Spending Daily | December 4, 2012

Cliff Divers and Cliff Negotiators Battle It Out During Fiscal Debate
The Wall Street Journal reports, “That sputtering sound you hear in Washington is the sound of the deficit-reduction talks trying to get rolling again. That other noise? Oh, that’s the sound of a growing number of partisans on both sides strapping on parachutes, because they would be just as happy to go over the fiscal cliff that will be reached if those talks fail. The negotiating process had ground to a complete halt until House Speaker John Boehner made a move to revive it Monday. The Ohio Republican’s proposal—$800 billion of tax revenue without any increase in tax rates, and cuts in both Medicare and Social Security growth—will be as unacceptable to the Obama administration as the president’s offer last week—twice as much revenue, largely from a tax-rate increase, with smaller long-term cuts in Medicare—was unacceptable to the Republicans.” Many fear posturing on both sides makes strike a compromise impossible. “The longer it goes on, the more deeply entrenched become the partisans on both sides who would just as soon go off that fiscal cliff of economically perilous mandatory tax increases and spending cuts that will arrive at year’s end without a deal.”

“White Houses rejects GOP offer as ‘nothing new,’ unbalanced”
The Hill reports, “The White House on Monday blasted a counteroffer from House Republicans on debt talks as failing to ‘meet the test of balance.’  The White House said the $2.2 trillion offer of spending cuts, entitlement reforms and $800 billion in new tax revenue ‘includes nothing new’ and was not serious. It also faulted the proposal for lowering tax rates on the wealthy. … Republicans touted their proposal as a much more serious offer than the one President Obama floated last week. Obama’s proposal was based on his budget, and included $1.6 trillion in new tax revenues.”

Fiscal Cliff Negotiations Likely To Remain At A Stalemate
The Washington Post reports, “Sure, Republicans may have made a show of offering to include more revenues in the discussion.” But three things are in the way of a compromise. “One: Democrats may have had several key wins in the election, but the contest was still close enough not to give anyone an overwhelming mandate. Two: The already terrible hyper-partisanship is likely worse in the aftermath of the election, with one side licking its wounds, the other feeling overconfident and both sides with less to gain (at least in the short term) from appearing to give anything up.  And three: The president learned a lot in the bruising battles over the budget and the debt ceiling during his first term, and is likely to be less willing to give ground early. Coming off the heels of the election, Obama has ‘emerged as a different kind of negotiator in the past week or two,’ the New York Times wrote Sunday. He appears far more disciplined and adamant than in earlier discussions. … Obama has made the first formal proposal one that does little to include compromises for Republicans, such as tax cuts. Instead, the plan Treasury Secretary Timothy Geithner delivered includes $1.6 trillion in taxes from the rich, short-term stimulus spending, $600 billion in cuts, and the ability for the president to raise the ceiling on federal borrowing without Congress’s approval. “

Poll: Americans Trust Used Car Salesmen More Than Congress
Politico reports, “Americans’ opinion of congressional honesty has improved over the past year, but lawmakers are still more distrusted than even used car salesmen, according to a poll released Monday. More than half of Americans — 54 percent — have a low or very low opinion of congressional honesty and ethics, Gallup found. That’s improved from 2011, when 64 percent had a low or very low opinion. Ten percent had a high or very high opinion of congressional trustworthiness, up from 7percent a year ago. The only similarly distrusted profession is used car salesmen: Only 8 percent trust them, and 49 percent do not. Americans are also more likely to trust governors and senators than they are to trustrank-and-file members of the House of Representatives. One-fifth of Americans have high or very high opinions of gubernatorial ethics, and 14 percent said the same of senators.”

“GOP ‘Fiscal Cliff’ Plan Echoes Failed Budget Talks”
The Associated Press reports, “Republicans are proposing a fiscal cliff’ plan that revives ideas from failed budget talks with President Barack Obama last year, calling for raising the eligibility age for Medicare, lowering cost-of-living hikes for Social Security benefits and bringing in $800 billion in higher tax revenue. The counter to a White House plan last week relies more on politically sensitive spending cuts and would raise half the $1.6 trillion in revenue proposed by Obama over the coming decade. The 10-year, $2.2 trillion proposal from House Speaker John Boehner, R-Ohio, resembles a framework similar to what Boehner supported last year, but Obama is pressing for additional tax increases and appears to be balking at spending cuts discussed in those talks and since.”

