Boehner pulls ‘cliff’ Plan B as GOP splits

$1 million-threshold bid stalls

In Washington on Thursday, U.S. Sen. Charles Schumer, D-N.Y., indicates how close he believes lawmakers are to a deal on avoiding the “fiscal cliff.”

In Washington on Thursday, U.S. Sen. Charles Schumer, D-N.Y., indicates how close he believes lawmakers are to a deal on avoiding the “fiscal cliff.”

Friday, December 21, 2012

— Confronted with a revolt among the rank and file, House Republicans abruptly scrapped a vote Thursday night on legislation allowing tax rates to rise for households earning $1 million and up, complicating attempts to avoid a year-end “fiscal cliff” that threatens to send the economy into recession.

The legislation “did not have sufficient support from our members to pass,” Speaker John Boehner conceded in a brief statement. At the same time he challenged President Barack Obama and Senate Majority Leader Harry Reid, D-Nev., to work on legislation to avert the fiscal cliff, a set of automatic, endof-the-year spending cuts and tax increases.

“The Senate must now act,” said the Ohio Republican, who has noted recently that he has taken risks in supporting higher tax revenue during several weeks of fruitless negotiations on the fiscal cliff.

In a statement released a short while later, the White House said the president’s “main priority is to ensure that taxes don’t go up on 98 percent of Americans and 97 percent of small businesses in just a few short days. The president will work with Congress to get this done and we are hopeful that we will be able to find a biparti- san solution quickly that protects the middle class and our economy.”

Reid’s office sounded a more combative note. “The only way to avoid the cliff altogether is for Speaker Boehner to return to negotiations and work with President Obama and the Senate to forge a bipartisan deal,” spokesman Adam Jentleson said.

Earlier, emerging from a hurriedly called evening meeting of House Republicans, Ohio’s Rep. Steve La-Tourette said Boehner told lawmakers he’s “going to call the president and he’s going to go down and talk to him and maybe they can hammer something out.”

The turn of events marked a major personal defeat for Boehner and was yet another indication of the power of Tea Party-backed lawmakers who helped Republicans gain a majority in the 2010 elections.

One first-termer, Rep. Tim Huelskamp, said the developments were “a victory for Republican principles.” The Kansas Republican is one of three lawmakers recently stripped of favored committee assignments for bucking the leadership.

“Some people don’t know how to take yea for an answer,” said Rep. Charlie Dent, R-Pa., who supported the measure and was open about his disappointment with his colleagues.

The abrupt move left precious little time for divided government to prevent across-the-board tax increases and deep spending cuts from taking effect with the new year. Economists say the combination threatened a return to recession for an economy that has been recovering slowly from the last one.

The House will not meet again until after Christmas, if then, and the Senate is expected to meet briefly today, then not reconvene until next Thursday.

In his written statement, Boehner said the House has previously passed legislation to prevent all the tax increases from taking effect, and noted that earlier in the evening it had approved a measure to replace across-the-board spending cuts with “responsible” reductions.

Hours earlier, Boehner said Thursday night’s legislation — he’d dubbed it Plan B — marked a move to “protect as many American families and small businesses as possible from the tax hikes that are already scheduled to occur” with the new year.

Referring to one of the core themes of Obama’s reelection campaign, he said the president has called for legislation to protect 98 percent of the American people from a tax increase. “Well, today we’re going to do better than that,” he said of the measure that would raise total taxes by slightly more than $300 billion over a decade. “Our bill would protect 99.81 percent of the American people from an increase in taxes.”

Democrats said that by keeping tax rates unchanged below $1 million — Obama wants the level to be $400,000 — Republicans had turned the bill into a tax break for upper-income earners. They also accused Republicans of crafting their measure to impose a tax increase on 11 million middle-class families.

“This is a ploy, not a plan,” said Rep. Sandy Levin, DMich. He accused Republicans of being “deeply cynical,” saying the legislation would scale back some education and child tax credits.

But the House Republican leadership’s three-day struggle to wrangle the votes for the speaker’s plan seemed only to underscore how difficult it will be to find Republican support for any bipartisan deficit deal.

