Fiscal Cliff Discussions Resume

November 14, 2012

Lawmakers returned to Washington, D.C. this week to, among other things, begin work to address the looming fiscal cliff before the end of the year. With the first two weeks of the lame duck session expected to consist of leadership elections and other non-tax issues, any action on the expiration of the Bush tax cuts, a patch for the individual alternative minimum tax, expired and expiring tax extenders and budget sequestration is unlikely to happen until after Thanksgiving while a final resolution is unlikely until late in the year.

To begin the process, President Barack Obama invited Congressional leaders to meet with him at the White House later this week, however, he has firmly stated since winning reelection that Congress must extend the middle-class tax cuts, while for those individuals earning over $200,000 per year and families earning over $250,000 the Bush tax cuts should expire—specifically calling for Congress to support Senate legislation, S. 3412. The President has said while he is “open to compromise” he will not accept a Republican plan that only contains spending cuts, but was encouraged to hear House Speaker John Boehner (R-Ohio) agree that revenue has to be part of this equation.

In separate press conferences, neither Boehner nor Senate Majority Leader Harry Reid (D-Nev.) gave the impression they are willing to budge from their long-held positions on how to avert the fiscal cliff. Reid reiterated his plan for rolling back the Bush-era tax cuts for wealthier individuals, while Boehner said that Republicans “are willing to accept new revenue” as part of a deal to bring down the deficit, but cautioned that any new revenue would have to come “as the byproduct of a growing economy, energized by a simpler, cleaner, fairer tax code, with fewer loopholes, and lower rates for all” and not as a result of “government taking a larger share of what the American people earn through higher tax rates.” He added that Republicans would only agree to these increased revenue levels if the president agreed to reduce spending and reform entitlement programs.

Leadership has recognized that the outcome of the election means that both parties will have to work together—nothing will get accomplished otherwise. Their willingness to come together and the apparent readiness to consider a wide array of options looks very encouraging for an attempt to reach a bipartisan and comprehensive approach to the fiscal cliff and also address the debt.