Cutting Medicare Hurts AARP’s Bottom Line
The Washington Post reports, As Washington debates whether to cut federal retirement programs as part of a deal to tackle the nation’s debt, one of the most powerful advocates for preserving them could have millions of dollars riding on the outcome. AARP, the highly influential lobby for older Americans, is fiercely opposing any Medicare or Social Security cuts and emphasizes that it is fighting for the good of its members. But the proposals for changing Medicare also could affect AARP’s bottom line. … It advocates for the interests of seniors, and it makes money allowing its name to be used in selling them private insurance, including coverage known as Medigap, which supplements government-provided Medicare. … But in last year’s negotiations over the federal debt ceiling, President Obama and top Republicans discussed proposals to change Medicare that could have reduced AARP’s revenue from Medigap. …Now, political observers predict that those measures will be back on the table in the coming weeks as Democrats and Republicans wrangle over a deal aimed at avoiding the ‘fiscal cliff…’”

GOP Fiscal Cliff Plan Freezes Federal Pay Through 2015
Joe Davidson writes in The Washington Post, “In a Monday letter outlining the plan to President Obama, House GOP leaders, led by Speaker John A. Boehner (Ohio), did not detail how their plan would affect the federal workforce, but they did say it would include ‘hundreds of billions in savings in other mandatory spending, including reforms to Federal employee compensation’ that are in the fiscal 2013 budget resolution approved by the House. … Federal employee leaders have denounced the GOP budget document, which ‘freezes federal pay through 2015,’ for a total of five years, and…calls for reducing the workforce by 10 percent through attrition by 2015. Although a current freeze on basic federal pay, which began in 2011, and other hits to their compensation are already costing federal workers $103 billion over 10 years, the Republican budget says they are ‘immune from the effects of the recession.’ Referring to within-grade ‘step’ increases, the GOP budget said, federal employees ‘have received regular salary bumps regardless of productivity or economic realities.’”

Bipartisan Delegation of Governors Talk Cliff With Obama, Boehner 
Reuters reports, “With a few weeks remaining before the onset of  ’fiscal cliff,’ a bipartisan delegation of governors is set to meet Tuesday with President Barack Obama and congressional leaders in search of some answers about the impact of deficit reduction measures on their state budgets, which rely heavily on federal aid. … Cutbacks in federal contracting due to the automatic budget cuts set for January 1 will also reduce employment levels regionally, with the heaviest impact expected in areas with large numbers of defense contractors

“House, White House aim for $32-$35 billion in farm bill cuts”
Reuters reports, “As time runs out to pass a new U.S. Farm Bill in 2012, the White House and Republicans in the House of Representatives hold surprisingly similar goals about how much to cut spending – roughly from $32 billion to $35 billion. But getting to a final agreement is proving difficult. Each side agrees to significant cuts to farm subsidies and soil conservation, but they have diametrically different views on food stamps, which the White House refuses to cut. A final figure for cuts may emerge as part of an agreement on government-wide retrenchment to rein in the federal deficit.”

Detroit’s Fiscal Clock is Counting Down           
Reuters reports, “Detroit’s fiscal clock is ticking down again as the city faces running out of money by the end of the year unless a political squabble between the mayor and city council can be resolved. Without a resolution, the state of Michigan will not release cash to keep the city running. Mayor Dave Bing, who contends that bankruptcy or bond defaults are not on the horizon, is prepared to put city workers on unpaid leave to keep the struggling local government operating. Credit rating agencies are warning that political and legal obstacles could derail plans to get Detroit back on solid financial footing. Moody’s Investors Service last week pushed the city’s credit ratings deeper into the junk category and warned of a heightened risk of bankruptcy or default over the next year or two. The city of 700,000 has been hard hit by a steep population drop, years of severe budget deficits and escalating employee costs — factors that led state officials to begin an intervention process about a year ago.”