Georgia Senator Johnny Isakson wrote yesterday that he is concerned that President Obama is not sincerely negotiating to avoid the fiscal cliff. The comment, written in Isakson’s weekly newsletter to constituents on Dec. 7, echoed a statement made earlier this week on MSNBC’s Daily Rundown with Chuck Todd.
Isakson wrote, “I am concerned that the president is not acting in good faith and actually wants us to go off the fiscal cliff, let tax cuts expire, cut defense spending and then turn around and cut taxes on just a few later on in order to gain exactly what he has wanted all along while looking as though he has single-handedly rescued the country.”
The senator believes that President Obama and the Democrats are presenting the Republican negotiators with unrealistic proposals in order to force the country toward the fiscal cliff. He believes that the president intends to either force the Republicans to give in to a one-sided deal or simply wait for the automatic tax hikes to take effect. Afterward, the Democrats would attempt to enact new tax cuts for all but the top two percent of taxpayers.
Senator Isakson told MSNBC that he favors an approach that would “raise the base” by “capping itemized deductions at means-tested levels.” Tax reform of this type would increase tax revenue without raising tax rates as wealthy taxpayers would be able to take fewer deductions, leaving them with more taxable income. Isakson says that this was the approach favored by President Obama’s own bipartisan deficit commission.
This sort of tax reform was also used by President Reagan in 1986 in a tax compromise with Democrats. The Tax Reform Act of 1986 lowered the top marginal rate from 50 percent to 28 percent while at the same time eliminating many loopholes and tax shelters. According to historical data from the Tax Policy Center, federal tax receipts increased both in terms of dollars and as a percentage of GDP after the reform.
As support for his position that President Obama does not really want a deal, Isakson cited the fact that Senate Minority Leader Mitch McConnell (R – Ky.) offered Senate Majority Leader Harry Reid (D- Nev.) the chance to vote on President Obama’s proposal. Sen. Reid declined to allow the senate to vote on the measure. The proposal included $1.6 trillion in new taxes and would have given the president the power to raise the federal debt limit without congressional approval. A Republican summary of the president’s proposal provided to Huffington Post also includes an additional $600 billion in taxes effective in 2014, more stimulus spending, an extension to unemployment payments, and a one year deferral of the spending cuts included the fiscal cliff.
Meanwhile, President Obama repeated that he is not willing to compromise on raising tax rates. The president told Yahoo News, “If we’re serious about reducing our deficit while still investing in things like education and research that are important to growing our economy – and if we’re serious about protecting middle-class families – then we’re also going to have to ask the wealthiest Americans to pay higher tax rates. That’s one principle I won’t compromise on.”
Rep. Tom Price (R- Ga.) had previously pointed out on MSNBC that Congressional Budget Office figures show that Obama’s tax increase would generate only $82 billion per year. According to Price’s figures, this represents just over two percent of the $3.5 trillion 2012 federal budget, enough to fund the federal government for about eight days. The 2012 federal deficit is $1.1 trillion according to the Treasury Department.
The president’s confidence may be the result of two new polls that show that a majority of voters trust the Democrats to make “a good-faith effort to cooperate with Republicans” according to Yahoo News. By almost two-to-one, voters would blame Republicans over Democrats if the country goes over the fiscal cliff.