After All, He's Only Your Party's Leader In Congress



It was widely reported that Joe Biden engaged in fiscal slope negotiations with Senate Minority Leader Mitch McConnell only after the latter tired of dealing with Senate Majority Leader Reid and demanded to talk directly to the Vice President.  Details, however, were sketchy until this report in The National Journal in which Shane Goldmacher reported in part

We know that when McConnell has hit a wall with Reid, he calls Joe Biden to get some more candy,” said a senior Senate Democratic aide, who requested anonymity to speak candidly about the vice president.

It was a good-cop, bad-cop routine that Reid wanted no part of. “We thought it was unnecessary,” the aide said of Biden’s involvement. “We had a lot of leverage.”

Reid and McConnell had been bargaining about how to avert the cliff ever since a White House summit on Friday, when they agreed to take charge of negotiating an accord. Talks between President Obama and House Speaker John Boehner had collapsed by then. The president and congressional leaders had agreed that a last-minute compromise, if there was to be one, had to be forged in the Senate.

The opening Senate GOP offer from McConnell to Reid came at 9:30 p.m. on Friday night, only hours after the White House meeting, according to congressional officials with knowledge of the negotiations.

Reid’s team sent back its first counteroffer at around 3 p.m. on Saturday. A flurry of activity followed as McConnell was cloistered in his office on Capitol Hill. Aides shuttled between the leaders’ offices, as a GOP counterproposal was drafted by 4 p.m. A Democratic reply to that arrived only an hour and a half later, according to the sources. At 7:10 p.m. on Saturday, McConnell said he sent yet another offer to Reid and the Democrats.

Then, radio silence.

Reid’s office had suggested that another counteroffer would come in the morning, but the clock ticked to afternoon without one. Instead, Reid’s office told McConnell’s at about 1 p.m. that the majority leader was done with the back and forth. “At this stage, we are not able to make a counteroffer,” Reid announced soon after on the Senate floor.

Reid was playing hardball. With polls showing that the public was far more likely to blame congressional Republicans than the president if the nation jumped off the fiscal cliff – and billions in automatic tax hikes and spending cuts went into effect – Reid rightfully knew that McConnell wanted a deal – and badly.

Reid felt that he’d compromised enough, according to a senior Senate Democratic aide with knowledge of the discussions and the senator’s thinking. Besides, if no accord was reached, Obama and Reid had said they would push the president’s plan to stop tax hikes for those earning below $250,000 and extend unemployment insurance to the floor. Republicans could block that and be responsible for everyone’s taxes spiking at their own peril.

About the same time on Sunday, a story popped about a “major setback” in talks – that McConnell had demanded that a reduction in the Social Security benefits formula, known as “chained CPI,” be included in a deal. True, that had been part of the 7 p.m. Saturday GOP offer. But Reid was now using it as political cover to withdraw from talks. “We are not going to have any Social Security cuts. At this stage, that just doesn't seem appropriate,” the Democratic leader announced later Sunday on the floor.

McConnell’s negotiating options with Reid had narrowed. He could either let Congress veer off the cliff, take Reid’s latest offer, or accept the president’s tax-hike package for those earning more than $250,000. Instead, McConnell sought a familiar and friendlier face across the negotiating table – his old colleague Joe Biden. He called and left a message to open talks with the vice president.

“We have yet to receive a response to our good-faith offer. I am concerned about the lack of urgency here. I think we all know we are running out of time,” McConnell said on Sunday of his talks with Reid. Then he revealed on the floor that he’d called Biden “to see if he could help jump-start the negotiations on his side.”

“I need a dance partner,” McConnell said.

Those words appeared to be a swipe at Reid, echoing Reid’s comments the day after the election when he had said, “It's better to dance than to fight. It's better to work together.” McConnell was saying that Reid wasn’t willing to dance, after all.

In his negotiating two-step, McConnell had found a willing partner in Biden. The call to Biden set off a fresh round of offers, counteroffers, and concessions. They spoke as late as 12:45 a.m. on Monday, retreated for a few hours of sleep, before another call that began before 7 a.m. Within about 24 hours, Biden and McConnell had settled on what amounted to the framework for an agreement – although they never engaged face to face.

