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. Pat

    To Mike Lake Orion Michigan...unfortunately for you, you are clueless because you can't understand that President Obama was elected President and saying "he's not your President" can't help you in doing what he proposes. Get over buddy, because if you don't, you're going to suffer from depression.

    January 1, 2013 11:28 am at 11:28 am |
  2. tarura

    So, Obama wants to extend Bush's tax cuts to have somebody to blame for bad economy in his 2nd term.

    Or would he rather blame his predecessor, that is the Obama first term, LOL.

    January 1, 2013 11:37 am at 11:37 am |
  3. Yourang

    President Obama continues to prove his lack of leadership and maturity . . . he is ineffective because he is confrontational and divisive – He Demands everything and belittles those that don't agree with him! The Democratic leadership is no better particularly Senator Reid.

    Considering this issue has been on the plate since last spring – it is the Democrats Fault for the Cliff. They chose to ignore any action until the last minute – believing they could pressure play their end result. This article is amusing at best, if correct; they are all in these little huddles, back and forth, like they don't reside in the same City – stupid. Rent a bigger room, sit at the table and hammer a deal down. We do that in our business every day!

    This draft deal, perpetuated by the Republicans, is moving in the correct direction – now – when finalized to include significant spending cuts, adjustments and tweaks to NON-ENTITLEMENTS such as Social Security and Medicare; adjustments and tweaks to ENTITLEMENTS such as Medicaid and Obamacare – then we will have something of substance to move forward and find the balance.

    As a small business owner (28 years) . . . I'm a bit more optimistic at this point . . .

    January 1, 2013 11:49 am at 11:49 am |
  4. sandra Sharp

    I do not see this as an Obama "victory". The tax increase is not on the $250k he wanted, the estate tax number is not what he wanted and the sequester did not get delayed by a year as he wanted. AND they voted to block the raise he wanted to give them.

    January 1, 2013 12:23 pm at 12:23 pm |
  5. Tony

    Yourang, Social Security and Medicare are entitlements. They are the sources of our long-term fiscal problems. What you pay in Social Security tax and payroll tax in no way pay for your future Social Security and Medicare benefits. The taxes do not make up for cost-of-living increases in your Social Security checks and rise of medical cost in Medicare. That is why Social Security and Medicare are going bankrupt. Medicare first, followed by Social Security. The sooner people understand this, the sooner they will understand why Republicans never explain what they want to cut in the budget.

    January 1, 2013 12:24 pm at 12:24 pm |
  6. Peter

    Astonishing......absolutely ASTONISHING..... that anyone on this board can accuse EITHER party of being blameless in this mess.

    You stupid fanboys with your "Liberals wont rest until the US is destroyed" and "Republicans want to wipe out the middle class" nonsense reveals just how many simpletons reside in the USA.

    If this is your idea of intelligent political discussion, get off the internet and go watch football. You will be more comfortable with that game's simple team culture.

    January 1, 2013 12:33 pm at 12:33 pm |
  7. sosimplyput

    Happy New Year to all, and just a reminder that this is a capitalist country, thank God. Congrats to Obama, Biden, McConnell and anyone else who doesn't stand in the way of proven compromise. Socialists and Communists need to find a new place to live. Period.

    January 1, 2013 12:39 pm at 12:39 pm |
  8. Name

    Had the Clinton era tax remained in effect budget surpluses would have e paid off the deficet in 2010. The repubs represent the plutocracy bringing our country down.

    January 1, 2013 12:40 pm at 12:40 pm |
  9. Mitchell

    So the next step is killing off the elderly and sick. Spending for social programs MUST stop. We can't afford to help those that PAID INTO the system for the last 50 years. The funny thing is government forgets about the promises made to us in our youth. Now you want to cut our social security cola's. This is a damn fine country unless your old and sick.

    I would suggest the political wheeler dealer to remember we seniors VOTE in every election, I wheel try my best to try my best to throw your sorry ass out of office.

    January 1, 2013 12:42 pm at 12:42 pm |
  10. Mark in San Diego

    To Mitchell who is ranting about social security cola's... I've paid into that system for 20 years and will never see a dime of it, but you keep complaining about not getting your cola... You're grandchildren are the ones who are really going to get screwed. But it seems you don't care as long as you get yours.

    January 1, 2013 01:11 pm at 1:11 pm |
  11. Claudia, Houston, Tx

    Congress holds the "Purse Strings" and remember Congress is made up of doctors and lawyers, not Economist, so you get what you voted for, a do nothing, know nothing Congress.

