Boehner Proposes Conditional Tax Hike On High Earners, Obama Refuses

Tyler Durden's picture


The Fiscal Cliff cat and mouse game is entering its last two weeks of calendar 2012, with Congress now officially closed for the year. And while we would have expected major updates in the Cliff timeline to only hit during trading hours, usually just as AAPL once again threatens to trade with a 4-handle, Reuters reports that out of the blue Boehner, who last we checked is back in Ohio, has made a radical departure with the Norquist pledge status quo, and has offered to raise tax rates on high earners to break the "fiscal cliff" deadlock in exchange for major cuts in entitlement programs, "but President Barack Obama is not ready to accept, a source said late Saturday."

Which brings us back to political square zero, because at the end of the day none of this is about a fiscally sustainable America, and certainly won't be until one day the shadow banking mechanism, whereby PDs can extract par cash from custodians for TSYs just issued and purchased and immediately re-pledged, and use said cash to recycle TSYs as effectively infinite collateral, and where more issuance means more demand (which creates a Giffen good perpetual engine which of course works, until suddenly out of the blue, for whatever reason sentiment shifts rapidly and violently, and it no longer does), fails and yields spiral out of control.

In the meantime, both political parties will trundle along pretending a tax hike which covers about a month (max) of government spending is even remotely relevant.

More from Reuters:

While the White House considers Boehner's offer "progress," the source said more remained to be worked out between the two.


Tax rates are a major sticking point in negotiations to avert steep automatic tax hikes and budget cuts set for the end of the year if a deal isn't reached. Republicans have resisted Obama's demand to extend lower tax rates for everyone except top earners, preferring to extend them for all taxpayers.


The Boehner offer was the first departure from the position the House speaker has held for months.

The question now is whether the GOP can now spin the president's
negative response to the proposed "compromise" - and it will certainly try - to portray Obama,
instead of themselves, as the entity that wants to push the US over the
cliff in exchange for political brownie points. Because now Boehner will have all the leverage to tell any splinter GOP group in either the Congress or the Senate, that he made a good will offer, and it was the president who refused.

As for the actual cliff, we repeat what we said back on November 13: "once again, it will be up to the market, just like last August, just like October of 2008, to implode and to shock Congress into awakening and coming up with a compromise of sorts. Only this time, now that Bernanke has shown he will "get to work" at a moment's notice, the impetus to do anything as a result of even a market plunge will be far less. After all why lose face, and put your career in jeopardy when there is the Fed which, supposedly, can offset a market crash, courtesy of the shining example set by Chuck Schumer."

Nothing has changed since then.

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Sat, 12/15/2012 - 23:25 | 3067844 overhere2000
overhere2000's picture

Shame Boehner is not a leader, he is being steamrolled by his own party.

Sat, 12/15/2012 - 23:30 | 3067856 Cash2Riches
Cash2Riches's picture

They will play this game of cat and mouse right down to the wire, for show. The MOPE continues. QE to infinity is here to stay until it all blows apart.


Five Gold & Silver Mistakes.

Sat, 12/15/2012 - 23:33 | 3067866 HedgeAccordingly
HedgeAccordingly's picture

we are down to the wire..... imo 

Sat, 12/15/2012 - 23:59 | 3067912 Raymond K Hessel
Raymond K Hessel's picture

I must be missing something.  

Congress set up the fiscal cliff which means tax rates go up and spending goes down if they don't come to some agreement on a budget.  


They are not in agreement because one side doesn't want rates to up and the other side won't tolerate spending cuts.


Am I crazy or is the cliff the goal?  Either side gets to look strong, resolute while getting to the ultimate goal: tax rate and spending cuts increases! 

Sun, 12/16/2012 - 00:25 | 3067951 brettd
brettd's picture

Boehner's a pussy.

Why do a deal that has less cuts than he now has?

Lousy negotiator. 

Needs to go repeatedly in public ask Obummer for cuts.

No cuts, no deal.

Like every family in the USA, the Govt needs to DO MORE WITH LESS!



Sun, 12/16/2012 - 01:33 | 3068087 DoChenRollingBearing
DoChenRollingBearing's picture

The Fiscal Cliff is discussed again by Barron's writing team, and it looks like the R-Team is going to lose...  The Cover Story is their "Outlook 2013", where 10 "Wall Street Top Strategists" discuss prospects for the coming year.  S&P 500 up 10%???

