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Morning Examiner: State of the Sequester

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Politics,Beltway Confidential,Conn Carroll

From the very beginning of his first campaign for the White House, President Obama had repeatedly promised to end the Bush tax cuts on all families earning more than $250,000 a year. And for about the first 48 hours of 2013, when Bush tax cuts expired at midnight on December 31st, he succeeded. But Obama had also promised not to raise taxes on the middle class, and of the $4 trillion tax hike that kicked in on January 1st, $3.2 trillion of it benefited the middle class. Obama couldn’t let that happen.

So he reneged on his multiple campaign promises and agreed to a new tax cut that restored the Bush rates for all Americans up to $450,000 of family income. In order to portray the deal as a “win” and not a “loss” for Obama, White House aides were dispatched to feed the media quotes portraying the Republican vote for tax cuts as a historic vote for tax hikes. Obama “broke the Republicans’ backs on a 20-year pledge” not to raise tax rates, one White House official told Fox News. “It is one of the most consequential policy achievements of the last couple decades,” the official said.

But the fiscal cliff deal tax hike only netted Obama $600 billion in new revenue. That is not nearly enough taxes to sustain Obama’s spending plans. Unless the Republicans actually vote for a new tax hike, Obama’s fiscal cliff deal will end up looking like a failure. He left some $3.4 trillion worth of revenue on the table.

Which leads us to tonight’s State of the Union address. In a mirror image of the fiscal cliff, when taxes were set to rise by $4 trillion if Congress passed nothing, now spending is set to be cut by $1.2 trillion if Congress does nothing before March 1st. The top priority of Obama’s speech tonight will be to build public support for turning at least half of the scheduled spending cuts into tax hikes. Obama previewed this message in his weekly radio address Saturday:

Two months ago, we faced a similar deadline, and instead of making deep, indiscriminate cuts that would have cost us jobs and slowed down our recovery, Democrats and Republicans came together and made responsible cuts and manageable changes to our tax code that will bring down our deficit. This time, Congress should pass a similar set of balanced cuts and close more tax loopholes until they can find a way to replace the sequester with a smarter, longer-term solution.

In line with this plan, the Senate is preparing to introduce legislation Thursday that would back-load half of the spending cuts while also raising taxes on oil and gas companies and people making more than $1 million a year to cover the rest. On Friday, The House and Senate are scheduled to adjourn for President’s Day recess, but Minority Leader Nancy Pelosi, D-Calif., has written Speaker John Boehner, R-Ohio, a letter asking him to keep the House in session all next week.

On the House side, there is absolutely zero indication that Boehner plans to do anything about the sequester until after it kicks in. And aides to Sen. Marco Rubio, R-Fla., who is giving the Republican response tonight, could not say whether or not Rubio would even address Obama’s sequester argument. Republicans seem content to let Obama make his case, confident that the American people will accept the scheduled spending cuts. We’ll see if Obama can move them off that position tonight.

From The Washington Examiner
Examiner Editorial: Medicaid expansion steamrolls conservatives
Byron York: While Obama postures, GOP offers ways to fine-tune sequester
Philip Klein: Job of debt reduction not even close to done
Tim Carney: H&R Block, TurboTax, and IRS lose in effort to regulate small tax preparers out of business

In Other News
McClatchy Newspapers, North Korea tests ‘miniaturized’ nuclear device: North Korea on Tuesday announced that it had conducted a nuclear test in what amounted to a sharp challenge of the U.N. Security Council, which warned the rogue nation last month of “significant action” if it undertook such a provocation.
The Hill, Senate Dems aim to have sequester bill ready by Thursday: Senate Democrats are aiming to produce a bill to replace the sequester by Thursday, according to Democratic aides. The bill would include tax increases and spending cuts, and it would replace the $85 billion in automatic spending cuts known as the sequester.
The Wall Street Journal, Millions Improperly Claimed U.S. Phone Subsidies: The U.S. government spent about $2.2 billion last year to provide phones to low-income Americans, but a Wall Street Journal review of the program shows that a large number of those who received the phones haven’t proved they are eligible to receive them.
The Washington Post, In Afghanistan, Pentagon favors reduction over 3 years: The Pentagon is pushing a plan that would keep about 8,000 U.S. troops in Afghanistan once the NATO military mission there ends in 2014 but significantly shrink the contingent over the following two years, according to senior U.S. government officials and military officers.
The New York Times, Slower Growth of Health Costs Eases U.S. Deficit: A sharp and surprisingly persistent slowdown in the growth of health care costs is helping to narrow the federal deficit, leaving budget experts trying to figure out whether the trend will last and how much the slower growth could help alleviate the country’s long-term fiscal problems.

Lefty Playbook
Ezra Klein on Why the White House took the Medicare age off the table.
Dan Pfeiffer‘s sequester facts.
Firedoglake reports that a new “academic” study proves the Tea Party was first created by the Koch brothers in 2002.
Justice Ginsburg tells the San Diego Association of Business Trial Lawyers that the Senate is ‘Destroying The United States’ Reputation As A Beacon of Democracy’

Righty Playbook
Chris Stirewalt on Obama, Lew and the Cayman Tax Trap.
Stars and Stripes notes that Esquire falsely reported the SEAL who killed bin Laden was denied healthcare.
Joel Kotkin on how California is becoming less family friendly.

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