Posted by: sweeneyblog | January 1, 2013

Keep It Simple, Sweeney: The Fiscal Cliff

Hello Loyal Readers, 

So there is a great deal of hubbub about the fiscal cliff. Did we go over? I heard there was a deal, what is going on? Did Obama cave? What does that even mean? Have no fear, I will try to break this down for you folks in my new-ish segment, “Keep It Simple, Sweeney.”

Yes, that’s the title for the new column. It will have a logo at some point, still working on that.

John Boehner (R-OH)

John Boehner (R-OH)

The fiscal cliff can really be boiled down to a struggle between two men: Speaker of the House John Boehner (R-OH) and House Majority Leader Eric Cantor (R-VA). Speaker Boehner has been struggling to maintain control of the House Republicans ever since he took the big gavel in 2010. The main source of conflict has been between the old guard Republicans in Congress, many of them elected during the Newt Gingrich revolution or during the 2002 Bush surge, who are loyal to Boehner and installed him as Speaker, and the Tea Party representatives that Eric Cantor helped get elected in 2010. Boehner, to appease them and cement his power, installed Eric Cantor as his second in command in the House.

Cantor has steadily pushed for zero compromise with the Obama White House or with the Senate Democrats. Boehner, while also committed to obstruction, at least made some efforts to bargain on bills. When he and the president sat down to discuss the debt ceiling in 2011, Boehner kept proposing deals and Obama would say, “Do you have the votes?” and Cantor would pop up and say, “No.”  The president then asked if he should be negotiating with Cantor instead. Boehner got all snarly and kicked everyone out of the room but the president and himself. They worked out a deal, but Boehner had to plead with Nancy Pelosi (D-CA) to produce the votes from the Democratic side of the fence to get the debt ceiling raised, since he didn’t have enough sway over his own people to pass the compromise.

Now flash forward to the fiscal cliff negotiations this year. There was a great deal of back and forth, offers and counteroffers, but really only two things of substance occurred. One, John Boehner tried to fix the fiscal cliff on his own. He tried to pass “Plan B” which would extend the Bush tax cuts for everyone, rich and poor. That failed to get enough votes to pass. Guess why? Cantor wanted more concessions from the Democrats and helped sabotage the effort.

Then, today, Obama and Boehner announced they had a deal. It would allow the Bush tax cuts to expire on income over $400,000, it would fix the capital gains (money you make in the stock market) tax at Clinton-era levels, and it would delay most of the brutal cuts for two months. Personally, I think the Democrats could have gotten quite a bit more, but no matter what I think, Eric Cantor declared war.

Eric Cantor (R-VA)

Cantor is stepping up from vicious backstabbing friend of Boehner to openly opposing him and this deal. He would rather see all the tax rates go up than this deal move forward. He has put out a statement and is rapidly gathering support in his efforts to kill this deal.

So why is this so heated? Because next week, the House Republicans vote for who will be their Speaker of the House for the next two years. Right now, it is between Cantor and Boehner. That’s right, they are in election mode but the only people who can vote are Republican members of Congress.

But what about the Democrats, you ask? Well, they are doing the political equivalent of standing on the sidelines of a schoolyard brawl and shouting, “Are you going to let him get away with that?” and “I think Cantor just said something about your mother!” Reid has leaked negotiation details to the press, Pelosi has openly taunted Boehner about his complete lack of control over his caucus.

So that’s where we are. The grand bargain will probably fail, the fiscal cliff will kick in, pundits will panic, and after the Speaker of the House election, a solid solution can be hammered out. Until then, expect more empty posturing than an interpretive dance competition between Pete Kremen and Sam Taylor.



  1. Just read the NW Citizen – John Servais has some good comments about Open Government. Applying it’s failure to government, at all levels. The question is “What can we the citizens do about it?” It takes interest and input from all of us to make a Movement. I want to thank you Riley for your interest and input helping to bring the pertinent and meaningful issues to us ! And, with that said – Happy New Year to everybody! 2013 gives us another year to make the changes we believe in!

  2. It’s way simpler than you put forward Riley…Obama is desparate to raise taxes and, like most Demos, Progressives, Liberals, incapable of comprehending the term “reduce expenditures.” The Repuplicans, like most Demos, Progressives, Liberals are desperate to be seen as not raising taxes but are equally in love with more money to spend because they too are iincapable of refusing to give the people whatever circus buys the most votes… Voting today means a massive tax hike went into effect last night so a vote for the “compromise” can now be presented as a vote to actually reduce the taxes that went into effect last night and, an opportunity to tell the people, “You voted for tax hikes and more spending… You got what you wanted, now see how you like living with the now five year old and legthening depression we find ourselves in…” Way simple, Ehhh?

  3. Curiously absent from all commentary I’ve read (from numerous and diverse sources) is any mention of income classification for hedge fund managers and other “masters of the universe” (to borrow a phrase from Tom Wolf). By allowing all such income to be classified as capital gains and carried interest, thus permitting an effective tax rate of around 15%. Congenital optimist that I am, I nonetheless suspect that this is another deliberate omission (or concession, if you will) to the benefit of the “job creator” class. The more starry-eyed amongst us might actually believe that taxes actually have increased on the “1%”…but I don’t really think that Obama (the Pre-Emptive Capitulator in Chief) would permit that despite his failures on HSBC, JPMorgan-Chase, Countrywide and so on, would he?

    • I am amending my above comment. Per today’s Washington Post, “The tax on capital gains and dividends will be permanently set at 20 percent for those with income above the $450,000/$400,000 threshold. It will remain at 15 percent for everyone else. (Clinton-era rates were 20 percent for capital gains and taxed dividends as ordinary income, with a top rate of 39.6 percent.)”. Not mentioned: carried interest. This may be the hidden gift.

  4. Riley, thanks for a good, simple explanation … and for making me laugh! Happy New Year.

  5. […] that in mind, I’m doing another installment of “Keep It Simple, Sweeney!” where I walk through the city budget. If it is well-received, I’ll do a companion piece for […]

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