Review of Barron's -- Dated 17 December 2012

Sun, 12/16/2012 - 02:21 | 3068154 LetThemEatRand
LetThemEatRand's picture

Neither team is going to "lose."  They both work for the same 400 people who own more wealth than 1/2 of the entire country combined.  The two teams and their captive media are engaged in a false debate about who should "pay" for the trillions skimmed off the top (commonly referred to as the "national debt") by those same 400 for the last hundred years.  News flash -- the 400 are not included in either equation.  Those individuals do not "earn" money that is taxable as income.  They could care less how much some guy who makes $500K a year or $1.5M a year or $25k/year actually working or owning a business or living off a pension will be required to pay now that the jig is up.  They know that most people (e.g., you) believe that the poor and middle class and upper-middle class should one day "pay back" the debts incurred on their behalf to fund the already acquired wealth of the very few.  Congratulations.  You've been had.

Sun, 12/16/2012 - 02:27 | 3068164 flacon
flacon's picture

I'm going to be in Jon Corzine's State over Christmas..... God save me! He's still in jail though, right?

Sun, 12/16/2012 - 03:38 | 3068223 savagegoose
savagegoose's picture


Sun, 12/16/2012 - 11:46 | 3068534 redpill
redpill's picture

August 15, 1971.  Or December 23, 1913 if you want to get old school.

Sun, 12/16/2012 - 12:41 | 3068668 Theosebes Goodfellow
Theosebes Goodfellow's picture

Just droll, Redpill, simply droll. Love it.

Sun, 12/16/2012 - 13:48 | 3068818 Fredo Corleone
Fredo Corleone's picture

...Let us not omit the Fiat Era from the grand chronology: we suggest 22 September, 1985.

Sun, 12/16/2012 - 15:28 | 3069000 MiltonFriedmans...
MiltonFriedmansNightmare's picture

I'm old school. That Dec 23date lives in infamy.

Sun, 12/16/2012 - 21:42 | 3069834 Midas
Midas's picture

Yeah, Merry F'n Christmas from Jekyll Island.

Sun, 12/16/2012 - 15:35 | 3069008 QQQBall
QQQBall's picture

State of DENIAL?

Sun, 12/16/2012 - 06:53 | 3068303 Non Passaran
Non Passaran's picture

Well, genius, if it wasn't for the fake capitalist system, it woukn' be that way.
And I sure can tell free shit handouts are real money which isn't going to the top 400.

The negos are sure a farce. The public and media love it: their democratically elected reps working hard and overtime, day in day out. Splendid!

Tax code should be simplified - no exceptions, deductions and loopholes.
It won't happen. It's all fucked.

Sun, 12/16/2012 - 10:28 | 3068418 mtomato2
mtomato2's picture

Merry Christmas, LTER.  Don't know if you celebrate or not, but there it is.  Excellent post, IMHO.

Sun, 12/16/2012 - 10:51 | 3068452 max2205
max2205's picture

We have not had a budget in 4 years. What makes anyone think we will get a deal that magically produces one in 2 hours before the last two tires depart the Clift at 100 miles per hour.

Sun, 12/16/2012 - 17:58 | 3069319 bugfixx
bugfixx's picture

Why do these clowns in Congress and the White House deserve more tax revenues when they can't even pass a budget for 3+ years? When taxes go up in 2013, they still won't pass a budget and they'll spend 3x any tax revenue increase.

Sun, 12/16/2012 - 13:14 | 3068737 Dingleberry
Dingleberry's picture

Excellent post Rand. 

How come the average Joe can spot a horrible "B" movie when they go to the theater, but cannot for the life of them spot horribly-acted political drama?

Sun, 12/16/2012 - 11:32 | 3068509 azusgm
azusgm's picture

Boehner needs to take his useless, confused, statist self to a microphone and say that these talks should be going on in the House of Representatives, not the White House. Then he should go get into the Speaker's chair and gavel the place into session. If those turkeys miss the turkey and dressing, so be it.

Sun, 12/16/2012 - 03:31 | 3068217 blunderdog
blunderdog's picture

"Politics is the entertainment branch of the military-industrial complex."  -FZ

Yes, most of the time we go to the movies even though we already know how it's going to turn out.  It's still kinda fun, I guess.

Sun, 12/16/2012 - 11:29 | 3068461 Race Car Driver
Race Car Driver's picture

> They are not in agreement because one side doesn't want rates to up and the other side won't tolerate spending cuts.


