Monday, January 14, 2013

First published on December 28, 2012 via email newsletter 'Fiscal Cliff Notes.'

The Senate is not built for speed so time has run out on a Fiscal Cliff deal prior to sine die of the 112th Congress. The weekend will bring attempts for a short-term fix but any deal has little chance of passing the House with a majority of the majority. Speaker John Boehner (R-OH) has clearly determined he’d rather be House Speaker in the 113th Congress than a deal-maker in the 112th and won’t allow a vote on a bill that
needs Democrats to pass.
The very real problem for Speaker John Boehner (R-OH) is the rooting belief that Majority Leader Eric Cantor (R-VA) is really in charge. Some House Republicans are delusional in hanging onto the idea that President Obama will try and help Boehner out by offering entitlement reform so as to avoid a Speaker Cantor. The reality is that House and Senate Republicans would rather go over the fiscal cliff and start anew than leave any income brackets out of a tax package prior to Dec. 31st.
A retroactive deal on tax rates will get done before the end of February 2013 with the tax threshold at $500,000, but the negotiations will start anew with Senate Republicans giddy about being able to leverage the debt ceiling for deep entitlement reform. The White House will default back to the $250,000 threshold given GOP insistence on entitlement reform. Any tax bill will have a sunset provision while the hard work of a tax code overhaul becomes central.
Expect a hard-line from Senate Majority Leader Mitch McConnell (R-KY) on taxes and entitlement reform, remembering he is up for re-election in ’14. The House will be more of the same from the 112th with the threat of Tea Party primary election challenges hanging over every Republican Member, inhibiting incentive to compromise.
Senate Rules: Moving forward there will be an instance of sunlight as indicators suggest the Senate may agree to bipartisan filibuster reform (Senate Rule 22) via a Standing Order to make the Motion to Proceed non-debatable (as it was prior to 1949), reduction of post cloture debate on nominees from 30 hours to zero, and a method for the minority to offer amendments (opening the Amendment Tree). These reforms bode well for acceleration in the Senate schedule, encouraging legislative productivity.
DefSec: The Chuck Hagel Secretary of Defense nomination started off bumpy but will right if he is nominated by the White House. The conditions for accepting the nomination is to proceed with defense sequester cuts, which fits Hagel’s predisposition. While Hagel will have a more jerky confirmation process than Sen. John Kerry (D-MA) to Secretary of State, he will ultimately be confirmed if nominated.
Assessing Accuracy: This first of these newsletters were bearish on a Fiscal Cliff deal being reached by year end (Nov. 12-16, 2012) and Speaker Boehner being able to whip his Tea Party caucus around a deal with the White House. This gloomy outlook continued through the following week, stating “one can’t get there (a deal) from here,” (Nov. 19-23). In the Dec. 3-7 edition the sense was wrong that an increase in Social Security retirement age would be offered before chained CPI was offered. That said, while there were moments of optimism as President Obama and Speaker Boehner sincerely tried, in the end there was never confidence a deal could be struck. A blockbuster deal will not happen before year end, although a Senate tax package might see the light of day with little chance of passing the House (much less seeing its floor).

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