BY ADEYEMI OSHUNRINADE
House Speaker John Boehner’s offer this week is one President Obama can’t afford to accept. In a desperate attempt to avoid going over the fiscal cliff, Mr. Boehner, presented to the White House a deal that would extend the debt limit for a year, as part of a deficit reduction the GOP wants to ensure a cut in government spending and avoid the fiscal cliff. If the issue is unresolved by end of the year, every American will pay more in taxes, followed by an aggressive spending cut and a return to the Clinton era tax rate.
The new deal pushed forward by Mr. Boehner will allow the Obama administration to raise the debt ceiling, a move which the GOP had earlier opposed and which formed the basis for the Republican sweep in the midterm elections that saw the GOP taking control of the House of Representatives. The speaker may have renege on his party’s position not to raise taxes on affluent Americans, by putting forward a proposal that would allow tax rate on household with income over $1 million to return to the Clinton rates of the 1990s while extending the current reduced rate for all income as reported by Politico.
While Mr. Boehner’s offer is a step in the right direction, his proposed tax increase on income of more than $1 million is an offer President Obama is unlikely to accept. First, his tax increase on income within $1 million bracket will not raise enough revenue to sustain the economy, if the President decides to go ahead with the spending cut put forward by the GOP. Secondly, President Obama had campaigned to raise taxes on income above $250,000. It was a campaign promise that won him support among voters and one believed to have helped his reelection to the White House. A decision to go back on his promise will not sit well with his supporters though, majority of Americans believe both parties should negotiate and possibly allow for concessions to avoid the fiscal cliff.
The latest development could be read as a signal there is a deal in the making, since Mr. Boehner had earlier rejected any tax increase on the wealthy. He had offered instead to increase tax revenue by eliminating deductions and tax loopholes enjoyed by the rich even though, analysts have said such method will not generate enough revenue to override the aggressive deficit reduction his party is seeking. The Obama administration has indicated that only a balanced approach which combines increased revenue with higher tax rates on the wealthy should be part of broader deficit reduction, to prevent the middle class from bearing the cost or getting hit too hard.
President Obama has since responded to Mr. Boehner’s offer with a counteroffer, which would raise revenue by $1.2 trillion over the next decade but keep in place the Bush-era tax rate for household making below $400,000. An offer that many believe is close to what Mr. Boehner proposed as a way forward to avoiding a fiscal cliff. With his offer, the President has made what could be described as a reasonable concession. Bearing in mind, he had earlier proposed raising taxes on household earning more than $250,000. The new concession by the President is expected to permanently extend the Bush-era tax cuts on household with income below $400,000, meaning that only those with income beyond the threshold would see a tax increase from 35% to 39.6%.
The President’s plan would cut the deficit by $1.22 trillion over 10 years, unlike the $1.2 trillion in cuts the GOP had initially offered. “Of that $800 billion would be cuts to programs, and $122 billion to come from adopting a new measure of inflation that slows the growth of government benefit, especially Social Security.” According to a White House NY Times report. Based on same report, half of the $800 billion in cuts would come from Federal health care programs. Such would include $200 billion from mandatory programs, $100 billion from domestic programs and another $100 billion from military spending.
Irrespective of the final outcome, the current atmosphere is an indication both sides are getting closer to averting a fiscal trouble. There is a possibility the White House and the Boehner’s side could reach an agreement by end of the year or at most early January. However, there are still differences. Mr. Obama is sure not to accept Boehner’s proposal to raise tax on household with income over $1 million, a move far from what the President wants which is to increase rate on earnings over $250,000. Though, the President is likely to raise the household earning a little bit more as he has since conceded with a $400,000 offer. He will also fight for the middle class and won’t agree to any concession, likely to burden the most vulnerable.
Mr. Boehner on the other hand, will strive to achieve his party’s agenda of spending cuts and smaller government, whereas the President will continue to ask for upfront spending on infrastructure and extending benefits for the unemployed. It is expected there would be a meeting point where both sides are likely to ditch their party’s ideology to save the nation from a looming fiscal cliff.
Dr. Adeyemi Oshunrinade [E. JD] is the author of ‘Wills Law and Contests,’ ‘Constitutional Law-First Amendment,’ ‘Murder of Diplomacy’ and ‘SAVING LOVE.’ Follow on Twitter @san0670.