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With Fiscal Cliff Deal Close, GOP Gets Cold Feet and Offers ‘Plan B’

It looked like a deal to avert the fiscal cliff was at hand—but apparently Republicans at the last minute got cold feet, perhaps spooked by the fear of what would happen to House Republicans in their ultra-conservative districts if it appeared they actually compromised with President Obama.

This is the gift that the country has gotten from the intense gerrymandering that’s been done all across America by Republican-controlled state legislatures: In their effort to create as many conservative Republican districts as possible, they have now created a scenario where the House is full of politicians who are out of step with the rest of the country, representing right-wing communities so virulently opposed to Obama and everything he stands for that they would punish any Congressman who appeared to be giving Obama something that he wants—even if it benefits the country.

The president acknowledged as much in comments he made yesterday.

“It is very hard for them to say yes to me. But at some point, they’ve got to take me out of it,” he said. “I’m often reminded when I speak to the Republican leadership that the majority of their caucus’ membership come from districts that I lost. And so sometimes they may not see an incentive in cooperating with me, in part because they’re more concerned about challenges from a tea party candidate, or challenges from the right, and cooperating with me may make them vulnerable.”

Obama chided Republicans to “take off the war paint” and “take the deal.”

“The fact that they haven’t taken it yet is puzzling,” Obama said Wednesday.

It looked like the two sides were close to a deal after both sides made some concessions earlier in the week, bringing about movement in the negotiations. The movement was prompted by Obama’s concession that he was willing to raise the income threshold where tax increases would begin to $400,000, up from his starting point of $200,000 for individuals. Earlier, Republicans had indicated they would be willing to consider raising some taxes for the wealthy.

But now that they have apparently been spooked, Boehner and the Republicans are talking some nonsense about a “Plan B,” which deals strictly with the pending expiration of the George W. Bush-era tax cuts by extending those cuts except for incomes of more than $1 million a year. The plan would have no chance to pass the Senate and Obama said he would veto it anyway, calling it “a waste of time.” But Boehner feels that if he can get the House to pass his Plan B, then he would be putting pressure on the president because he could say, Hey, we gave the president a plan that even raised taxes on the wealthy, but he refused to take it—thus raising taxes on everybody.

This is where the sides stood earlier in the week, when it looked like a deal was near:

The current level of revenue increase in the latest Obama offer stands at $1.2 trillion over 10 years, down from his initial offer of $1.6 trillion and significantly closer to Boehner’s offer of $1 trillion. As for the tax cuts, the White House would permanently extend the Bush tax cuts on incomes below $400,000, meaning that only the top tax bracket, 35 percent, would increase to 39.6 percent. The current cutoff between the top rate and the next highest rate, 33 percent, is $388,350.

As for spending, the White House sits at $1.22 trillion in spending cuts over 10 years, which is actually more cuts than the Republican initial offer of $1.2 trillion. But it is where the cuts occur that will be the biggest sticking point. The White House plan says $800 billion of the cuts would come from programs and $122 billion would come from using a new way to measure inflation that slows the growth of government benefits, particularly Social Security. The White House plan also includes $290 billion in savings from lower interest costs on a reduced national debt.

As for the $800 billion in program cuts, half would come from federal health care programs, $200 billion from other mandatory programs like farm price supports, $100 billion from military spending, and $100 billion from domestic programs under Congress’s annual discretion.

According to Obama aides, Boehner’s Plan B actually offers new tax breaks for millionaires, while ending other tax breaks that benefit the middle class.

“What separates us is probably a few hundred billion dollars,” Obama said yesterday. “The idea that we would put our economy at risk because you can’t bridge that gap doesn’t make a lot of sense.”

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