Good News, Bad News in Averting the 'Fiscal Cliff'

With Congress returning from its Thanksgiving break, here's the good news for those looking to avoid the upcoming so-called "fiscal cliff": Members of both parties do agree on one LARGE point — taxes for the wealthy should go up.

Good News, Bad News in Averting the 'Fiscal Cliff'
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"It's fair to ask my party to put revenue on the table. We're below historic averages," Republican Sen. Lindsey Graham said Sunday on ABC, adding: "But to do this, I just don't want to promise the spending cuts. I want entitlement reforms."

And, as it turns out, some Democrats are willing to look at some entitlement reform. "We can make meaningful reforms in Medicare and Medicaid without compromising the integrity of the program, making sure that the beneficiaries are not paying the price for it, except perhaps the high-income beneficiaries. That to me is a reasonable approach," Sen. Dick Durbin explained on ABC.

But here's the bad news: The two sides can't agree on how to raise the taxes on the wealthiest. Democrats are adamant that the Bush tax cuts must expire for them (which would raise their tax rate), while Republicans insist that rates can't increase.

A potential compromise here?

Both Democrats and Republicans point to poll numbers to bolster their argument over the rates. In the national exit poll, a combined 60 percent of voters in the presidential election said that income tax rates should either increase for all or on income above $250,000; just 35 percent said tax rates shouldn't increase for anyone.

In addition, a new CNN poll finds that two-thirds of adults (67 percent) believe that deficit reduction should come from a mix of spending cuts and tax increases. But according to a survey conducted by Republican pollster David Winston, 61 percent say the better way to raise revenue is through closing loopholes and reforming the tax code; only 28 percent said the better way is through raising tax rates on those making $250,000. (As with all polling, it matters how you word the questions.)

Yet over the holiday weekend, The New York Times mentioned one possible compromise here: "allow effective tax rates to rise for the wealthy without technically raising the top tax rate of 35 percent." Per the Times, "One possible change would tax the entire salary earned by those making more than a certain level — $400,000 or so — at the top rate of 35 percent rather than allowing them to pay lower rates before they reach the target, as is the standard formula."

Willing to break Norquist's pledge

The other "fiscal cliff"-related development over the long holiday weekend was that more Republicans said they were willing to break Grover Norquist's pledge not to raise taxes, the National Journal writes.

"I think Grover is wrong when it comes to 'We can't cap deductions and buy down debt,'" Graham said on ABC. "I will violate the pledge, long story short, for the good of the country, only if Democrats will do entitlement reform."

That followed these comments from Sen. Saxby Chambliss. "I care more about my country than I do about a 20-year-old pledge."

But here's the thing: These statements are coming from Senate Republicans, not House Republicans who have to worry more about primaries than general contests. The exception here is Rep. Peter King of New York, who said on "Meet the Press": "I agree entirely with Saxby Chambliss: A pledge you signed 20 years ago, 18 years ago, is for that Congress. ... I think everything should be on the table." Then again, King isn't your typical House Republican.

Folks, don't get caught up in the Conventional Wisdom trap of the Senate. Right now, these senators are nothing more than elected pundits. The talks are between the White House and House Republicans.