Senate takes wheel on drive to fiscal cliff

Moving the action to the Senate to avoid billions of dollars of tax increases and spending cuts before the end of the year might offer some hope for averting a plunge over the fiscal cliff.
The spotlight shifted to that side of Capitol Hill Thursday night, after House Speaker John Boehner, R-Ohio, pulled a bill that would have extended the George W. Bush-era tax cuts permanently for households making less than $1 million annually.
Shortly before the scheduled 8 p.m. vote, he had a tense meeting with the House Republican caucus and realized that he lacked a majority to pass a bill that every Democrat was poised to oppose.
“We have a number of members who didn’t want to be perceived as raising taxes,” Mr. Boehner said Friday at a Capitol Hill news conference.
He told reporters that he isn’t giving up on resolving the fiscal cliff, which would raise taxes on every American.
But Mr. Boehner did put the onus on the Senate and President Barack Obama to come up with a solution.
“We don’t have a Senate bill,” Mr. Boehner said. “At some point, the United States Senate has to do something.”
The Senate approved a bill over the summer that would extend Bush-era tax cuts for households making less than $250,000 annually. It sets both capital gains and dividend rates at 20% for incomes above that level.
Both Senate Democrats and Mr. Obama have been promoting the bill as the fiscal cliff fix. But the Constitution requires that revenue measures start in the House.
In a speech on the Senate floor on Friday, Senate Majority Leader Harry Reid, D-Nev., charged Mr. Boehner with making excuses for not putting the Senate bill up for a House vote.
“The only reason Speaker Boehner hasn’t brought our bill to the floor sooner is that he knows it will pass,” Mr. Reid said. “Americans are not fooled by the Speaker’s phony, procedural excuses for failing to bring this solution to a vote. They’re tired of excuses. They expect action.”
Mr. Boehner suggested Friday that the Senate take up legislation that the House passed over the summer that would extend Bush-era tax cuts for all income levels.
“If the Senate wants to act on that bill, we’ll certainly take a look at it,” he said.
This game of political tag comes amid worries that Congress and the Obama administration won’t reach an agreement to stop the approximately $600 billion in tax increases and spending cuts that are scheduled to go into effect Jan. 1.
Mr. Boehner offered his failed bill as a so-called Plan B to ensure that tax cuts remain in place for the vast majority of Americans. Prior to introducing the measure, he rejected the latest offer from Mr. Obama, a package of about $1.2 trillion in tax increases and $1.2 trillion in spending cuts that would have extended the Bush-era tax cuts for households making less than $400,000.
Mr. Boehner said that Mr. Obama was actually proposing about $1.3 trillion in tax increases and $850 billion in spending cuts.
As both the House and Senate break for Christmas, the status of the fiscal cliff is murkier than ever.
The Senate is due back in Washington on Dec. 27. The House will return as needed to deal with the cliff.
The shift to the Senate could be a good thing, according to Clint Stretch, a Washington tax consultant and former legislative counsel to the congressional Joint Committee on Taxation.
“The Senate is less partisan on this issue,” he said. “There are Republican senators who think we need to make progress.”
But the latest impasse occurs with only 10 days left before the fiscal cliff becomes a reality, a blink of the eye in legislative terms.
“It makes it almost impossible to pass any substantive bill before the end of the year,” said Tim Steffen, senior vice president and director of financial planning at Robert W. Baird & Co. Inc. “There’s no way to start a brand new bill at this point.”
A resolution could come in the form of a bill that gets 60 votes in the Senate to avoid a filibuster and then achieves a majority in the House with the backing of all Democrats and about 25 Republicans. In that situation, Mr. Boehner would have to decide whether to schedule a vote on a bill that may not draw a majority of his caucus, which could put his speakership in jeopardy.
Even though the latest fiscal cliff developments are full of political intrigue, the reality is that Mr. Boehner and Mr. Obama had been coming closer to an agreement before the House speaker turned to Plan B, according to Andrew Friedman, principal at The Washington Update.
“They’re clearly within striking distance,” Mr. Friedman said. “The odds are we will not go over the cliff.”
But the next 10 days are certain to be a cliffhanger.
“Given the political divide in the country, trying to resolve these differences is difficult,” Mr. Boehner said.