It's so simple, even a Kindergartener can understand it:

John Boehner could eat no fat
Barry could eat no lean
And so betwixt the two of them
They licked the platter clean

John ate all the lean,
Barry ate all the fat.
The bone (of contention) they picked clean,
Then gave it to the cat.

John Boehner was wheeling,
Barry by the ditch.
The barrow turned over,
And in he did pitch.

Says John, “He’ll be drowned!”
But Barry did not reply,
“I don’t think I shall,
for the ditch is quite dry. Let's Party!”

Sat, 12/15/2012 - 23:32 | 3067861 Beam Me Up Scotty
Beam Me Up Scotty's picture

Ya, he should compromise right? For the good of the country?? Well, we've comrpomised ourselves right into a 16+ trillion dollar debt.

Sat, 12/15/2012 - 23:33 | 3067868 vast-dom
vast-dom's picture

i did not vote for these assholes to raise taxes. nor did i vote for them to go on illegal military adventurism escapades. nor did i vote for them to rig the markets. nor did i vote for them to spend billions campaigning. i did not vote for this.

Sat, 12/15/2012 - 23:55 | 3067905 Mr. Magoo
Mr. Magoo's picture

When everyone comes to the realization that your votes no longer matter we will be better off. There will NEVER be anther fair election until a drastic change occurs but at this point it looks like change for the worse

Sun, 12/16/2012 - 00:38 | 3067979 AldousHuxley
AldousHuxley's picture

people used to support the church with 10% tax while they built the elaborate cathedrals in Europe because they believed that prayers mattered.


people believed in government with 10-45% tax while they built massive buildings because they believed that voting mattered


people believed in capitalism with management fees by banks while banks built the highest high rises because they believed that they could beat the market and the bankers

Sun, 12/16/2012 - 01:05 | 3068035 Mr. Magoo
Mr. Magoo's picture

Either way we are all screwed in the end

Sun, 12/16/2012 - 02:44 | 3068173 LetThemEatRand
LetThemEatRand's picture

Except the few hundred (or few thousand) individuals with a net worth above several hundred million who already got theirs.  They will go on engaging in "I own the biggest ship" wars, and buying islands and such.  You know the old saying about the devil's greatest trick?   The slightly more nuanced version is, "the devil's greatest trick was convincing the masses that his wealth was earned and that taking it away from him would be a violation of the law [that his purchased politicians wrote]."

Every King and Queen (and devil) who has ever existed will tell you that the masses are just jealous and engaging in class warfare.   With a few exceptions, the wealthiest individuals in the world inherited their wealth.  In the law, children are sometimes called "produce." Perhaps that is the true meaning of the "productive class."  

Sun, 12/16/2012 - 03:43 | 3068227 Beam Me Up Scotty
Beam Me Up Scotty's picture

So why are we talking about raising taxes
On couples who only make $250k/yr again?? Because they live lavish lifestyles like Warren Buffet?

Sun, 12/16/2012 - 08:47 | 3068337 nmewn
nmewn's picture

"So why are we talking about raising taxes on couples who only make $250k/yr again??

Because raising taxes on just millionaires & billionaires won't get government even close to the "projected" 60-70 billion PER YEAR...its all been a lie...eagerly lapped up by retards.

"Because they live lavish lifestyles like Warren Buffet?"

That's right. And government should steadily decrease the threshold for inheritance taxes until the point that their house, in that quiet little cul-de-sac, is is auctioned off just to pay for the parents death, regardless of poor little Tiny Tim on crutches, the government has a program for him.

And God bless us, everyone ;-) 

Sun, 12/16/2012 - 09:03 | 3068347 tickhound
tickhound's picture

Bingo!!!! Ding ding ding!!! 

Damn, I agreed with you completely.  You're not mad at me, right?

Sun, 12/16/2012 - 09:24 | 3068359 nmewn
nmewn's picture

Of course not ;-)

Sun, 12/16/2012 - 13:11 | 3068730 AldousHuxley
AldousHuxley's picture

Republicans use upper middle class to Argue for lower taxes As much as democrats use the poor to redistribute.

As long as capital gains taxes are lower than total income tax , rich will get richer.

Sun, 12/16/2012 - 11:52 | 3068544 Lednbrass
Lednbrass's picture

Yep, its the beginning of the redefinition game of what constitutes the wealthy.

It will start with the evil 1%, then the evil 2%, then those 5% ers will look prettry well off so they should be cut down a bit also. Once that is done, well why should anyone in the top 10% mind paying a fair share- and just who do those 25% ers think they are anyway?

