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Budget Plan Offers Laid Out in Negotiations, But Deal Remains Elusive

President Obama raised the threshold for higher tax rates to households making $400,000 annually and offered spending cuts, but Republicans held that the White House’s plans don’t go far enough on spending cuts. Judy Woodruff talks to The Wall Street Journal’s Carol Lee and WNYC’s Todd Zwillich about the battle for an agreement.

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    The White House had a new proposal on the table today in the fiscal cliff negotiations. House Republicans said it fell well short, but the two sides kept at it, hoping to avert across-the-board tax hikes and steep mandatory spending cuts in 2013.

  • REP. WALLY HERGER, R-Calif.:

    We're moving closer. Let me say that. It looks more encouraging today than it did yesterday.


    There were some voices today, like California Republican Congressman Wally Herger, who saw signs of a deal in the works. President Obama offered Monday to lower his target for new revenue to $1.2 trillion over 10 years, down $400 billion from his first offer. He also raised the threshold for higher tax rates to households making $400,000 a year, instead of $250,000.

    And he proposed spending cuts of $1.2 trillion from health programs and cost of living hikes for Social Security.

    White House press secretary Jay Carney:

  • JAY CARNEY, White House:

    In the details that have come out about the president's proposal, I think it is clear that he has demonstrated good faith and a willingness to meet Speaker Boehner and the Republicans halfway.


    But Republicans dispute the president's numbers. They contend the plan would raise $1.3 trillion in revenue when accounting for a new inflation index. They also insist savings from lower payments on the debt shouldn't be tallied as spending cuts. This was House Speaker John Boehner after meeting with his caucus members.


    What the White House offered yesterday was essentially $1.3 trillion in new revenues for only $850 billion in net spending reductions. That's not balanced, in my opinion.


    Boehner said he's ready to put a backup plan before the House. It sets the threshold for raising tax rates much higher than the president wants.


    Our plan B would protect American taxpayers who make $1 million or less and have all of their current rates extended. I continue to have hope that we can reach a broader agreement with the White House that would reduce spending, as well as have revenues on the table.


    But the plan appeared to be doomed in the Democratic-controlled Senate, where Majority Leader Harry Reid accused Republicans of threatening to abandon negotiations.

  • SEN. HARRY REID, D-Nev.:

    Plan B, as I understand it, plan B calls for sending out a bill that the only thing that will be in it is raising taxes on people who make over $1 million. If that's not walking away, I don't know what walking away is.


    Indeed, Boehner also faces the challenge of selling an agreement to members of his own party, resistant to tax hikes of any kind. After today's party caucus, Arizona Congressman Jeff Flake, about to move to the Senate, said he is withholding judgment until he sees more specifics.


    We have got to have more cuts than the president is proposing or has been discussed here.


    But retiring Ohio Congressman Steve LaTourette predicted that in the end most could live with higher tax rates if they are part of a broader package.


    If I had to say where most of the votes are today, most will accept an increase in tax rates, but they really want a way forward on how we're going to get the rest of the government under control.


    But the only real certainty appeared to be that lawmakers will be back in Washington right after Christmas if there's to be any deal before the New Year's deadline.

    And to two reporters who've been closely watching this story. Todd Zwillich covers Congress for Public Radio International's "The Takeaway" ON WNYC. And Carol Lee of The Wall Street Journal joins us from the White House.

    Thank you both for talking to us.

    Carol, I'm going to start with you. So, from the White House perspective, where do things stand?

  • CAROL LEE, The Wall Street Journal:

    Well, I think, from the White House perspective, the ball is essentially in the House Speaker John Boehner's court.

    I think the president and his senior advisers feel that they have positioned him fairly well, that he's in a very defensible position in terms of his latest offer that he put forward yesterday to the speaker. But if you step back and think about where we were four days ago vs. where we are now, it's pretty remarkable how much the two sides have come to — very close to reaching an actual deal.

    And now the two sides are in this position where the job is to sell it to their different caucuses and make sure that the seams don't come unraveled in the coming days. But once Speaker Boehner on Friday decided that he was going to retreat on Republican opposition to raising tax rates, it became a matter of what you dial up and what you dial down, as opposed to this philosophical debate that we have been seeing since the election.

    And so now that's what they're doing. And their staff is meeting and they're deciding how much goes up in spending cuts, where does that from? They're deciding on how much revenue the package should have and where the threshold is for income in terms of raising tax rates.


    So, Todd Zwillich, from the Speaker Boehner side of all of this, how does it work?


