Why Obama Has Clout In Fiscal Cliff Negotiations

by Stuart Shapiro

As attention turns from the election to the fiscal cliff negotiations, President Obama put a marker down:

But as I’ve said before, we can’t just cut our way to prosperity.  If we’re serious about reducing the deficit, we have to combine spending cuts with revenue — and that means asking the wealthiest Americans to pay a little more in taxes.  (Applause.)  That’s how we did it in the 1990s, when Bill Clinton was President.  That’s how we can reduce the deficit while still making the investments we need to build a strong middle class and a strong economy.  That’s the only way we can still afford to train our workers, or help our kids pay for college, or make sure that good jobs in clean energy or high-tech manufacturing don’t end up in countries like China.

Now, already, I’ve put forward a detailed plan that allows us to make these investments while reducing our deficit by $4 trillion over the next decade.  I want to be clear — I’m not wedded to every detail of my plan.  I’m open to compromise.  I’m open to new ideas.  I’m committed to solving our fiscal challenges.  But I refuse to accept any approach that isn’t balanced.  I am not going to ask students and seniors and middle-class families to pay down the entire deficit while people like me, making over $250,000, aren’t asked to pay a dime more in taxes.  I’m not going to do that.

This is the consequence of the deal last July.  President Obama does not have to do anything.  With no action, taxes go up on everyone and the defense budget gets slashed.  The President gambled that he would be re-elected and won the gamble.  Now Congress must pass something he likes or taxes go up.  Elections have consequences.

About Stuart Shapiro

Stuart is a professor and the Director of the Public Policy program at the Bloustein School of Planning and Public Policy at Rutgers University. He teaches economics and cost-benefit analysis and studies regulation in the United States at both the federal and state levels. Prior to coming to Rutgers, Stuart worked for five years at the Office of Management and Budget in Washington under Presidents Clinton and George W. Bush.

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