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Obama Sets Stage for Conflict

Just as it looked like a fiscal cliff deal was coming together, President Obama gave a partisan, sarcastic speech this afternoon that seemed intended to set back the entire process. As Jonathan wrote, Republicans have good reason to think the president’s goal is to go over the cliff. But they also suspect the White House is preparing to push for further tax increases, in addition to the hikes on individuals making over $400,000 (and families making over $450,000) a year.

“What they’re telegraphing to me is that when Republicans ask for spending cuts, [Democrats are] gonna say ‘You’re not getting those unless we get more tax hikes’,” said one Republican Senate aide after the speech.

According to Senate GOP sources, there is no more debate on the deal to raise taxes on those making over $400,000, which is necessary to avert automatic across-the-board expiration of the Bush tax cuts. But Republican leadership is balking at the White House demand to delay sequestration without corresponding, targeted spending cuts.

“Not only was [Obama’s speech] unhelpful and antagonistic (as pretty much every journalist on Twitter and even Ezra Klein recognized), the tax part of negotiations is done,” another Republican aide said in an email. “There’s already an agreement there. The sticking point is Democrats trying to turn off the sequester cuts. Republicans aren’t going to agree to simply set spending cuts aside.” 

One big concern is that the White House will demand additional tax increases down the road, in return for spending cuts. Some also say the current tax deal will impact more Americans than initially thought. According to a Senate Republican source, the tax increase on individuals/families making over $400,000/$450,000 a year is not enough to reach the $600 billion in tax revenue included in the potential deal, even if you include hikes on capital gains, dividends, and phased-out personal exemptions and itemized deductions. In other words, those making well under $400,000–and as low as $250,000 a year–could also end up paying higher taxes under the deal.