President Obama and congressional Republicans have learned sharply different lessons from the deal to avert the “fiscal cliff” as they prepare to battle again over the next two months on a series of budget deadlines that carry risks such as crippling defense cuts and a government default.
Mr. Obama, having won the first round by forcing congressional Republicans to accept a tax increase for the first time in 20 years, said the deal set a precedent for agreements on deficit reduction and federal spending. All deals, he said, must achieve balance by requiring wealthier individuals or corporations to pay more taxes.
The agreement “enshrines … a principle into law that will remain in place as long as I am president: The deficit needs to be reduced in a way that’s balanced,” Mr. Obama said. “Everyone pays their fair share.”
But many Republicans said the agreement this week gave Mr. Obama all the tax increases he ever will get and that future deals must emphasize spending cuts. Some said they are willing to force a government shutdown to make their point in negotiations over raising the nation’s borrowing limit, which the president said he no longer will debate.
“We Republicans need to tolerate a temporary, partial government shutdown,” Sen. Patrick J. Toomey, Pennsylvania Republican, said on MSNBC. “It’s disruptive, but it’s a hell of a lot better than the path we’re on. We absolutely have to have this fight over the debt limit.”
Both sides will get the chance to test their principles soon. The bill approved by the House on Tuesday postpones steep, automatic spending cuts until March 1, giving the White House and Congress less than two months to agree on an alternative solution to reduce deficits.
That fiscal deadline will be followed by another on March 31, when temporary legislation to keep the government running is set to expire. Looming over both of those cutoff dates is the even more contentious question of raising the nation’s debt ceiling of $16.4 trillion.
The government technically has already reached its borrowing limit, but the Treasury Department is taking steps to postpone the day of reckoning until late February or early March. After that, the government would start defaulting on its debts, a scenario that Mr. Obama said is reckless.
“If Congress refuses to give the United States government the ability to pay these bills on time, the consequences for the entire global economy would be catastrophic — far worse than the impact of a fiscal cliff,” the president said late Tuesday at the White House.
Mr. Obama said his protracted feud with Republican leaders over raising the debt ceiling in the summer of 2011 hurt the economy.
“The last time this course of action was threatened, our entire recovery was put at risk,” Mr. Obama said. “Consumer confidence plunged. Business investment plunged. Growth dropped. We can’t go down that path again.”
The president said he “will not have another debate with this Congress” over raising the debt limit, but it’s hard to see how he can avoid it if Republicans want to use the issue as leverage to achieve spending cuts.
As for the president’s argument for more revenue, Republicans said this week’s agreement ended the question of taxes.
“Now that we have permanently settled how much revenue the government is going to take out of the economy, we can move on to next steps,” said Rep. Dave Camp, Michigan Republican and chairman of the House Ways and Means Committee. “We can and will pursue comprehensive tax reform this year, in 2013, and next steps. We need to address the fundamental driver of our deficits and debt, and that is out-of-control spending.”
Mr. Toomey said Republicans are “totally done” raising taxes.
“We will only solve this problem when we finally get the spending under control,” Mr. Toomey said. “And the debt ceiling, and after that, the continuing resolution expiration, those are the vehicles that give us the opportunity to insist on making progress on the real problem.”
But Rep. Sander M. Levin of Michigan, the ranking Democrat on the Ways and Means Committee, echoed the president’s view that the fiscal cliff agreement has created a guideline for future talks on deficit reduction.
“This package is vital for future deficit-reduction efforts, setting the stage for a balanced approach from here on out by delaying sequestration through 1-1 revenue-to-spending cuts,” Mr. Levin said.
Both sides dispute just how much the fiscal cliff bill accomplishes. While the president is hailing it as a deficit-reduction measure, the agreement would boost the deficit by $4 trillion over the next 10 years, when compared with a scenario in which Congress did nothing.
Democrats said the legislation will lower deficits by about $600 billion over 10 years compared with current policy, because doing nothing was never a realistic option. The nonpartisan Congressional Budget Office said the bill will increase spending over the next decade by about $330 billion.
The agreement includes an extension of lower tax rates for families earning up to $450,000, and a patch to the alternative minimum tax that adds roughly $3.6 trillion to the deficit over the next decade. Other business and energy tax extenders would add a further $76 billion. The extension of unemployment benefits for about 2 million people will cost roughly $30 billion, and the so-called “doc fix” on Medicare reimbursements will cost an additional $25 billion.