Negotiations over the so-called ‘fiscal cliff’ resume in earnest as Congress returns today. Both sides have struck cooperative tones since Obama’s re-election. Even so, he and House Speaker John Boehner, R-Ohio, the GOP’s pivotal negotiator, have spent most of the past two years in a toxic political climate in which both sides have fought stubbornly to protect their constituencies.
A big coalition of business groups says there must be give-and-take in the negotiations to avoid the “fiscal cliff” of massive tax increases and spending cuts. But raising tax rates – a White House priority – is out of the question, the group adds.
The homebuilding industry says it won’t tolerate even a nick in the mortgage interest deduction. It doesn’t matter, industry leaders say, if it’s part of a broad, spread-the-pain package designed to tame the soaring debt.
And there’s no ambiguity in the views of the top lobbying arm for retirees.
“AARP to Washington: No cuts to Medicare and Social Security in last-minute budget deal” the group’s Web site declares. AARP nixes the notion of slowing the cost-of-living formula for Social Security recipients, even if it’s part of a big, bipartisan compromise package. And President Barack Obama should drop his idea of raising Medicare’s eligibility age, AARP adds.
So much for the notion of shared sacrifice as Congress and the White House face a Dec. 31 deadline to craft a far-reaching deficit-reduction plan. If they fail, the government tips over the so-called fiscal cliff, at least for a time. Nearly everyone’s taxes will rise, and federal programs will be whacked. Financial markets might quake, and a new recession could begin, economists say.
In Washington, meanwhile, it’s virtually every group for itself, scrambling to protect 100 percent of each tax break and government payout it now enjoys.
America is split down the middle politically, as the last half dozen presidential races have shown. Aside from a few think tanks and civic-minded groups, there’s almost no talk of splitting the pain among interest groups, populations and professions in a manner that seems inevitable if lawmakers are to achieve the trillions of dollars in deficit-reduction both parties call for.
The old adage, “Don’t tax thee, don’t tax me, tax the man behind the tree” was never more in vogue.
Of course, some of the tough talk may be posturing. No one wants to show a willingness to compromise at the start of a long, tough negotiating season.
Still, the adamant positions that major interest groups are taking – and their insistence that sacrifices hit others, not them – underscore the difficulty Obama and congressional leaders face. The tougher a group talks to its members and the public, the harder it is to back down later when a bit of shared pain for everyone emerges as the only path to a deal.
The line-in-the-sand talk begins, of course, with top politicians themselves.
“Raising tax rates is unacceptable,” House Speaker John Boehner, R-Ohio, said shortly after Obama won re-election. He seemed unfazed by Obama’s campaign promise to let the Bush-era tax cuts expire for couples making over $250,000 a year.
Washington insiders think both men might bend, as they did last year when they nearly struck a “grand bargain” combining major spending cuts with tax increases. Boehner’s conservative colleagues rebelled before the package took final shape.
Boehner’s House caucus seems slightly less restive now. But outside groups are gearing up to fight virtually every idea being floated to reduce spending or raise revenues. To reach a deficit-cutting package big enough to replace the fiscal cliff, lawmakers will have to stare down these groups, which pour millions of dollars into political campaigns and flood congressional offices with constituents’ phone calls.
Interest groups, like many politicians, talk warmly of compromise in the abstract. But they dig in when the talk turns to specific ideas that run counter to their philosophies or profitability.
“There has to be give” in the negotiations, said Jade West, who heads the decade-old Tax Relief Coalition, comprised of major business groups. But on the question of raising tax rates on the rich – probably the most-discussed issue on the fiscal cliff table – West said her group is adamantly opposed.
“I don’t care what he said,” she said of Obama’s campaigning on the topic. “The sound bite, `tax the rich, tax the rich, tax the rich'” ignores the harm such a policy would do, she said.
“Taxing the people who hire is just nuts,” West said.
AARP is equally firm in opposing changes to Social Security and Medicare, the mammoth “entitlement” programs that economists say must be reined in soon to avoid disastrously large deficits in future years.
Seventeen months ago, AARP showed more flexibility. Its policy chief said the group would consider modest cuts in Social Security for future retirees, noting that such changes seem all but inevitable at some point. AARP members complained, the official left, and the organization resumed the stance it holds today: no reductions in Social Security or Medicare benefits.
Itemized tax deductions are another area where Democrats and Republicans are looking for possible ways to generate more government revenue. Here, too, powerful lobbying groups are rallying to oppose any changes that would cost their members money.
The home mortgage interest deduction saves borrowers $99 billion a year in taxes, making it easier to buy and sell houses. Should even a small portion of that tax break be eliminated, perhaps for the richest people, to help reduce federal borrowing?
No, says Jerry Howard, chief executive of the National Association of Home Builders. Home owners suffered huge losses in personal wealth during the recent collapse of the housing market and the sector should be spared any further dings, he said.
“While the rest of the nation was in a recession, we were in a depression,” he said. “Congress should be embarrassed” to even think of asking homeowners to help pay for a fiscal crisis that lawmakers brought on themselves through years of inaction, he added.
It’s the same tune at universities and other institutions that rely on charitable gifts. They want to fully exempt the charitable gift deduction, which costs the government about $51 billion a year, from a role in the fiscal cliff talks.
“We urge you and House leaders not to impose any limits or caps to the charitable deduction,” the Charitable Giving Coalition said in a recent letter to Boehner and others.
Like other interest groups, this one says it has special attributes that set it apart.
“The charitable deduction is different than other itemized deductions in that it encourages individuals to give away a portion of their income to those in need,” the letter said.
And so it goes, group by group, tax break by tax break, payout by payout. Everyone is special. Everyone is deserving.