither side is willing to say "OK, let's do both." I guess that wouldn't be politically expedient.
 @Necrobio That isn't true. Both plans mix spending cuts and tax increases.  Â
The problem is not that hard to solve. Just put a tax on all securities transactions. Tax 1% from the buyer and 1% from the seller, apply all the revenue that generates to the national debt. The money saved on interest will fund the rest of the shortfall.
 @4ShotLatte You do know that profits from securities' sales are taxed.?
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A great deal of our nation's securities are held in pension funds. You would be taxing pensions indirectly but you thought of that already.
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I say spread the pain. Fifty per cent Federal excise tax on tattoos and piercings (double for those idiotic earlobe hubcaps that seem to be seen in inverse ratio to one's economic status).
 @Getov Mylon I know the majority of the pension funds are held in securities, however most of them are invested in long term funds. The people that would be hurt the most are the speculators that make millions of transactions a week for their own profit, those that speculate on commodities (like the ones that caused the gas price spike) Everyone would feel the pain some but at 2% it would not be a major pain for the vast majority of the people.
The GOP should Just go home and pick it up next year and see what really needs to be done. let the huge cuts happen let all the taxes increase. Who cares! Let it happen!
Cliff dive! As Senator Murray says, next session it will be easier to get a deal done, and make it retroactive. Mid term elections are going to be a hoot!
If they want to return to the Clinton era tax rates because the conomy was doing so well, then they will need to return to ALL of the tax rates of that time. That means everyones rates will increase. They also need to return to the Clinton era spending rates, 18% of GDP rather than the 24% being spent right now. This is really very simple, we don't have a tax problem, we have a spending problem.
 @Unsalvageable "we don't have a tax problem, we have a spending problem".... Fox rhetorical talking point #47. Say... rinse... repeat.Â
@TruthinAdverts -  Granted, I just have my household to run, but I am pretty certain that if I bring in $30,000 a year but decide to spend $40,000 a year, refuse to follow a budget or limit my spending, and continually borrow more and more money to get that extra $10,000, I HAVE a spending problem. Please explain how the same principles do not apply to the government.
"My hope, my expectation, is that after the election, now that it turns out that the goal of beating Obama doesn't make much sense because I'm not running again, that we can start getting some cooperation again," he added optimistically.
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So Republicans you might as well cooperate (do it my way) as I have nothing to loose if you don't.
@Dumbfounded883, yes, HE has nothing to lose. We're the ones who are going to suffer.
@Dumbfounded883 The best thing to do is beat him at his own game make him live by his rules make him go out side his experience attack him on every level night and day make him rue the day he was reelected..
Go for it! This is about cutting spending on entitlement programs that have run amuck. Obama is the one who refuses to cut his out of control spending. Raising taxes on those who make over $250,000 is useless because the rich have moved their money and will not make over $250,000. This does not resolve the problem of spending by the democrats.Â
Yep....the kids are arguing again. Snot nose little brats can't get along, and both need to be put in "time out" until they can play nice. When our "parties" are willing to risk the financial health of our country over partisan bickering, it's time to slap the taste out of BOTH their mouths. Dunno about you all, but I'M sick of their crap.