A companion bill on the evening’s House agenda, meant to build GOP support for the tax bill, called for elimination of an estimated $97 billion in cuts to the Pentagon and certain domestic programs over a decade. The vote to cancel the cuts, expected to be relatively easy, was a close 215-209. Even a routine procedural vote to take up the speaker’s tax bill passed by a surprisingly tight 219-197, with 13 Republicans bolting from their leadership to vote no.

“I want something that treats everybody fairly. I think everybody needs to be protected, and I don’t think the bill does that,” said Rep. Mick Mulvaney, R-S.C., who opposes Plan B.

Those cuts would be replaced with savings totaling $314 billion, achieved through increases in the amount federal employees contribute toward their pensions and through cuts in social programs such as food stamps and the health-care law that Obama signed earlier in his term.

The votes were set in motion earlier in the week after Boehner and Obama had significantly narrowed their differences on a compromise to avoid the fiscal cliff.

Republican officials said members of the GOP leadership had balked at the terms that were emerging. Democrats said Boehner’s abrupt decision to shift to his Plan B — legislation drafted unilaterally by Republicans — reflected a calculation that he lacked support from his own rank and file to win the votes needed for the type of agreement he was negotiating with the president.

Asked at a news conference a few hours before the scheduled vote if that were so, Boehner avoided a direct answer. “Listen, the president knows that I’ve been able to keep my word on every agreement we’ve ever made,” he said. Boehner told reporters Thursday that Obama and Democratic lawmakers have been slowly edging the country toward falling off the cliff. He said Republicans have made every effort to reach an agreement with Obama.

At the same time, Boehner hinted broadly that however Democrats end up responding to the legislation he placed before the House, it will not be the end of the attempt to keep the economy from reaching the fiscal cliff.

“Our country faces serious challenges. The president and I in our respective roles have a responsibility to work together to get them resolved. I expect that we’ll continue to work together.”

Obama made it clear Wednesday that he, too, is prepared for further negotiations, and numerous officials in both parties in the Senate predicted that might happen quickly after the votes in the House.

“I did my part; they’ve done nothing,” Boehner said. “I’m convinced that the president is unwilling to stand up to his own party.”

The tax bill would prevent scheduled increases from taking effect on Jan. 1 on all income under $1 million. Above that, the current rate of 35 percent would rise to 39.6 percent, the level in effect more than a decade ago when then-President George W. Bush signed tax cuts into law that now are expiring.

The top rates also would rise on capital gains and dividends from 15 percent to 20 percent.

By any measure, the two bills in the House were far removed from the latest offers that officials said Obama and Boehner had tendered.

Obama is now seeking $1.2 trillion in higher tax revenue over a decade, down from the $1.6 trillion he initially sought. He also has softened his demand for higher tax rates on household incomes so they would apply to incomes over $400,000 instead of the $250,000 he cited during his successful campaign for a new term.

He also has offered more than $800 billion in spending cuts over a decade, half of it from Medicare and Medicaid, $200 billion from farm and other benefit programs, $100 billion from defense and $100 billion from a broad swath of government accounts ranging from parks to transportation to education.

In a key concession to Republicans, the president also has agreed to slow the rise in cost-of-living increases in Social Security and other benefit programs, at a savings estimated at $130 billion over a decade.

By contrast, Boehner’s most recent offer allowed for about $940 billion in higher taxes over a decade, with higher rates for annual incomes over $1 million.

His latest offer seeks about $1.2 trillion in spending cuts, not counting the change in the cost-of-living adjustment that Obama has said he can accept. He is seeking $600 billion in savings from Medicare and Medicaid, $200 billion from other benefit programs and $300 billion from a range of government accounts.

Information for this article was contributed by David Espo, Andrew Taylor, Alan Fram and Jim Kuhnhenn of The Associated Press; by Johnathan Weisman and Jeremy W. Peters of The New York Times; and by James Rowley, Richard Rubin, Kathleen Hunter, Heidi Przybyla, Hans Nichols, Roger Runningen, Margaret Talev and Roxana Tiron of Bloomberg News.

Front Section, Pages 1 on 12/21/2012