Obama insisted on sequester buy down in final fiscal cliff deal
January 1st, 2013
02:14 AM ET
1 year ago

Obama insisted on sequester buy down in final fiscal cliff deal

Washington (CNN) - Fiscal cliff negotiations between the White House and Congressional leaders involved late-night discussions in the Oval Office and an ultimate hardline from President Barack Obama, according to a source familiar with the process.

President Obama wanted a delay to the massive spending cuts known as the "sequester," but Republicans requested the final deal to include measures to offset what delaying those budget cuts would add to the deficit.

The source said it was the president who insisted the final deal include a pay down on the sequester, and a tax increase that hit individuals making at least $400,000 a year and $450,000 for households.

Senate Minority Leader Mitch McConnell started negotiations at $750,000, and then moved to $550,000 before giving in and agreeing to $450,000 for households.

The White House and Senate Democrats added the last hours to Monday’s late session figuring out the specific revenue sources and spending cuts to pay for the sequester delay.

On Monday, Republicans agreed to a plan that raises $620 billion in revenue over 10 years and makes a $24 billion down payment on deficit reduction through a combination of revenue and spending cuts – also a priority for the president. Those spending cuts have been pre-determined and will be evenly divided between defense and non-defense areas.

A source familiar with the discussions and revealing a slant on negotiations argued these deal points represented significant concessions from the GOP. This person insisted that because Republicans backed off their pledge to oppose tax rate increases for the wealthiest Americans and said this deal represents one of the most significant policy victories of the last two decades.

Not everyone has the same view. The progressive group moveon.org criticized the White House for moving off Obama's pledge to raise taxes for households earning $250,000 and more and took issue with the short-term nature of the sequester delay.

"At the end of the day, poor and middle class families deserve a better deal than more tax cuts for the rich and the potential for another hostage situation in two months," the organization said in a statement.

Negotiations to reach this deal ramped up after Congressional leaders met with Obama in the Oval Office on Friday.

Senate Republicans brought their first offer: allowing income taxes to rise for households earning $750,000 or more – significantly higher than the $450,000 threshold the Democrats won in the end; indexing Social Security to CPI; keeping the estate tax at the current rate; paying for the sequester by means-testing Medicare. The offer included no extension of unemployment insurance and no tax credits for low income people and for education, a source familiar with the discussions said. The final deal includes both.

Senate Minority Leader Mitch McConnell and Senate Majority Leader Harry Reid began negotiations, which then shifted to negotiations between McConnell and Vice President Joe Biden with Reid talking to the White House and the president talking to Biden. The leading Senate Democrat and Republican decided it was too difficult to turn off the sequester and would leave it out of the deal.

Saturday night, the vice president and the White House economic team met with the president in the Oval Office at 8 p.m. and reviewed the offers. According to this source, the president made his bright lines clear: tax cuts had to hit families at $450,000 and above, unemployment insurance had to be extended for one year and the sequester had to be addressed.

So Biden went back to the phone and returned to his negotiations with the Senate minority leader.

After a 12:45 a.m. Sunday phone call between Biden and McConnell, the president, vice president and their staffs met in the Oval Office until 2 a.m. Monday morning to go over additional details.

The president's legislative affairs director Rob Nabors went to Capitol Hill to meet Senate Democratic staff at 2 a.m. to begin drafting legislation and returning home to change his shirt before he returned to the White House at 7 a.m.

Biden and McConnell spoke again before at 7 a.m. Monday to continue discussions and much of the day Monday was spent focused on tackling the sequester, because of Obama's insistence. The White House and Senate Democratic staff went back and forth identifying areas to find revenue and spending cuts.

Ultimately, Republicans agreed to a plan that raises $620 billion in revenue over 10 years, makes a $24 billion down payment on deficit reduction by turning off the sequester for two months, which sources familiar with the discussions said represented significant concessions from the GOP.

Those concessions, which included a back down in their pledge to oppose tax rate increases for the wealthiest Americans, strengthens the Democrats' hands as both political parties brace for the upcoming debt ceiling battle.

Although Obama wanted to buy down the sequester for a year instead, a longer-term deal would have taken more time than negotiations in this timeframe allowed and required finding $120 billion in pay-fors.

The agreement also included an individual $5 million exemption level for the estate tax, the "Doc Fix," an agreement to extend unemployment benefits for one year, a cap in itemized deductions starting at $250,000 for individuals and $300,000 for households and an extension in unemployment insurance.


Filed under: Fiscal Cliff • President Obama
soundoff (102 Responses)
  1. John

    Allowing the Bush tax cuts to stay in place for anyone fixes nothing...we couldn't afford to make those cuts to begin with, and we sure as hell can't afford them now. If you want to live in a decent country with good infrastructure, you're just going to have to suck it up and pay taxes.

    January 1, 2013 02:34 am at 2:34 am |
  2. joe2sixpacks

    Its sad that these leaders couldn't address this right after the election. Everyone in Washington is looking for a win at the other parties expense. Good for Obama to have learned the lessons of the past 4 years. The Republicans are always playing hard ball and looking to hurt the President's standing. This is the party of Dubya, Romney, Trump, Cheyney, Rumsfeld, Libby and Fox News. These guys got us into wars and didn't pay for them, and deregulated Wall Street so much that the whole economy almost collapsed. Pretty selfish and destructive. McConnell was dumb enough to say he wanted to make Obama a one term President. Impressive way to win friends and influence people. Kentucky is a special place. I do believe that we need to cut entitlement spending and reform our tax code. I am an Independent.

