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. Joe from CT, not Lieberman

    Sidnie, Republicans are just like the other kidnappers. They don't care what happens to the hostages (the American People) either, as long as they get the tax cuts their wealthy supporters want.
    It does seem interesting that Billionaires like Bill Gates and Warren Buffett, who believe their taxes should be higher and more equitable, tend to support Democrats, while those like the Koch brothers believe that not only should they be exempt from paying any taxes, but that the Government should also provide tax breaks on their businesses to allow them to make even more profits.

    January 1, 2013 09:26 am at 9:26 am |
  2. mike Lake Orion Michigan

    Obama will never be my President! He is arrogant and for people saying how smart he is, in my view he is clueless!

    January 1, 2013 09:31 am at 9:31 am |
  3. tarura

    @allenwoll – Those who have money to invest will do so if they can get a reasonable return. Thus far, the return seems unreasonably low, kudos to Obama administration regulations and laws, including Obamacare looming for 2014.

    Like buyers of goods would buy only what THEY judge as worth buying, or have no alternative (food,fuel), same with investors will invest in the US if it's worth it, with an alternative for them to invest elsewhere, kudos to Clinton's globalization.

    You can't have cake and eat cake, liberals !

    January 1, 2013 09:34 am at 9:34 am |
  4. nick

    I dont understand why people think that raising taxes on ANYONE would do anything to seriously tackle the debt problem (I don't care who is to blame for it, either, it's here now) or our unemployment problem. When has higher taxes ever lead to more jobs? The "President" is a joke and I ashamed to have him represent me. Congress and Senate aren't any better. So far let's see- Socialists3- America 0.

    January 1, 2013 09:42 am at 9:42 am |
  5. SW

    This has to be the worst reporting I have ever read. Did Ted "the UN is our only hope" Turner write this piece himself. They couldn't even acknowledge the simple fact that had it not been for Sen Mitch McConnel- REPUBLICAN-the talks would have collapsed completely. It was he and he alone that reached out to Joe Biden when it became clear that dealing with Reid was an impossibility. So, to get it straight, it was the Republicans and the Republicans alone that got this "deal" done and averted tax hikes on every tax paying American.

    January 1, 2013 09:53 am at 9:53 am |
  6. NickAnast

    mike Lake Orion Michigan:
    Obama will never be my President! He is arrogant and for people saying how smart he is, in my view he is clueless!
    *****************************************************************
    You'll love Somalia: low taxes, very limited government, no Obamacare.

    January 1, 2013 09:54 am at 9:54 am |
  7. NickAnast

    nick: When has higher taxes ever lead to more jobs?
    ***************************************************************
    Answer: 1993-2001. Bill Clinton and the Democrats raised taxes and 22 million jobs were created.

    January 1, 2013 09:58 am at 9:58 am |
  8. Just a thought

    @mike Lake Orion Michigan ...Obama will never be my President!

    You know, please feel free to leave the country. Because If Pres. Obama isn't your president, then this isn't the United States of America.

    Much to the contrary Barack Obama is the 44th president, This Is The United States of America....Therefore, Don't Let the Door-knob Hit ya, Where the Good Lord Split ya. I won't say we are sad you are leaving – LOL

    January 1, 2013 10:02 am at 10:02 am |
  9. jpmichigan

    Sure, every American knows Obama won the election again, but what Obama forgets it did not come with a CROWN. He can arrogantly remind us over and over again, but to no avail. The next problem he will see is getting the debit ceiling risen, now he will have to cut spending more realistically . He will have a fight on his hands for the raise in spending money he will state he needs. With an increase in revenue he will be receiving , he will have to learn to be fugal. The President for all the smarts he states to have, he has not learn a thing from the pass 4 years. He still can't lead or govern and Congress lacks common sense and ability to function for the benefit of ALL Americans , not on party lines only.

    January 1, 2013 10:11 am at 10:11 am |
  10. Pete

    Remember republicans the ropes around your reps neck not Pres.Obamas .If this deal isn't cut your republicans in both houses will be history and again you lost months ago not us remember, so get with the program or get out!!

    January 1, 2013 10:14 am at 10:14 am |
  11. joe dunwoody

    Take a look at this headline again. what in the world is it saying. Talk about indide baseball. It makes no legible sense.

    January 1, 2013 10:17 am at 10:17 am |
  12. Anonymous

    @tarura

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

    Surprise? Senat increased taxes for income over $400k. How conveeenient !
    ================================================================================================ If you'd been listening to anything but Fox News you'd know the President wanted the line at $250k – for several years. Republicans fought to reduce Social Security benefits and fought only to preserve the wealth of the top income earners in America – hence the $400k level. Those are facts – something you won't hear on Fox.

    January 1, 2013 10:25 am at 10:25 am |
  13. michaelkeating

    The reality is that this doesn't fix anything. The 47% will need to pay more and/or get less benefits before we get $1.2 trillion of deficit fixed. Yes, the richest should pay more – even as a staunch conservative I agree with that – but the middle class and lower need to pay something. Obamacare already taxes the rich more and provides more handouts to middle income ($85k and less) Americans. It cannot continue.

