CNN is reporting that the “Fiscal cliff deal is down to wrangling over the details.” While others in the media continue to say that talks are stalled, everything I know about both the economics and the politics of the situation tells me that CNN is right.
At 4:30 this afternoon, CNN updated its story: “Both sides agree the wealthy will pay more, so now fiscal cliff talks come down to how much Republicans can wring out of the White House in return for giving in on taxes.
“To President Barack Obama, it’s all about first locking in additional revenue from raising taxes on high-income owners, an outcome the GOP has long rejected.”
President Obama had made it clear that negotiations over government spending on safety nets such as Medicare wouldn’t begin until Republicans accepted a higher marginal tax rate for individuals earning over $200,000 and couples earning over $250,000.
The president dug in, and, according to CNN, he has won round one.
“Retiring Republican Rep. Steve LaTourette of Ohio told CNN on Thursday that he sensed a shift in the House GOP approach during a conference meeting the day before.
“A GOP source told CNN that talks between staff members on both sides resumed Thursday for the first time this week, after Obama and Boehner spoke by phone the day before.”
A Two-Step Approach
It is not clear whether negotiations over so-called “entitlements” will be concluded before the end of the year. But CNN, reports
“All signs point toward a two-step approach sought by newly re-elected Obama — an initial agreement that would extend lower tax rates for income up to $250,000 for families, while letting rates return to higher levels from the Clinton era on income above that threshold.” That agreement on taxes will be signed and sealed before the end of the year.
“Even conservatives such as Oklahoma Sen. Tom Coburn and Louisiana Gov. Bobby Jindal acknowledge the obvious — taxes on the wealthy are going up despite opposition by Republicans.
“‘Whatever deal is reached is going to contain elements that are detrimental to our economy,’ Jindal wrote Thursday in an opinion piece published by Politico. ‘Elections have consequences, and the country is going to feel those consequences soon.’”