Late Friday afternoon, December 28, President Obama held a press conference reporting on the status of negotiations on the so-called ‘Fiscal Cliff’. Having met with House and Senate Democrat and Republican leaders earlier the same day, in his press conference Obama reported both sides had made progress during the day toward an eventual deal. Senate leaders Reid and McConnell were in fact working on an agreement as he spoke, Obama noted.
Whatever Senate leaders Reid and McConnell may work out will almost certainly come to a Senate vote by December 31st. Less certain is whether the House of Representatives will allow a vote on the same Senate package to be taken by then as well. An ominous indication of what the details of the Senate version might be were hinted by Obama during his press conference, as he indicated the deal would require “the wealthiest to pay a little more” and that spending would be cut “in a responsible way”. Watch for an emphasis on ‘little’ with regard to taxes, and on ‘responsible’ meaning major spending cuts.
Should the House balk at voting on the forthcoming Senate proposal, Obama noted he was prepared to have Senate Democrat leader, Harry Reid, introduce a second bill, the outlines of which he, Obama, suggested before the Xmas holidays. That alternative bill would reintroduce the tax cuts for the 98% earning less than $250k a year, pass an extension of unemployment insurance, as well as other unspecified economic growth measures.
The first package being developed this weekend in the Senate by Reid-McConnell will not come up for a vote in the Senate until Monday, December 31. The House will then either vote it up as well or refuse to vote. If the latter, then the Obama-Reid backup proposal will likely come up for a vote on it on January 2 or 3. At that point, the Bush tax cuts will have expired officially. That means the vote on the tax cuts for the 98% will be a vote to reintroduce and pass the 98% tax cuts. House radicals who might refuse to vote on the Senate’s initial December 31 proposal—in which tax cuts for the wealthiest 2% aren’t extended—might then find themselves in the difficult position of NOT voting for reintroducing tax cuts for the 98%. This possibility will almost certainly force the House radicals to vote for the Senate’s first version on the 31st, especially if that Senate version includes major cuts in spending for social security, Medicare, Medicaid and the like, and ‘smoke and mirrors’ tax revenue hikes on the 2%. In short, the House radicals now find themselves ‘boxed in’, as Obama doubles down on them.
Metaphorically, they have jumped out of Boehner’s ‘Plan B’ frying pan proposal of last week, onto the hot stove of Obama’s double down proposal announced today. Watching them ‘hot step it’ to an eventual deal may prove entertaining.
As this writer has predicted since November, a deal will be concluded between the two wings of the ruling party of Corporate America. That deal will come in three stages: the first a partial settlement to get through the January 1, 2013 artificial deadline to show the ‘markets’ (e.g. Investors, speculators and corporate America) that a deal is being hammered out, albeit in stages. The second stage negotiations will commence immediately after next week on additional items, continuing through February to March 2013. And a final third stage will come later this year, involving a major revision of the US tax code that will result in big corporate tax rate cuts.
Jack Rasmus is the author of the 2012 book, “Obama’s Economy: Recovery for the Few” , and host of the weekly radio show, Alternative Visions, on the Progressive Radio Network, PRN.FM. His website is www.kyklosproductions.com, his blog, jackrasmus.com, and twitter handle #drjackrasmus.