    January 1, 2013 10:32 am at 10:32 am |
  14. Chris

    Fact is, Obama did not and will not be getting what he wants no matter how much he "stuck" to his guns! America may be saved from this socialist.

    January 1, 2013 10:38 am at 10:38 am |
  15. Johnny DC

    Bottom line, this fixes nothing. Our trajectory is still Greece, and there's nothing that can be done about that from the revenue side.

    Without cutting our budget extensively, our future is doomed. Maybe not in January 2013, but within a few years, this kicking-the-can policy will doom us.

    You can point at the wealthy, you can point at the corporations, you can point at the House all you like. Doesn't change the state of the game right now – without reducing our spending and cutting entitlement programs, we are essentially dooming ourselves.

    There is no counter-argument to this. There is no rhetoric that can change this. This is pure fact. It doesn't win elections, but it is fact.

    January 1, 2013 10:40 am at 10:40 am |
  16. Ancient Texan

    No spending cuts; just more money for the tax and spend administration to repay the unions for their reelection efforts.

    January 1, 2013 10:42 am at 10:42 am |
  17. Pick Pickering

    It is interesting that the President wants to raise taxes, but pays less than 25%. This information was provided to the American people by the White House press office. We have a serious problem in the United States with regard to uncontrolled and unprincipled spending. I am proud that the taxes have increased on families making more the 450K, but doesn't the Declaration of Independence state that "All men are created equal", and if created equal should be taxed equally. I propose a flat tax of 25% for all individuals with the first 40K being untaxable. There would be no exemptions. It has been demonstrated that aflat tax rate would increase revenues, but those who require a complicated tax code (attorneys, accountants, and crooks) continue to oppose such an issue.

    As Americans, we should vote the 5 most ranking members of each party out of office and replace them with individuals of the highest moral character and common sense.

    January 1, 2013 10:46 am at 10:46 am |
  18. Don Hill

    I disagree totally with the chained CPI which will cost social security recipients dearly. This is from the Boehner camp. These are people strictly for the wealthiest Americans , and to hell with the low and middle class. 2014 can't get here soon enough for me. The GOP better see the writing on the wall. Their demise is certain.

    January 1, 2013 10:46 am at 10:46 am |
  19. Anonymous

    "So, to get it straight, it was the Republicans and the Republicans alone that got this "deal" done and averted tax hikes on every tax paying American."

    Has FOX News started blabbering this nonsense already? Guess FOX forgot to let folks know there WILL be a tax hike on those earning 400K or more.

    January 1, 2013 10:49 am at 10:49 am |
  20. Joe

    Lets see this saves us 62 billion per year. And we are currently spending 2 trillion a year. FAIL! We need to cut spending.

    January 1, 2013 10:56 am at 10:56 am |
  21. Joe

    62 Billion of 2 trillion that we are borrowing every year. Does anyone really believe this will even put a dent in the problem,?? We need to cut spending!!!!

    January 1, 2013 11:02 am at 11:02 am |
  22. Lynda/Minnesota

    "We need to cut spending."

    Good luck getting that past the folks living off the government. You know. All those red states folks that collect more from the government than they give back.

    But, I do agree that we need to cut spending. Unfortunately, those who live off the government don't want their "stuff" cut. They want everyone else's stuff cut. I'm still trying to understand why these red state folks voted for Mitt Romney. They yell cut spending ... without understanding it is they who will suffer most. Oh, well. Such is life.

    January 1, 2013 11:06 am at 11:06 am |
  23. Gregory M. Newbold

    As an MBA holder from Columbia Business School [CBS], I learned early that sometimes the best deal is the one you DON`T MAKE. It`s too bad we don`t have more CBS-grads in leadership roles in government.

    From a negotiations standpoint, about $1.8 TRILLION in revenue would have been gained by doing nothing . . . letting the law take it`s course. Simpson-Bowles calls for $2.6TRILLION in new revenues. This agreement falls far short.

    The President would have had much leverage for comprehensive TAX SIMPLIFICATION & REFORM and would win a political victory for his party in the 2014 elections if Boehners Plan B fiasco had been the exclaimation point on this sad chapter.

    January 1, 2013 11:07 am at 11:07 am |
  24. Ed1

    You people just don't get it we can't continue to spend what we don't have period.

    This is basic math.

    The current Congress was elected to stop over spending and bring our debt down with spending cuts why can't you understand this. The rate we are going we will be just like Greece in the next three years.

    Obama talks about a balanced approach that means leave the giveaways alone.

    Congress is doing what they were elected to do in 2010 and 2012 so just stop the blame game.

    January 1, 2013 11:08 am at 11:08 am |
  25. Randy, San Francisco

    These bitter GOP/Tea Party Republicans are like school yard bullies who lost a fight and received their just due. It must be a bitter pill to be reminded that a majority of Americans do not agree with their extremist views.

    January 1, 2013 11:21 am at 11:21 am |
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