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GOP's Plan B Would End Paralyzing Uncertainty Over Tax Rates And Boost Economic Growth

The opinions expressed by columnists are their own and do not necessarily represent the views of

WASHINGTON - The dizzying, budgetary roller coaster ride careened closer to the "fiscal cliff" this week when House Speaker John Boehner tossed a new Plan B into negotiations with the White House.


Just when it seemed Boehner and President Obama were nearing a deal, the speaker changed course, voicing doubts a full package could be worked out in time before the January 1 deadline.

That's when a combustible combination of higher taxes and sweeping automatic defense and domestic spending cuts will send the economy into a recession, economists say.

Boehner's eleventh hour rescue plan would permanently extend virtually all of the tax cuts enacted under President George W. Bush for all households under $1 million. That includes reigning in the punishing alternative minimum tax and retaining the lower tax rate on inherited estates.

"I believe it's important we protect as many American taxpayers as we can. And our Plan B would protect American taxpayers who make a million dollars or less and have all of their current rates extended," Boehner told reporters after closed door meetings with his House GOP caucus.

Was this an insurance policy move by Boehner and his leaders to blunt a likely White House offensive that would blame Republicans if a compromise isn't reached before year's end? Or a daring move to demonstrate his political strength in the GOP House to extract deeper concessions from Obama?

To many House Republican veterans who have fought over countless negotiated legislative deals before, he was playing both strategies at once.

It was a high wire act by a cunning legislative strategist who has gone toe-to-toe with Obama many times before, only to walk away from a deal his party could not accept. He believes a deal can still be worked out, but that the White House needs to be convinced that only a tougher package can win House passage -- one with no increase in tax rates below $1 million at a time when the economy remains sluggish and full time jobs are in short supply.


Boehner pulled out his back-up plan at mid-week after both sides had moved the needle toward a deal. But then the talks stalled over deeper spending cuts the speaker sought, and other complicated tax matters. GOP leaders feared there was little or no time to construct a full-blown trillion dollar-plus deal over a raft of fiendishly complex issues that cannot be fully resolved in less than 12 days.

Ordinarily, fiscal fights take months to wind their way through a fierce gantlet of committees, subcommittees, countless votes, and endless conference committee deal-making before a bill reaches the floor for final passage.

In this case, the White House was attempting to by-pass much of that process in the belief they could bully Republicans into caving in for fear of suffering the public's rath against the wave of higher taxes that would result if no agreement is reached. That has been Boehner's fear from the very beginning of the negotiations.

By mid-week, he was preparing to play the tactical card he had hidden up his sleeve: House Republicans would show their resolve by making the expiring Bush tax cuts permanent, avoiding the worst of the fiscal cliff, postponing action on spending, then send it to the Senate, daring the Democrats to kill it and push the economy over the edge.

"Then, the president will have a decision to make," Boehner said. "He can call on Senate Democrats to pass that bill, or he can be responsible for the largest tax increase in history."

Senate Majority Leader Harry Reid said the bill could not pass the Senate and swore to block it's consideration. The White House, caught off guard, called it a non-starter, but the talks have clearly stalled.


As many as 10 or more House conservatives opposed the bill's top tax rate increase on millionaires. The Heritage Foundation also opposed it on those grounds, but Grover Norquist, the hardcore anti- tax crusader, supported Plan B, saying it didn't violate his anti-tax pledge that almost all GOP lawmakers signed.

Boehner has made significant concessions in the past week or so in negotiations with Obama, and so has the president. Obama gave up his long-standing demand to raise the top tax rate to nearly 40 percent for people who earn more than $250,000 a year, limiting it to households earning more than $400,000.

Boehner held fast to his opposition to all tax rate hikes that would hit small business employers and investors, but agreed to applying the highest rate to those earning over $1 million. In fact, existing tax deductions and exemptions would bring the effective rate well below that top levy for many if not most millionaires anyway.

The White House also gave in to Boehner's key demand on entitlements, allowing a less-generous inflation formula on cost-of- living adjustments for Social Security benefits, and agreed to end the 2 percent payroll tax cut that affects virtually every worker in the country.

In the final analysis, Boehner was sending a signal that the House Republicans would not be bullied into accepting Obama's higher taxes when the economy was limping at a less than 2 percent average annual rate that was expected to decline in the fourth quarter.

Plan B would not only avoid tumbling over the fiscal cliff that every economist says will drive the economy back into a recession, it would erase the pervasive uncertainty that has retarded economic growth over the last four years.


Businesses would know that their tax rates would not change next year, emboldening them to make investments and other plant expansion plans that have been on hold throughout Obama's first term.

It would also buy needed time for Congress to reform the difficult revenue reform plans pushed by Republicans to cleanse the tax code of inefficient, special interest tax loopholes and other corporate welfare provisions. That will not only raise tax revenues, reducing the deficit, it will spur stronger economic growth -- the pivotal fiscal ingredient that has long been missing from this debate.

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