    Well, Speaker Boehner's staff and Republicans in Congress, despite some of the bluster today in Congress, are actually still feeling OK about the talks between the speaker and the president.

    In reality, they're actually pretty close. They're having a counting dispute over whether this thing counts as a tax increase or whether interest actually counts, saving on interest counts as real savings. They're having an arithmetic dispute. But really in the end, Judy, they're really only $40 billion or $50 billion apart.

    And over 10 years, in relation to GDP, that's really not much.


    Only $40 or $50 billion, in the scheme of things.


    In the scheme of — which is a gigantic number, of course, but we're in Washington, aren't we And over 10 years, it's really not that much.

    So, they're very close right now. There are some disputes, as Carol says, on dialing things up and dialing things down. What you're seeing in Congress though is a different game. And I think it important for people to realize that right now we're on a two-track kind of inside game/outside game scenario.

    The speaker and the president are actually quite close. They're on substance and they're not speaking past each other anymore. They're actually talking about numbers on the same page.

    Meanwhile, in Congress, Speaker Boehner and Harry Reid are both setting up fallback scenarios, ways to give political cover to their own side and make sure the other side gets blamed if those inside talks fall apart or if Speaker Boehner can't sell it to his people after a deal is made.


    Carol, how does the White House view this other track that Todd is describing? Do they see that as something necessary that the speaker needs to do, or do they see it as a problem?


    Sure, they do. Privately, they do. Publicly, they dismiss it and say that it's not a nonstarter, which it is.

    The speaker has two problems with it. One, Democrats won't vote for it. And, two, there are members of his own party who aren't going to vote to raise tax rates under any circumstances, but particularly if you're not going to get anything for it, meaning this plan doesn't call — if they pass this plan, the plan B, there wouldn't be any spending cuts attached to it.

    But you will remember the White House has its own plan B on its own separate track. The president has just been talking about it a lot longer. And that's the Senate bill where they passed — they extended the Bush tax rates for under $250,000, people making under $250,000.

    And the president has been saying since the election that the House could easily take care of part of this fiscal problem by immediately passing that bill.

    So both sides have this — as Todd mentioned, these backup plans that are more tactical maneuvers. They're designed to keep their parties in line and to give them a fallback position and also to give them cover politically if one side backs out.


    And, meanwhile, Todd, you're saying that the real talks are really continuing. I saw a tweet today from an associate, a former aide to Eric Cantor, who is, of course, a close associate, the majority leader in the House, saying Republicans only have a third of the power, conservatives do. They need to get on board with the most conservative deal possible, rather than waiting for utopian purity, saying, let's be practical.


    The very nature of John Boehner's dilemma, not just now, but since 2010, the Tea Party election, is there — and we have said this all along with the Cantor-Biden talks, the super committee, Simpson-Bowles — is there a deal that Speaker Boehner can make with this president, that he can shake hands on, that he can also sell to this decidedly conservative Republican House?

    Is there? That remains to be seen. That is the very nature of Speaker Boehner's dilemma. And that operative in those tweets which we all saw go to the very heart. That operative is telling conservatives the best way to get things done is not to have your druthers, not to have your greatest scenario, but get the very best conservative deal you can, given the fact that President Obama just won the election and actually ran on these tax increases. The public has spoken. And that does mean something.


    So, Carol Lee, at the White House, do they think this can get done, whether it's done before Christmas, but can it be done by the end of the year?


    They do.

    I had spoken with someone in the White House who said they see an over 50 percent — they put the odds over 50 percent that they can get a deal done. But it's very delicate. And they're having to — their main concern right now is having to keep Democrats in line as the president concedes on some of these entitlement programs like Social Security and Medicare cuts.

    And so that's what you see them working on doing today behind the scenes.


    And, Todd, from the speaker's perspective, what is he working on? What does he need to get?


    He needs to — well, he's going to have a tax increase. That is inevitable. And you have seen through his actions, finally saying that he would accept a millionaire's tax. That's a pretty far place from where he was just a couple of months ago.

    He needs to take the reality of a tax increase, get that threshold number, whether it's $400,000 or $500,000, get that as high as possible and then get spending cuts as high as possible through changes to Social Security and other things they have been talking about to convince his conservative members, yes, this goes against our very core philosophy, but we're getting something big for it, not just now, but any likely deal that we're looking at also has ramifications for tax reform next year. We will get a lot of deficit reduction there, a lot of debt reduction there. This is the very best we were going to get.

    That's his charge.


    So, they're not there yet, but they're working on it.

    Todd Zwillich, Carol Lee, thank you both.


    Thank you.



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