    January 1, 2013 01:43 pm at 1:43 pm |
  12. Sam

    Obama just has went soft with the Republicans. He will never get what he wants as he caves into them. He will not stand up to them. He speaks out and talks a lot but caves in. We need a strong President to lead this nation, not a weak one.

    January 1, 2013 01:53 pm at 1:53 pm |
  13. diane

    Where were all you people while bush /cheney spent us into oblivian for 10 years. No screaming about to much spending back then. The only screaming we heard was from our brave soliders looking for weapons of mass destruction.

    January 1, 2013 02:05 pm at 2:05 pm |
  14. A little sad

    "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!"

    I'm going to enjoy the next 4 years and 19 days that President Obama WILL be your president, if you are a US citizen. Feel free to self deport if it gets too tough for you.

    January 1, 2013 02:12 pm at 2:12 pm |
  15. Dave R.

    Fixing Social Security is so simple. I cannot believe it has not been discussed. Remove the cap on the employee contribution to FICA taxes. Why should those making $110k + a year stop paying FICA taxes once that income level is reached? Those making less than that pay FICA all year.

    January 1, 2013 02:13 pm at 2:13 pm |
  16. Jennifer

    We know how hard you all wked on this fight.we think it was a good show..applause to all.happy 2013.eat a big dinner with friends.v

    January 1, 2013 02:26 pm at 2:26 pm |
  17. Chipster

    Republicans think $450,000/yr is "middle class." Yet, they think it's greedy for teachers to ask for more than $50,000/yr and even to expect benefits. There's something seriously wrong with their thought processes.

    January 1, 2013 02:39 pm at 2:39 pm |
  18. Chipster

    @Dave R. I completely agree with you about the FICA cap. Most workers pay FICA on every dollar they earn all year long. This year, those earning more than $113,700/yr will not pay anything the earnings above that limit. So, the rest of us pay a greater percentage of our earnings than those earning more than that, especially those earning more than the GOP's magic number of $450,000/yr.

    January 1, 2013 02:45 pm at 2:45 pm |
  19. penguin

    There is no good solution. Society has parasitized the economy for so long that the host is about to die. The "deal" does essentially nothing to increase revenue and absolutely nothing to curtail spending. Going over the so-called "cliff" may be a tough pill to swallow, but it is probably the medicine needed to cure what ails us

    January 1, 2013 03:23 pm at 3:23 pm |
  20. Diane

    Toalittlesad. Pres Obama is not arrogant he is brilliant. Most of us did not say Pres Bush was not our president (even though he stole it) you are so unamerican. To bad so sad.

    January 1, 2013 03:23 pm at 3:23 pm |
  21. Pepina

    Seems as if everyone is conveniently forgetting who got us into this fine mess. We let our government loose in a candy store with Daddy's credit card. Taxes and inflation are killing, literally killing, the middle class. The only way anyone can make it is if they are very rich or very "poor." Doubt me...? I have a relative who is on permanent vacation thanks to unemployment, eats better than we do... on food stamps and has free fer nuttin healthcare while we dip into our savings every month just to pay bills. But, no worries.. we have enough to live on for the rest of our lives.. providing we only live 2.4 years.

    January 1, 2013 03:32 pm at 3:32 pm |
  22. MSARK

    Sorry, but the House is not going to agree to this. They will ammend it and send it back. Too few cuts in spending. Reagan and Bush the elder know how democrats' promises work on spending. Democrats agreed to cuts of 2 to 1 and 1to 2 and they lied. They cut zero.

    January 1, 2013 03:58 pm at 3:58 pm |
  23. Dave

    Congrats to McConnell, Reid, Biden and Obama for putting together a compromise when their country needed them to work together.

    Now, let's see what Cantor and Boehner are made of; do they live in a bubble or can they work with Democrats who were also elected by the people? Is there any hope left for my Republican party? Or are they hopeless ideologues, living in a fantasy?

    January 1, 2013 03:59 pm at 3:59 pm |
  24. Dan5404

    Pepina: Since when did unemployment offer free healthcare? Your relative is apparently on wefare, not unemployment. And, if he is on welfae, he's eiher disabled, sick, or not able to work for some legitimate reason, because qualification is difficult, no matter whether you beieve Romney's 47% lies and FOX propaganda or not. True freeloaders on government assistance are a very small minority.

    January 1, 2013 04:22 pm at 4:22 pm |
  25. BHPT

    It's not true that republicans want to "wipe out" the Middle Class. They simply want to SQUEEZE them a little more...

    January 1, 2013 04:42 pm at 4:42 pm |
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