We're Probably Not Getting A Deal

Moneybox
A blog about business and economics.
Dec. 4 2012 4:22 PM

We're Probably Not Getting A Deal

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These New York Times headlines help illustrate that all the negotiating around the fiscal cliff doesn't yet appear to be making any progress. John Boehner's caucus isn't unified around the idea of raising $800 billion in revenue through base-broadening rate cutting tax reform. And Boehner doesn't even have a concrete proposal to raise $800 billion through base-broadening rate cutting tax reform—a goal that I think is probably mathematically impossible. Meanwhile, even as John Boehner talks about reducing tax rates the White House is insisting on raising them.

So no deal.

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But as I've been saying, this all gets much easier starting in the new year. Taxes will go up, but there's no cliff-like disaster. Just a situation where Barack Obama and John Boehner agree that tax rates on 97-98 percent of Americans. Then you need a bill reducing those tax rates. Easy as pie. In addition, you'll have a situation where Boehner thinks rates on the top 2-3 percent of taxpayers are too high, while Obama insists that he won't agree to reduce the amount those people pay in taxes. It should be easy enough to come up with some kind of legislation that cuts the high-end rates a bit and makes up the difference with some deduction-capping.

Deal! It's win-win. The difference is just that when the baseline shifts from December to January, the framework changes from one in which Boehner and Obama have starkly opposed preferences to one in which they have weakly aligned preferences. In January, Obama won't agree to cut rates as much as Boehner wants but he'll agree to cut rates some. In December, there's a huge tension between Obama's desire for higher rates and Boehner's desire for lower ones.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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