WASHINGTON—House Speaker John Boehner, facing a rebellion in his party's conservative ranks, abandoned his own plan to avert tax increases for most Americans Thursday night, throwing Washington's high-stakes budget negotiations into disarray and bringing the prospect of tumbling over the fiscal cliff into sudden focus.
After pulling his bill without taking a formal vote, Mr. Boehner unexpectedly disbanded the House until after Christmas, leaving behind uncertainty about whether Congress and President Barack Obama would be able to avoid $500 billion in spending cuts and tax increases that begin in January.
House Republicans' refusal to go along with Mr. Boehner's tax plan represents a rebuke to the speaker that raises questions about his ability to lead his party in further budget negotiations with Mr. Obama. Negotiations between the White House and Mr. Boehner are at a standstill. The bill that failed Thursday, which would have raised income-tax rates on income over $1 million, was designed as a backup.
The dramatic course change, and the uncertainty about what will become of Washington's budget negotiations, could rattle investors and financial markets that until now have been reasonably stable on the expectation that the White House and congressional leaders would strike a deal.
In early trading, Asian markets slipped and U.S. stock futures were down 200 points. A selloff in the U.S. Friday would revive memories of September 2008, when the Republican House voted down the Bush Administration's first Wall Street bailout plan, sparking a 778-point fall in the Dow Jones Industrial Average.
In announcing he had canceled the vote, Mr. Boehner put the onus on the president and Senate Majority Leader Harry Reid (D., Nev.) to take the next step.
"The House did not take up the tax measure today because it did not have sufficient support from our members to pass," Mr. Boehner said in a written statement after a brief meeting with House Republicans. "Now it is up to the president to work with Senator Reid on legislation to avert the fiscal cliff."
White House press secretary Jay Carney said the president will pursue with Congress a budget deal, one that would prioritize extending current tax rates for households making under $250,000 a year.
he Senate is expected to be in session Friday, then recess until Thursday Dec. 27. The real action in deciding how to proceed is likely to take place behind closed doors in the White House and on Capitol Hill. Mr. Obama's first contact is likely to be with Mr. Reid, a Democrat familiar with the matter said. The president is also expected to reach out to other congressional leaders, including Mr. Boehner, to determine what type of legislation can pass both chambers and be signed into law before the New Year.
The White House sees a large-scale budget deal as much tougher to accomplish now, the Democrat said. Administration officials anticipate seeking a smaller deal that extends tax rates for households making less than $250,000 a year, and they want a final agreement to include an extension of unemployment-insurance benefits.
That points to the potential for Mr. Boehner to lose ground in the next stage of negotiation, as earlier Mr. Obama had proposed raising the tax increase threshold from $250,000 to $400,000. A Democratic official familiar with the talks indicated Senate Democrats would be less willing to accept that higher threshold, unless it is paired with another major concession such as a measure to increase the federal debt limit.
At issue Thursday was a bill Mr. Boehner unveiled this week after he concluded that his negotiations with Mr. Obama in search of a broad budget deal were stalled. In his so-called Plan B, Mr. Boehner proposed extending current tax rates for most Americans, while increasing rates only for income over $1 million. His bill didn't address the coming $110 billion in defense and domestic spending cuts. It also didn't address long-term deficit-reduction questions, such as how to rein in spending for Medicare and other fast-growing entitlements.
Mr. Boehner was already under pressure from party conservatives for concessions he had made in earlier talks with Mr. Obama, including a weekend offer to raise tax rates on millionaires and allow a one-year increase in the debt limit, in exchange for Mr. Obama proposing cuts in Medicare and other fast-growing entitlement programs. Administration officials now say they doubt whether Mr. Boehner would have been able to pass that proposal.
In a press conference early in the day, Mr. Boehner made clear he felt Mr. Obama hadn't conceded enough in offering spending cuts to match Republicans' concessions in allowing tax increases. "I did my part. They've done nothing," said Mr. Boehner. "Frankly, I'm convinced that the president is unwilling to stand up to his own party on the big issues that face our country."
Mr. Boehner's reversal was a personal embarrassment after he had dedicated days arm-twisting colleagues in search of support. Some also viewed it as a broader setback for the party.
Rep. Steve LaTourette (R., Ohio), a Boehner ally who has been urging his more-conservative colleagues to embrace a large budget deal with Mr. Obama, said the episode was a setback for the GOP.
"It weakens the entire Republican Party," Mr. LaTourette said. "We are going to be seen more and more as a bunch of extremists that can't even get a majority of our own party to support policies we're putting forward."
The failed Plan B bill laid bare divisions within the GOP exacerbated by the party's losses in November's elections. The party has become divided between conservatives who are firm in their commitment to antitax, small-government principles, and those who see the election as putting more pressure on them to cooperate with the president to solve big fiscal problems.
Rep. Paul Broun (R., Ga.) said he would oppose Mr. Boehner's backup plan because any bill allowing a tax increase without spending cuts would perpetuate the tax-and-spend cycle. "We've got to stop spending or we'll be going down the road that Greece is on, and we'll wind up taxing everybody in this country," said Mr. Broun.
Many Republicans were reluctant to accept any tax increase without major spending cuts as well. To allay those concerns the leadership scheduled a vote Thursday on a bill—nearly identical to one that passed last spring—to replace impending Pentagon spending cuts with reductions in domestic programs.
In an early harbinger of potential defections, the Thursday vote on that bill saw 21 Republican defections, including many conservatives who had supported the bill in the spring.
A senior Republican aide said part of Mr. Boehner's problem was the fact that this bill wasn't going to become law in the face of stiff opposition from Mr. Reid and the president. That made it hard to lean on recalcitrant Republicans when GOP leaders knew they would have to twist arms again next week to support a final deal the caucus will like even less.
After leaders concluded they were short of the votes they needed to pass the bill, House Republicans were summoned to a closed-door party meeting in the basement of the Capitol with only five minutes of warning.
Mr. Boehner opened the GOP meeting by saying it would be a quick conference and then took the unusual step of leading both a prayer and the Pledge of Allegiance. Mr. Boehner said the "Serenity Prayer," but made no attempt to garner further support for his proposal, said Rep. Scott Rigell (R., Va.).
"I knew they were having some trouble with the vote, but I had just assumed they'd say 'Hey look, rally, let's go.' That did not happen," Mr. Rigell said. Mr. Rigell quoted the speaker as saying "We do not have the votes and we are not going to have any further votes and I'll go before the press tomorrow and explain we don't have the votes."
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Fri Dec 21, 2012 7:05 am
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