What Exactly Does John Boehner Mean By 'New Revenue'?
Most of the uncertainty over the fiscal cliff (which we discussed yesterday) was a result of neither side having taken a post-election stance on the issue. Now that Speaker of the House John Boehner has made his his first statement, things are not much clearer.
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The key word that came up over and over in Boehner's remarks was "revenue," in that he and his fellow Republicans are willing to accept "new revenue" in a deal with the President. However, he was explicit that this new federal revenue should come from growth, not higher taxes, which is the easiest and fastest way to get new revenue. Instead, he said "we’re willing to accept new revenue, under the right conditions" and those conditions include cutting spending and entitlements.
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The problem, from Boehner's perspective, is that if he does nothing, and no new deal is reached, the Bush tax cuts will expire and everyone will see higher taxes on January 1. The President's message has always been that taxes need to go up on those in the top income brackets, and Boehner is still insisting that he won't do that. (Meanwhile, Majority Leader Harry Reid is already insisting that he must.) Boehner suggests that changing the tax code will bring in more revenue, but he won't do that either, without also cutting spending, another scenario that happens anyway when the sequester kicks in. If that's the case, he isn't really accepting "new revenue" as much as he is pushing his own plan and arguing it will make the economy stronger and thus create more of the things the government taxes, like personal income and capital gains.
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Perhaps that's why Matthew Yglesias at Slate calls Boehner's position a non-credible bluff, since he appears to be taking a position that leaves everyone worse off than if he just gave in a little bit.
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Financial experts have searched Boehner's remarks for signs of a compromise, but few seem to have found it. The tone of Boehner's speech was definitely one of cooperation, but the substance suggests that nothing has really changed. Democrats still want to raise taxes and Republicans still want to cut spending. The fiscal cliff was designed to do both of those things in dramatic fashion, punishing each side for their failure do them in a less dramatic fashion. The one thing it won't do is spur growth, another reason why everyone, including Boehner, should be desperate to avoid it.
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No matter what he says about cooperation and conviction, someone will have to blink. The trick is to keep them from both blinking at the same time. Joe Weisenthal at Business Insider argues that actually making a deal—a true "grand bargain"—could be the worst scenario of all, because it might end up looking a lot like the fiscal cliff itself, which also looks a lot like a European-style austerity program that has crippled most of that continent. That's the strategy of those who want to get serious about debt, but it's proven to be a disaster for economies that have watched recoveries grind to a halt.
