Obama Still Has an Ace up His Sleeve

President Obama is back at the budget negotiations table with the Republicans, and though he didn’t suggest any kind of compromise during the meeting at the White House, he still has an ace up his sleeve.

The timetable has been pretty much finalized: The Senate will vote on a measure to avert the fiscal cliff on Sunday, followed by a vote in the House. But it’s still anyone’s guess as to how the final bill designed to stop an automatic $536 billion dollar tax increase, with $110 billion dollars in cuts to social programs, will look.

In an attempt to find a solution, President Obama cut short his vacation in Hawaii and ordered Congress back to Washington to resume budget negotiations. But 30 minutes into their first meeting, CNN reported that the president had presented no new compromise plan. That word came to CNN via an anonymous source.

Government sources announced that the meeting lasted about an hour, and that the only result was a promise that the Democrat-controlled Senate would come up with a draft bill, according to a CNN source. The bill was to be a joint effort by both Republicans and Democrats. Democratic Majority Leader Harry Reid expressed confidence that a solution would be found. The solution was scheduled to be ready by Sunday.

The suddenness and ferocity of a potential $640 billion dollar reduction in the economy would threaten to revive the recession, with economists fearing a resultant rise in unemployment figures from the current 7.7 percent.

Watered-down Mixture

Because some Republican support in the House of Representatives is necessary for the bill to pass, the resulting legislation would have to be a watered-down mixture of two contrasting ideological philosophies: President Obama wants to raise taxes on the wealthiest Americans for starters. He has also offered comprehensive cuts in the budget, although the details are still murky.

Structural reform of social programs such as Medicare and Social Security has made only slow progress, and reluctant Democrats want to put those off until the new year.

Republican Speaker of the House, John Boehner, couldn’t even get his own party’s support for his “Plan B” that called for raising taxes at least on millionaires. His faction, in comparison, would rather see radical cuts in the budget, from which only the Pentagon would be largely shielded.

Shortly before Christmas, Boehner inched toward the president’s plan by offering a tax increase only for those earning over a million dollars annually. The fact that his own party refused to agree even to that was seen in Washington as a drastic emasculation of the Ohio Congressman.

Obama Demonstrates His Willingness to Compromise

For his part, Obama showed his willingness to compromise by changing the cutoff for avoiding a tax increase from the $250,000 annual income on which he had campaigned to $400,000. Obama cannot afford to abandon raising taxes entirely, for fear of having no leverage at the outset of his second term.

Democrats would likely accede to a plan to raise the limit once again to, say, $500,000 dollars — a scenario that might even find majority support in the House. But acceptance among the Republican faction is unlikely, despite Eric Cantor’s promise to support John Boehner’s negotiations. The bill could then potentially pass the House, even with only minority Republican support.

Another scenario: If there is still no agreement by Sunday, the automatic cuts will take effect on Jan. 1. But if on Monday, New Year’s Eve, the president suggests a tax program that adversely affects the lower and middle classes, yet protects the wealthy, the ball would then be in the Republicans’ court to respond to that.

If Republicans go along with it, the Democrats win. If they oppose it, then the onus is on them to explain why they opposed the largest tax relief measure since the Ronald Reagan era.