Sun, 12/16/2012 - 18:04 | 3069329 bugfixx
bugfixx's picture

The coming waves of price inflation and tax bracket creep will take care of that.

Sun, 12/16/2012 - 18:09 | 3069334 GMadScientist
GMadScientist's picture

Because differential taxation of capital gains and repatriation of foreign multinational dollars isn't redefining anything?!

If you're only talking about "The 1%", then you are, by definition, missing two entire pies.


Sun, 12/16/2012 - 15:38 | 3069014 MiltonFriedmans...
MiltonFriedmansNightmare's picture

Most families earning 250kK/yr are struggling to survive just like the Obamaphone Mama, the main difference being employment. Their struggle is enhanced by a few more creature comforts, but it's still a struggle nonetheless.

Sun, 12/16/2012 - 15:37 | 3069015 MiltonFriedmans...
MiltonFriedmansNightmare's picture

Most families earning 250kK/yr are struggling to survive just like the Obamaphone Mama, the main difference being employment. Their struggle is enhanced by a few more creature comforts, but it's still a struggle nonetheless.

Sat, 12/15/2012 - 23:52 | 3067899 Mr. Magoo
Mr. Magoo's picture

You are about 100 trillions short, but no matter that debt will never be paid

Sun, 12/16/2012 - 07:25 | 3068315 onewayticket2
onewayticket2's picture

the inept republican "leadership" have yet to clearly articulate (thanks, in large part, to their statist enemies in the press) that they, too, are in favor of raising revenues to the federal government...THROUGH GLOBAL COMPETITIVENESS AND GROWTH (not via rate increases which will ultimately slow down growth and revenue to the govt).

this is 101 level stuff and the fact that the R side of the aisle cant even get out of the gates to debate the premise tells me.....we're doomed. 

We're all Collectivists now.

Sun, 12/16/2012 - 12:31 | 3068642 Al Huxley
Al Huxley's picture

Diggin' that red-blue koolaid, huh?

Sun, 12/16/2012 - 18:13 | 3069343 GMadScientist
GMadScientist's picture

Enjoy your snooze.

What part of "bomb iran" fits with "global competitiveness"?

What part of repatriating the proceeds of off-shored jobs is "global growth"?

Your pablum has been Repugnican't fodder for the herd animals for decades, but they've never believed a word, sucker.

You deserve to be fleeced for being an ignorant fuck.

Sat, 12/15/2012 - 23:33 | 3067863 HedgeAccordingly
HedgeAccordingly's picture

progress is progress at this point.. he may be a moron.. but with the momo stock of the gods on the verge of a 100 point drop..

the timing could not be better.... 

Sun, 12/16/2012 - 00:11 | 3067925 zhandax
zhandax's picture

Not my job to train these idiots.  A dozen comments in and grilling dinner is starting to look far more appealing.

Sun, 12/16/2012 - 00:56 | 3068014 10mm
10mm's picture

His own party?It's the same party.

Sun, 12/16/2012 - 08:36 | 3068328 slaughterer
slaughterer's picture

Just a remark about the writing style of this the-most-complex Tyler above: "until one day the shadow banking mechanism, whereby PDs can extract par cash from custodians for TSYs just issued and purchased and immediately re-pledged, and use said cash to recycle TSYs as effectively infinite collateral, and where more issuance means more demand (which creates a Giffen good perpetual engine which of course works, until suddenly out of the blue, for whatever reason sentiment shifts rapidly and violently, and it no longer does), fails and yields spiral out of control"  

Any Economic Ph.D students with a minor in post-modern literature willing to simplify this sentence for us mere mortals?

Sun, 12/16/2012 - 10:18 | 3068409 fonzannoon
fonzannoon's picture

it means we passed through the event horizon already and when the first entity cashes in it's chips the avalance that is coming will bury everyone. thats what santelli has been saying. funny...."we think in a year or two people will start selling treasuries as rates begin to rise". Yup lets all wait until right before the music stops. no thanks. 

Sun, 12/16/2012 - 10:39 | 3068431 centerline
centerline's picture

I don't meet any of those requirements by a long shot... but, will give it a crack for the fun of it...

A recursive mechanism (loop) where profits are skimmed off the cycling of the taxpayers dollars (debt) through the Treasury via the PD's, enabled by the FED.  Because it is recursive, the law of dimishing returns applies.  Thus, it requires more and more issuance (exponentially) in order to meet the demand for yield.

Makes the debt ceiling look more like a debt target.  lol.

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