UPDATED: Added Grim Assessment By Todd Harrison of CSBA
WASHINGTON: Hope springs eternal, even here in the nation’s capital. After the election, both President Obama and House Speaker John Boehner made nice noises. And many pundits hailed this, believing either that sequestration would get kicked down the road a fur piece or a Simpson-Bowles’ grand bargain was in the works.
The big sticking point — at least rhetorically — had been that the Democrats want higher taxes on those earning more than a quarter of a million dollars each year and the GOP does not. Then came the electorate’s rejection of Mitt Romney and the Democrat’s better than expected performance in the Senate. Add to that the defeat of several high profile Tea Party candidates and some argued that the stage was set for compromise.
Then came the third day after the election. Speaker Boehner said this today:
“Raising tax rates will slow down our ability to create the jobs that everyone says they want.” He wants lower tax rates combined with the elimination of some tax deductions and loopholes.
And he also said: “This is an opportunity for the president to lead. This is his moment to work on a solution that can pass both chambers.”
Shortly after Boehner spoke, President Barack Obama said he has invited congressional leaders to the White House next week to begin negotiations and is “open to compromise.” The president claimed he is in the right. “On Tuesday night, we found out that the majority of Americans agree with my approach.”
Sounding just a bit tough, Obama said, “I refuse to accept any approach that isn’t balanced.”
We asked several experts just what the heck all this meant. Was Boehner actually issuing a plea for help to the president on one hand or issuing a declaration that talks are useless? And where did the president stand, both in electoral terms and as a negotiator?
A Republican at the American Enterprise Institute, Mackenzie Eaglen, said, “Obama has positioned himself well in these negotiations and has the upper hand all around.”
Boehner, she said in an email, “is simply publicizing where Republicans have been [saying] for a while on taxes. They’re willing to ‘raise’ taxes in select ways but as part of that deal cut taxes elsewhere and not on Obama’s 250K/year income earning households.”
She argued “that (1) Republicans are signaling a willingness to let some taxes increase and (2) there is a lot of overlap and common ground in these various proposals.
“The President will probably read this as something the Speaker must do and say right now. If he moves at the very end on the income threshold from $250K a year to, say, $500K, he has still won.
But defense consultant Loren Thompson, like Eaglen a member of the Breaking Defense Board of Contributors, offered a very different interpretation.
“Speaker Boehner is sending a message that nothing has really changed in the approach that House Republicans will take to averting sequestration. They may agree to kick implementation down the road a few months, but they will not agree to tax increases, and that will make any bipartisan deal on fiscal challenges tough to achieve,” Thompson wrote in an email. “I mean, really, what have the Republicans got left besides their promise to block tax increases? If they gave up on that commitment, their own base would desert them.”
Another expert, Todd Harrison at the respected Center for Strategic and Budgetary Assessments, laid out the possibilities with grim clarity.
“There are three possible outcomes from the lame duck session: a deal, a delay, or deadlock. I think both sides want a deal (on their own terms). If they can’t get a deal they may at least be able to agree to a delay. But if talks completely break down or if one side cannot convince their members to vote for a compromise then we may very well end up with deadlock and sequestration goes into effect.
All this carries special risks for the Defense Department, although much of the government will suffer.
“The risk for defense is that the consequences of sequestration have been hyped to a point that people seem to be expecting the sun to explode on January 2nd. When the sun rises on January 3rd and they don’t see any immediate consequences, then I think it will become much harder to roll back sequestration,” he said in an email. “It’s going to look like industry and DoD were crying wolf By the time we start to see the real consequences in terms of program delays, unit cost increases, layoffs, etc., it may be too late to change course.”
Dear reader, how’s your hope holding out?
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