In 'fiscal cliff' deal, Joe Biden upstages President Obama

With 'fiscal cliff' talks teetering, Vice President Joe Biden – a former longtime senator – stepped in to broker a deal with his old colleagues and and stave off big tax hikes for most Americans.

 The Senate deal to avert the fiscal cliff – or, at least, the harshest elements of it – owes much to the outsize, 11th-hour role of Vice President Joe Biden as “dance partner” to Senate minority leader Mitch McConnell (R) of Kentucky.

The deal extends Bush-era tax rates for all Americans except those with individual incomes over $400,000 and families with incomes over $450,000, which will be taxed at a maximum 39.6 percent rate, up from 35 percent.

The measure also extends Bush-era tax credits for families with children, the tuition tax credit, business tax credits, college tuition tax credits, and stimulus tax credits, such as credits for clean-energy companies. It extends unemployment insurance at the current 99 weeks. (Had Congress not acted, jobless coverage would have reverted back to 24 weeks.)

But it delays until next year a decision on what to do about the $110 billion in "sequester" cuts to government spending mandated by the debt-ceiling deal of 2011.

The Senate passed a bill to avert the fiscal cliff early Tuesday morning, 89-8. Now, the bill goes to the House, where Speaker John Boehner (R) of Ohio said in a statement after the vote that the House will "honor its commitment to consider the Senate agreement if it is passed."

"But decisions about whether the House will seek to accept or promptly amend the measure will not be made until House members – and the American people – have been able to review the legislation," he added.

As recently as about 7 p.m. Saturday night, prospects for a deal looked in doubt. Talk between Senate majority and minority leaders had ceased.

Years of gridlock take a toll on Senate leaders, especially veterans like Senate majority leader Harry Reid (D) of Nevada and Senator McConnell, who have been battling each other on the front lines of arcane Senate procedure for years.

By Saturday night, McConnell had made his latest offer, but Senator Reid never countered back. That’s when McConnell asked Mr. Biden to step in to jump-start the negotiations.

Unlike President Obama, Biden had spent 36 years in the Senate and is a seasoned negotiator. He and McConnell worked together to break an impasse over extending the Bush-era tax cuts in December 2010. With Reid gone silent, Biden looked like McConnell’s best option for a way out.

“Yesterday, after days of inaction, I came to the floor and noted we needed to act, but that I needed a dance partner. So I reached out to the vice president in an effort to get things done,” McConnell said on the floor of the Senate mid-afternoon on Monday.

By contrast, Mr. Obama played “tough cop” in the negotiations – or, critics say, inept cop. As negotiations hung by a thread, the president taunted Republicans in a campaign-style event at the White House Monday.

A deficit deal was “within sight,” the president told cheering middle-class voters, but added that Congress could be counted on to delay finding it, “if there’s even one second left.”

Moreover, he laid down an ultimatum to congressional Republicans.

"Now, if Republicans think that I will finish the job of deficit reduction through spending cuts alone – and you hear that sometimes coming from them ... then they've got another thing coming,” Obama said. “That's not how it's going to work at least as long as I'm president, and I’m going to be president for the next four years."  

Members of Congress are used to being the brunt of jibes. But a stick-in-the-eye to House Republicans whose votes will be needed to on a deal to avert the fiscal cliff is a poor negotiating strategy, said GOP senators, who took to the floor after the president’s remarks.

“The American people have to wonder whether the president really wants this issue resolved or is it to his short-term political benefit for us to go over the cliff?” said Sen. John McCain (R) of Arizona, the GOP presidential nominee in 2008.

“I know the president had fun heckling Congress. I think he lost probably numbers of votes with what he did,” said Sen. Bob Corker (R) of Tennessee, who worked with the White House on the 2009 auto bailout.

If, in fact, the president wants to break the deal and charge House Republicans with taking the country over the fiscal cliff, the jibes might work, says John Pitney, a political scientist at Claremont-McKenna College in California  

“There are two possible explanations: (1) He was trying to bolster Democratic morale or (2) that he really wants to go over the cliff and was trying to goad Republicans into busting the deal. He may end up succeeding.”

The Biden-McConnell deal offered some compromise on both sides.  

Responding to GOP pressure, the deal continues to give an estate-tax exemption for estates up to $5 million. (Had Congress taken no action, the exemption would have reverted back to $1 million.) In a nod to Democrats, estate tax rates will increase to 40 percent, up from the current 35 percent level but short of the 45 percent rate that the president wanted.

The last issue to be resolved later Monday was how to deal with $110 billion in automatic spending cuts known as the sequester. Obama and Democrats proposed using new tax revenues to offset the spending cuts, but Republicans insisted that the whole point of the sequester produced by the debt-ceiling negotiations was to cut spending.

The Biden-McConnell deal delays the sequester cuts for two months, offset by spending cuts elsewhere in the budget.

For many Senate Democrats, the shift from $250,000 to $450,000 was a bigger pill.

“We’re going to lock in forever the idea that $450,000 a year is middle class in America?" said Sen. Tom Harkin (D) of Iowa, responding to press reports of a deal on Monday. “Need I remind people that at $250,000 a year, that’s the top 2 percent income earners in America.”

Top labor leaders protested what they saw as a White House capitulation on tax rates. Richard Trumka, president of the AFL-CIO, tweeted his opposition to a proposal that would raise tax rates only on incomes above $400,000 for individuals and $450,000 for couples, while inviting future debt-reduction standoffs just months down the road.

“It’s not a good fiscal cliff deal if it gives more tax cuts to 2 percent and sets the stage for more hostage taking,” said AFL-CIO leader Richard Trumka in a message tweeted to followers.

Labor leaders worry that the next fiscal cliff negotiations will lead to even more concessions, or hostage taking.  The Treasury reports that the US hit its debt ceiling on Dec. 31, but that emergency measures could delay breaching the ceiling into February.