Harry Reid was faithfully promoting Barack Obama's line in the sand to end tax increases only for those earning below $250,000, which would make at least a small dent in the deficit which greatly concerns the President.  He had McConnell cornered- until, of course, the Administration decided to let the Minority Leader off the hook- because, as a former Reid aide explained, McConnell "is far more comfortable cutting deals with the vice president than he is with Senator Reid."

As the Administration accommodated the guy who once put commitment to defeating Barack Obama above commitment to country, the $250,000 limit became $400,000, which will be greater than $400,000, once it is indexed for inflation.     And the vast majority of those "Bush tax cuts" are permanent, as engineered by a Democratic Administration.   Additionally, the offshore tax loophole, which expired at the end of 2011, was extended, and is projected to decrease economic growth by 1.3% this year.    The exemption was born in the 1997 Taxpayer Relief Act and has been renewed every few years by Congress.  Citizens for Tax Justice explains

A U.S. multinational corporation is taxed on its worldwide earnings. If the income is also taxed by a foreign jurisdiction, the company receives a credit against its U.S. tax for any foreign taxes paid. Tax on “active” income from a U.S. corporation’s foreign subsidiaries is not imposed until those earnings are brought back (“repatriated”) to the United States.

A U.S. multinational corporation generally cannot defer paying tax on the income of its foreign subsidiaries that is considered “passive,” such as interest, dividends, rents, and royalties. A section of the tax code, known as “Subpart F,” requires multinational corporations to include this type of income in their taxable income each year even if the income is not repatriated.[5] Congress has determined that deferral is not appropriate for this type of income because it is highly fungible and the entities that earn it are very mobile.

Subpart F was designed to prevent companies from manipulating their U.S. tax obligation by the simple act of moving intangible assets that earn this type of passive income offshore.

Once upon a time, Barack Obama's commitment to reducing the deficit centered on eliminating the Bush-era tax cuts.   In 2008, the Illinois Senator criticized John McCain because (he) "promises to make those same tax cuts permanent, embracing the central principle of the Bush economic program."  Even after his re-election, President Obama declared

Option one, if Congress fails to act by the end of the year, everybody’s taxes will automatically go up -- including the 98 percent of Americans who make less than $250,000 a year and the 97 percent of small businesses who earn less than $250,000 a year.  That doesn’t make sense.  Our economy can’t afford that right now.  Certainly no middle-class family can afford that right now.  And nobody in either party says that they want it to happen.

The other option is to pass a law right now that would prevent any tax hike whatsoever on the first $250,000 of everybody’s income.  And by the way, that means every American, including the wealthiest Americans, get a tax cut.  It means that 98 percent of all Americans, and 97 percent of all small businesses won’t see their taxes go up a single dime.  The Senate has already passed a law like this.  Democrats in the House are ready to pass a law like this.  And I hope Republicans in the House come on board, too.

Democrats in the House were ready to pass "a law like this"  once Congress stepped over the curb on January 1, and Republicans would have resisted only at severe political peril.  However, Obama pulled the rug out from under Reid, ended his own party's leverage, and sent in McConnell's sugar daddy.  The Minority Leader now warns

I have news for (Obama): the moment that he and virtually every elected Democrat in Washington signed off on the terms of the current arrangement, it was the last word on taxes. That debate is over. Now the conversation turns to cutting spending on the government programs that are the real source of the nation’s fiscal imbalance. And the upcoming debate on the debt limit is the perfect time to have that discussion.

 " I hear you're interested in raising the debt limit,"  McConnell hints.  "Nice little entitlement programs you have there. It would be a shame if something happened to them."

When he lobbied Democratic Senators to support the deal he had engineered with McConnell- who now is targeting earned benefits- the Vice President reportedly told them “This is Joe Biden, and I’m your buddy."  (They bought it!) However,  the Daily Kos' Joan McCarter cautions

What every elected Democrat other than President Obama needs to remember is that they have to run for reelection, and he doesn't. Obama doesn't have to worry about Republicans running against him (again) for cutting Medicare and Social Security. He can secure his grand bargain, his legacy, without putting any of his own political skin in the game. Every other Democrat who wants to stay in office isn't in such an enviable position. What's more, they don't have to worry about providing cover for him anymore; he's a lame duck.




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