Obama could risk going over fiscal 'cliff'

WASHINGTON (AP) — 12.05.12 — It may be just a bluff or a bar­gain­ing ploy, but the White House is sig­nal­ing that Pres­i­dent Barack Obama is will­ing to let the coun­try go over the “fis­cal cliff,” a hard-line nego­ti­at­ing strat­egy aimed at win­ning con­ces­sions from Repub­li­cans on taxes.

If Wash­ing­ton really does fail to avert the loom­ing series of tax hikes and spend­ing cuts, the White House will por­tray Repub­li­cans as the cul­prits for insist­ing on pro­tect­ing tax cuts for the wealthy, an effort the admin­is­tra­tion is lay­ing the ground­work for now.

“This is a choice of the Repub­li­can Party,” said Dan Pfeif­fer, White House com­mu­ni­ca­tions direc­tor. “If they are will­ing to do higher rates on the wealthy, there’s a lot we can talk about. And if they are not, then they’ll push us over the cliff.”

But going over the cliff also would be full of risk for a pres­i­dent fresh off re-election and fac­ing at least two more years of divided government.

End­ing the year with­out a deal could roil finan­cial mar­kets and dent con­sumer con­fi­dence just as the econ­omy is strength­en­ing. It could make it harder for Obama to get Repub­li­can help on his second-term pri­or­i­ties like over­haul­ing the immi­gra­tion sys­tem and the nation’s tax code, or in get­ting poten­tial Cab­i­net replace­ments confirmed.

And it would sig­nal to the coun­try that the president’s cam­paign pre­dic­tion that the GOP “fever” would break fol­low­ing his re-election was a pipe dream.

House Speaker John Boehner says Obama is play­ing a risky game. “If the pres­i­dent really wants to avoid send­ing the econ­omy over the fis­cal cliff, he has done noth­ing to demon­strate it,” the speaker said.

White House advis­ers say the pres­i­dent wants to avoid going into next year with­out a tax and spend­ing deal, a sce­nario they say would hurt the econ­omy. But with few signs of progress in post­elec­tion nego­ti­a­tions with Repub­li­cans, admin­is­tra­tion offi­cials are hard­en­ing their warn­ing that Obama will take that risk if the GOP refuses to drop its oppo­si­tion to rais­ing tax rates on fam­i­lies mak­ing more than $250,000 a year.

Of course, the White House warn­ing could be a bluff, offered in the belief that Repub­li­cans are unlikely to back down on taxes unless they believe Obama is will­ing to go over the cliff.

The White House says Obama’s firm stand on tax rate increases for the wealth­i­est 2 per­cent of Amer­i­cans is dri­ven by eco­nom­ics. The debt-saddled coun­try can’t afford to con­tinue with the George W. Bush-era tax cuts, the pres­i­dent and his advis­ers argue.

Obama has made that case to Repub­li­cans before only to back down in the final stages of nego­ti­a­tions. But this time around, the pres­i­dent and his team believe they hold the polit­i­cal leverage.

There is some evi­dence to bol­ster that notion. Taxes were a cen­ter­piece of the pres­i­den­tial cam­paign, with Obama run­ning on a pledge to end the Bush tax cuts for the wealth­i­est Amer­i­cans and return their rates to where they were in the 1990s, when the econ­omy was thriving.

Exit polls showed that 60 per­cent of vot­ers sup­ported that posi­tion, an even higher per­cent­age than backed Obama’s re-election.

A new poll also sug­gests a major­ity of Amer­i­cans would blame Repub­li­cans if the gov­ern­ment goes over the fis­cal cliff. Just 27 per­cent of those sur­veyed said they would blame Obama, com­pared with 53 per­cent who said they would point the fin­ger at the GOP, accord­ing to the Wash­ing­ton Post-Pew Research Cen­ter Poll.

Seek­ing to cement those impres­sions, the White House is cast­ing Repub­li­cans as will­ing to forgo tax cuts for the mid­dle class in order to pro­tect lower rates for wealth­ier Amer­i­cans. Rates for all income earn­ers will go up at the end of the year if both sides can’t reach a deal.

In turn, Repub­li­cans say Obama is act­ing like a stub­born par­ti­san who will put the econ­omy in peril in order to get his way.

“My sense is the White House wants to go over the cliff,” said Tony Fratto, a for­mer Trea­sury and White House offi­cial under Pres­i­dent George W. Bush. “That may be the only way they get rates they want.”

Going over the cliff could mark a new low in the rela­tion­ship between the pres­i­dent and con­gres­sional Repub­li­cans. While the con­tentious debates ear­lier in Obama’s first term over fund­ing the gov­ern­ment and rais­ing the nation’s bor­row­ing limit went right up to the edge, both sides were always able to reach a deal.

As Obama ran for re-election, he sought to assure vot­ers weary of Washington’s bick­er­ing that things would be bet­ter if he won a sec­ond term.

Speak­ing to sup­port­ers in June, he said, “I believe that if we’re suc­cess­ful in this elec­tion — when we’re suc­cess­ful in this elec­tion — that the fever may break.”

“My hope, my expec­ta­tion, is that after the elec­tion, now that it turns out that the goal of beat­ing Obama doesn’t make much sense because I’m not run­ning again, that we can start get­ting some coop­er­a­tion again,” he added optimistically.

Posted by Randa Wagner on Dec 5 2012. You can follow any responses to this entry through the RSS Feed. Both comments and pings are currently closed.