Democrats are confident that an Election Day mandate will deliver a fiscal cliff deal that raises tax rates on the rich.
Perhaps a little too confident.
Republicans may be reeling from their Nov. 6 drubbing, but Democrats have their own internal issues heading into the high-stakes talks — and they’re not insignificant.
By most accounts, President Barack Obama’s win and the party’s strong showing in Senate races gave the Democrats a leg up in the negotiations to avoid across-the-board tax hikes and draconian spending cuts set to kick in Jan. 1.
Yet getting a deal that raises tax rates for the wealthy may not be so easy for the party, and not just because of inevitable GOP resistance.
Senate Majority Leader Harry Reid (D-Nev.) will have to find 60 votes to extend just the middle-income tax rates — far from a given when a swath of the Senate’s moderate Democrats are up for reelection in 2014.
Reid and the White House will also need to navigate a hardening Democratic divide on entitlements. Progressives don’t want any deep cuts that Republicans will insist on for a deal. But a Third Way poll of 800 Obama voters set for release Tuesday found that efforts to fix Medicare and Social Security enjoy broader support than liberals suggest.
Even if Speaker John Boehner (R-Ohio) were to risk his job by backing a tax-rate increase, there are Democrats who think a $250,000 income threshold is too low. So finding 218 House members to pass a bill that would extend the lower tax brackets isn’t exactly a cakewalk. Want Boehner to raise taxes? Republicans privately say the entitlement changes would have to be unimaginably sweeping.
In a nutshell, Democrats haven’t yet coalesced around a position themselves, let alone found agreement with Republicans.
So while the election might have given Obama the political leverage to insist in allowing individual tax rates for high-income earners to snap back to nearly 40 percent, getting there is another matter.
“If you look at history, mandates are what you make of them,” said Rep. Gerry Connolly, a Virginia Democrat who represents the wealthy suburbs of Washington and backs raising taxes on families making more than $1 million annually. “Some people win election by very narrow margins and make enormous mandates out of them, and some people win by enormous margins and squander whatever mandate they’ve got.”
Top Senate Democrats are confident Reid can balance the conflicting demands of liberals and moderates. He has the confidence of his Democratic Caucus, and they don’t believe — although many Republicans do — that Obama will blink on raising tax rates for the wealthiest Americans.
“Every time a deal has sputtered or failed to come together at this point, it’s been because of the Republicans’ unwillingness to deal with revenues, not Democrats’ queasiness over making serious choices on spending cuts,” said a top Senate Democratic aide. “Certainly there are members of our caucus who are laying down markers now to try to get the best deal possible. But at the end of the day, the votes will be there for a balanced package.”
The poll from Third Way, a centrist group, attempts to speak to center-left lawmakers who may be sympathetic to the rising calls from liberals to not compromise. Unions and other progressive groups have pointed to surveys showing that Democrats don’t want lawmakers to touch entitlements, don’t view the debt and deficit as a top priority, and don’t favor Obama working with Republicans.
Actually, they want all three, concluded the survey by Peter Brodnitz of the Benenson Strategy Group, which does Obama’s polling. It was conducted Nov. 7-9 and has a margin of error of plus or minus 3.5 percent.
“There is a debate raging in this town among groups on the left about what this election means and what Obama should do on the fiscal cliff and the deficit,” said Jim Kessler, senior vice president for policy at Third Way, which provided the findings to POLITICO ahead of its Tuesday release. “A lot of the D.C.-based liberal groups seem to be representing a position that doesn’t exist in the Obama coalition.”
When asked if Democrats and Republicans needed to make “real compromises” to reach a deficit-reduction deal, 80 percent said that statement described their views extremely well, “making this the most strongly supported statement in the entire poll,” according to a Third Way memo on the survey.
Fifty-three percent of Obama voters ranked increasing taxes on the wealthy as “very important,” but fixing Social Security and Medicare was not far behind with 48 percent. Almost 80 percent said it would be better for the country if Congress and the president made changes to the programs, while 17 percent opted for no changes.
And 69 percent of the voters viewed the federal deficit as a major problem.
“The president, during the campaign, really sold the idea of a balanced deal that puts everything on the table,” Kessler said. “The people who voted for him are sold on it.”
And yet, moderate Democrats are still skittish.
Sen. Mark Pryor (D-Ark.) is a case in point. When the Senate voted for dueling GOP-Democratic proposals on extending the Bush tax cuts — keeping them in place for all tax rates and then just those for families making less than $250,000 annually — Pryor voted for both. So far, Pryor wants to see what deal is out there before he decides whether to back it.
“My view is that everything should be on the table,” Pryor told Arkansas reporters last week. “Where I am right now, I don’t want to rule anything out.”
Sen. Mary Landrieu (D-La.) told POLITICO that she wants to make sure that tax rates for those families making under $250,000 don’t rise. Yet she also supports efforts to keep estate tax rates — set to soar on Jan. 1 if no deal is reached — from increasing as well. That’s an important issue for small-business owners nationwide.
“With the economy still recovering, this is not the time to raise taxes on middle-class families or our small businesses,” Landrieu said. “The Senate should focus first on areas in which we all agree — specifically, extending the tax rates for those who earn less than $250,000 a year. Then, if we can afford to do more, given the fiscal pressures on our budget, we will make every effort while continuing to move our country down a more sustainable fiscal path.”
Sen. Mark Begich supported Reid’s floor proposal this summer to extend the Bush tax cuts for those families under the $250,000 limit. The Alaska Democrat won’t say what he’ll do now.
Pryor, Landrieu and Begich are all up for reelection in 2014.
This week, as Washington emptied out for the Thanksgiving recess, top aides across the Capitol are engaged in staff-level discussions on how to forge ahead on a fiscal cliff deal. On Monday, House Republican aides — including staff from Rep. Paul Ryan’s Budget Committee staff — huddled with White House staffers, aides said. Ryan’s staff and other committee aides are involved in the discussions.
All of this uncertainty of the ability to craft a deal — and get it through Congress — has some Democrats pondering the unthinkable: Maybe it’s better to plunge over the fiscal cliff. Rep. Peter Welch, an outspoken Vermont Democrat, said it will be a “challenge” for Obama and Boehner to “come up with a grand bargain where people generally do agree that it’s good for the middle class and good for the economy.”
“The most important thing is we end up with a balanced deal,” Welch said, describing the thinking of those who are prepared to allow all tax rates to jump. “If we end up with a balanced deal on July 15, that’s much better in the long term for the middle class and the economy than if we end up with a bad deal on Dec. 15.”