    January 1, 2013 02:40 am at 2:40 am |
  3. mfbnc

    so, in the end after all the drama, we end up with an average of $62B a year against deficits of $1.2T. that's lovely, now what about the other $1.138T?

    January 1, 2013 02:44 am at 2:44 am |
  4. Monomachos

    Congratulations on getting a deal done, though one has to wonder that if it was so hard to get a deal for a paltry $62 billion a year in increased revenue and $24 billion in cuts, will a deal to get a real handle on the deficit be impossible?

    January 1, 2013 02:44 am at 2:44 am |
  5. Dr. Who

    What ever they just want to grab more of our money. God forbid they get real jobs.

    January 1, 2013 02:49 am at 2:49 am |
  6. bannister

    With all due respect... Obama didn't insist on anything. He's a puppet of the elite 1% who work behind the scenes and TELL HIM EXACTLY WHAT TO DO – and- EXACTLY WHAT TO SAY. Anyone who believes otherwise may be well intentioned, but extremely naive.

    January 1, 2013 02:54 am at 2:54 am |
  7. WV Gleeman

    And, as predicted, politicians were politicians. In the end they did what they now do best; kick the can down the road. Why the last minute? We need a way to tell them this is no longer acceptable.

    January 1, 2013 02:55 am at 2:55 am |
  8. bob

    BS – they just kicked the can down the street – all of them deserve going to jail

    January 1, 2013 02:59 am at 2:59 am |
  9. Thomas

    Happy New Year !

    All the best to us all in the new year .

    January 1, 2013 03:05 am at 3:05 am |
  10. PumpkinEater

    This deal is ridiculous. Members of Congress should have to reveal how much money they and their contributors make off stock market fluctuations. When they can't make a deal that lasts more than a few months it raises suspicions in my mind that some in power may be deliberately manipulating the markets through these short term "deals".

    January 1, 2013 03:18 am at 3:18 am |
  11. Four and The Door

    The House needs to dump this loser bill in the trash. It's political garbage. Make them come back with a serious deal. Obama is chumping the middle class here with a solution to nothing. We need instead to make a real effort at spending control and job creation. This is a half- hearted poor effort at best. We can do better.

    January 1, 2013 03:25 am at 3:25 am |
  12. Bill Clay

    We would have been better off going over the cliff. The short term would have been rough, but in the long term we would have been much stronger than this wishy-wash deal will provide.

    January 1, 2013 03:54 am at 3:54 am |
  13. Pat

    Nothing's changed, it's the same old feudal system we had last year. Karl Marx was right.

    January 1, 2013 04:02 am at 4:02 am |
  14. john

    We must not keep spending and borrowing above what comes in. And stop raising the debt and taxes

    January 1, 2013 04:50 am at 4:50 am |
  15. Steve Smith

    Although a dem, hats off to Senate Minoirty Leader McConnell–when it came time to do what was right for America, he fought for his position, but at the end of the day, was willing to win some and loose some and get a deal done. That is the GOP I remember. No one get everything they want. The tea party can learn from him.

    January 1, 2013 04:50 am at 4:50 am |
  16. Marcia

    Nice job! Wish it wasn't all left to the last minute, and I hope this is a start to some better leadership from the top elected officials and consensus in Washington between the two parties. Of course not everyone will be happy with this deal, but necessary and realistic concessions from the GOP, FINALLY, are a welcome breath of fresh air. Now, can we please move on to continuing the recovery, and work on tax and other incentives to bring good jobs with decent pay and benefits back to the USA.

    January 1, 2013 05:02 am at 5:02 am |
  17. keith VanZandt

    President Obama looked them in the eye and they BLINKED

    January 1, 2013 05:09 am at 5:09 am |
  18. Don

    Good job guys.

    January 1, 2013 05:10 am at 5:10 am |
  19. Phill

    This is why I voted for Obama.

    January 1, 2013 05:29 am at 5:29 am |
  20. Winning

    YES!!!

    January 1, 2013 05:30 am at 5:30 am |
  21. West Virginia- Buck

    Finally Obama stood his ground and fought back on something. Didnt get everything but didnt cave into McConnell. Nothing wrong with compromise. Thats why I voted for you Mr. President!

    January 1, 2013 05:31 am at 5:31 am |
  22. oddjob2234

    They all need to be beaten, from top to bottom, no exceptions.

    January 1, 2013 05:34 am at 5:34 am |
  23. Winning

    BTW I hate both sides in this but holy crap, finally the Republicans gave in. I can't belive it actually, it's been a long time coming.

    January 1, 2013 05:36 am at 5:36 am |
  24. Todd

    Breaking News: More of the same from Washington

    January 1, 2013 05:44 am at 5:44 am |
  25. Allinstride

    Republicans are amazingly bad negotiators.

    January 1, 2013 05:48 am at 5:48 am |
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