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. OrganicManLives_N_anOraganicUNiverSE

    Its sometimes challenging being a who in whoville

    January 1, 2013 05:49 am at 5:49 am |
  2. mnworker

    It's about time!

    January 1, 2013 06:02 am at 6:02 am |
  3. Jerry

    Kick the can down the road, spend-spend -spend-America is screwed again

    January 1, 2013 06:23 am at 6:23 am |
  4. ring of truth

    This article is an unreal bunch of lies, half truths and twisted truths.
    What a big fat pot of propaganda !!!
    With reporting like this, we are all doomed!!!

    January 1, 2013 06:23 am at 6:23 am |
  5. Eric

    Good way to save money, start taking away people's unemployment checks...
    force them to get a job and start contributing to the economy again

    January 1, 2013 06:30 am at 6:30 am |
  6. jim atmad

    A bad deal for both sides. That's called 'compromise'.

    The thing stinks, but not as bad as I was afraid it would. House members should hold you nose and vote for it.

    January 1, 2013 06:31 am at 6:31 am |
  7. HenryB

    Compromise is nice and it ultimately did happen this time. Without talking about the contents of the bill, it is a shame that we have to always go through this process. This is but does not have to be.

    January 1, 2013 06:42 am at 6:42 am |
  8. Nancy

    Bravo Biden!

    January 1, 2013 07:14 am at 7:14 am |
  9. Dorothy Reeves

    Thanks CNN for putting the entire bill on your web site. Now I can read the bill and make my own decision about the bill. I am sick of all the uproar about minor things in the bill who have not read any of the bill. My wish for this new year is for more informed voters. Peple know the facts before making the wrong decision or stating untruths.

    January 1, 2013 07:15 am at 7:15 am |
  10. Yep, they kicked the can down the road again.

    Why bother turning off the sequester for JUST two months? It should be abolished PERMANENTLY since obviously both parties and the American public can't stomach any painful budget cut.

    In 2 months, the media and politicians will come up with another clever phrase such as "Fiscal Armageddon" to scare up the American people and postpone any meaningful cuts again. LOL

    January 1, 2013 07:17 am at 7:17 am |
  11. Lizard Lance

    All the Republicans wanted was to serve their master Grover Norquist. I suspect we'll see a number of Republicans in the House whine and moan in opposition to this agreement. What is best for the country is irrelevant to the Tea Party zealots. The rich must be protected and tax rates must never be raised for any purpose whatsoever, even when we go into an ill-advised war. As for the middle class...tough luck. You are getting squeezed more and more by the conservatives. But if you were all nothing but fetuses you'd be getting lots of tender loving care by the GOP!

    January 1, 2013 07:19 am at 7:19 am |
  12. Name lynn

    obama plans sound good but them republicans an white house leaders not agreeing with obama it dont matter because what obama says its going to pass anyway thats why them republicans an them white house leader is a pain in the whatever

    January 1, 2013 07:42 am at 7:42 am |
  13. Jules

    I'm a liberal and I think the left ought to back down a bit. You can't have negotiations and get everything your own way. It just doesn't work out that way in our type of government.

    January 1, 2013 08:02 am at 8:02 am |
  14. dnokc

    What a joke! Can kicking is still in vogue! Maybe the grand kids will eventually deal with it.

    January 1, 2013 08:23 am at 8:23 am |
  15. jimhale

    Okay. The Prez won round 1. But now the Dems no longer have the tax the evil rich lever.
    The GOP was dense as an anvil not to have given on the tax rate issue last summer. If they had, Romney would be Prez. Obama's whole campaign was built on tax the rotten rich more. He had nothing else to say.

    Now is where the fun begins.

    Hopefully, the House will see it that way and promptly adopt this .....by a one vote margin.

    January 1, 2013 08:36 am at 8:36 am |
  16. realist512

    Kicking the can is hindering our economy. Republicans should have taken Obama's offers for a grand bargain. This fighting of tooth and nail gets us nowhere. It is just playing to the folks at home. Govern!

    January 1, 2013 08:37 am at 8:37 am |
  17. Radgast

    They have had two years to get this done, They should have started with congressional pay cuts.

    January 1, 2013 08:42 am at 8:42 am |
  18. ST

    What I do not understand are those who are against spending. I do think they do not ask themselves what are we spending for and whether we need such expenditures. Is it a bad thing to help those who were involved by unexpected mother nature? (those who were affected by Sandy)? Is it a bad thing to let every individual of our kids get the right education needed? Is it bad to build schools, roads and bridges (infrastructure) to let easier transportation between one place to the other? Is it bad to let the future generation have modern and quicker transport like the highspeed trains, to allow them move without problems, like what other countries have? etc.etc.

    January 1, 2013 08:57 am at 8:57 am |
  19. tarura

    What Obama wants? Pay lower taxes, of course. His salary is $400k

    Surprise? Senat increased taxes for income over $400k. How conveeenient !

    January 1, 2013 08:57 am at 8:57 am |
  20. steve-0

    the tea party wont rest until the US is destroyed. They are more lethal than al-quaida.

    January 1, 2013 09:04 am at 9:04 am |
  21. Sidnie Feit

    In spite of all evidence showing that: trickle down does not work, stimulus works,
    the time to handle debt is when the economy is healthy, AND the fact that current borrowing costs
    are less than inflation, the wrangling goes on.
    Kidnappers have a great advantage. They do not care what happens to the hostages.

    January 1, 2013 09:10 am at 9:10 am |
  22. allenwoll

    .
    All this time, effort and heartache pushing around Blue-Smoke Money on the Casino tables : It is nothing but a red-herring designed to distract us from the REAL problems !.
    .
    Instead of playing Money-Men games, We should be finding ways to induce our lazy Capitalists to invest IN AMERICA again and keep their money here - NOT in Barbados, a la Ro-Money !
    .
    "Gee, we can't do THAT - We might have to wait a few quarters for our obscene profit !" - Say the young wet-eared Pseudo-Cappies !
    .
    This entire chain of crises was largely brought on by the utter failure of our Capitalists to do their jobs - to INVEST AT RISK WITH THE PROMISE OF PROFIT in the long-term ! ! . Instead they either did NOT invest at all or they invested overseas at LOW RISK for very, VERY high profits - but in the short-term - and THAT bill is now asking to be paid.
    .

    January 1, 2013 09:19 am at 9:19 am |
  23. G2

    I want to know if the agreement funds the OCR or if Congress successfully eliminated the only effective ethics and legal oversight group for thier activities.

    January 1, 2013 09:24 am at 9:24 am |
  24. Peter Q Wolfe

    Why can't anybody see what is the True Source of the problem? Mandatory spnding with Medicare is the true source of the problem. Fact is that 2/3rd of redistributed money goes to the elderly and 1/3rd to children and young adults and fact that 5% of Medicare gets 50% of the medical money for end-of-life care. Simple solutions just not politically salent to make these tough decisions.

    January 1, 2013 09:24 am at 9:24 am |
  25. tarura

    Steve-0 :
    Liberals wont rest until the US is destroyed. They are more lethal than al-quaida

    January 1, 2013 09:25 am at 9:25 am |
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