Wedged between standing ovations from supporters fore and aft, President Obama on Friday steered the good ship reelection straight toward the rocks of Speaker John Boehner’s refusal to raise income-tax rates on wealthy Americans.
“We have to combine spending cuts with revenue,” Obama said from the East Room in his first formal rejoinder to Boehner’s postelection openness to higher tax revenues but not higher marginal rates. “That means asking the wealthiest Americans to pay a little more in taxes.”
Obama, the first Democrat in modern times to campaign and win reelection with a plan to raise income taxes, invited the bipartisan congressional leadership to the White House next week for the first of many meetings seeking to resolve fiscal-cliff issues. Obama said that his victory and the exit-poll data behind it prove the country is ready to raise taxes to Clinton-era levels for individuals with adjustable gross income above $200,000 and for families above $250,000.
“I refuse to accept any approach that isn’t balanced,” Obama said. “I’m not going to ask students and seniors and middle-class families to pay down the entire deficit while people like me making over $250,000 aren’t asked to pay a dime more in taxes. I’m not going to do that.”
After pausing for 13 seconds of sustained applause, Obama drove the message home.
“I just want to point out this was a central question during the election,” the president said. “It was debated over and over again. On Tuesday night we found that the majority of Americans agree with my approach. Our job now is to get a majority in Congress to reflect the will of the American people. I believe we can get that majority.”
While on the surface Obama’s rhetoric sounded confrontational, subtle changes in language may prove telling. During the ugly days of recrimination after the pursuit of a grand budget bargain failed in August of 2011, top White House aides spoke derisively of Boehner’s inability to find votes or seal a deal. The phrase “Boehner couldn’t deliver a pizza” became a clichéd West Wing summation of House GOP disorder.
Obama could have said that it was up to Boehner to compromise or find the votes. Instead he said it was “our job” to find the votes in the House and that “we” can achieve a majority. That puts Obama and the persuasive powers of the presidency squarely in the legislative game. And even as he said he wouldn’t approve a deal that didn’t ask the wealthy to pay more in taxes, Obama didn’t explicitly call for higher rates as the only means of achieving the goal of higher revenue.
That leaves both sides some room — though not a lot — to negotiate the details and semantics of higher revenue, tax reform, and deficit reduction. Obama and Boehner have now laid down their tax markers, which they contend reflect the will of the people. Each is half right. The question is can they meet half way.
On spending cuts, Obama’s words carefully left wriggle room. Saying he would not ask students, seniors, and middle-income families to “pay down the entire deficit,” he left room for cuts affecting all three in the context of a “broader deficit-reduction package.” And because Boehner already has agreed to higher revenue along with spending cuts, shrinking government appears on something of a fast track. The remaining question is the depth and breadth of the cuts.
Boehner has now said three times that he won’t support, and the House couldn’t pass, higher income-tax rates on the wealthy. That’s his marker. Everything else appears negotiable unless and until Obama can change votes within the House GOP conference or flexible definitions of higher tax revenue can be negotiated.
When asked at his Friday press conference about whether he could provice details of a possible deal on taxes and spending, Boehner refused, saying he didn’t want to eliminate options for him or Obama. That signals seriousness and purposefulness that might reassure Wall Street and its downcast sell-off psyche in the wake of an election that reinforced the gridlocked power structure of old.
Obama also called on the House to pass a pending Senate bill extending the Bush-era tax cuts for all taxpayers below the $200,000 and $250,000 adjusted gross income level. He said that would alleviate some of the uncertainty stalking financial markets and clouding consumer confidence.
“Let’s not wait,” Obama said. “Let’s extend the middle-class tax cuts right now. I’ve got the pen ready to sign the bill right away. I’m ready to do it.”
Senate Majority Leader Harry Reid echoed the call.
But Boehner knows that the Bush tax rates are his one remaining lever. He’s holding firm with a House-passed bill that extends all Bush tax cuts for one year while negotiations proceed on tax reform and a big deficit-cutting deal. He appears disinclined to hand it over before negotiations get serious.
“The increased tax rates that would be allowed under the Senate-passed bill are part of the fiscal cliff that economists are warning us to avoid. Those increased tax rates will destroy jobs in America by hurting small businesses across the country," Boehner said in a statement responding to the president.
One note on the negotiations: Sen. Bob Corker, R-Tenn., a frequent participant in so-called Gang of Eight budget talks, said on Friday that all ad hoc groups should remain on the sidelines. “Now is not the time for any of us — Republicans, Democrats, rump groups, or gangs — to be publicly promoting our own plans,” Corker said in a statement that landed strategically between Boehner’s press conference and Obama’s remarks. “Right now the only two people who are likely to get a result by year’s end are President Obama and Speaker Boehner.”
Obama and Boehner said now was the time to get to work and minimize drama, conflict, and theatrics. At week’s end those ethos appeared to hold, the repeated East Room standing ovations for Obama notwithstanding.
In the coming days, the most important audience reaction will be on Wall Street. Stocks gained slightly Friday morning but gave back those advances immediately after Obama spoke. The market shed 434 points the two days after Obama’s reelection and the retrenchment of Democratic power in the Senate and GOP clout in the House. Investors are beating a hasty retreat out of fear Washington won’t avert the fiscal cliff.
Yes, Obama and Boehner are still weighing the voters’ verdict from Tuesday. But if appearances deepen initial impressions of more gridlock, the loudest and costliest verdicts may come from the stock exchanges. Real capital, not just political capital, is at stake.