Washington, DC–(ENEWSPF)–December 5, 2012 – 12:43 P.M. EST
MR. CARNEY: Thanks for being here. Good afternoon. I, as you can see, have brought a guest. Jason Furman is the Principal Deputy Director of the National Economic Council. He is also an assistant to the President for economic policy. He’s somebody that many of you are familiar with.
In the last several days in particular we’ve had a lot of questions and a lot of conversation about the issue of revenue, and how we achieve significant revenue as part of a broad deficit reduction package. It is the President’s position, as you know, that we need to have income tax rates on the highest earners in America, the top 2 percent, rise. And in addition to that, to pass policies that he has long proposed that would limit deductions and close loopholes for wealthy earners. And the combination of the revenue accomplished through that reaches the target that is necessary to achieve the kind of broad-based $4 trillion deficit reduction that the President seeks.
There’s been some discussion about whether or not significant amounts of revenue can be accomplished through just closing loopholes and capping deductions. Jason has done some work on this and for that reason I’ve asked him to come here today. He’ll make a little presentation and then take your questions.
MR. FURMAN: Thanks, Jay. So I just briefly wanted to give a tiny bit of context, then walk you through a tiny bit of math that can be a little bit boring but is very important because it explains where we’re coming from and where the President is coming from on this issue.
The context is we’re trying to cut the deficit by $4 trillion over the next decade, including what we did in the Budget Control Act. That’s the amount that you need to do in order to stabilize the debt and get the debt to start to be on a downward path as a share of the economy. And that’s ultimately the economic goal that the President has in a debt reduction agreement.
In the President’s plan, $1.6 trillion of that $4 trillion that we need would come from additional revenues. And it would come from a combination of allowing the rates on high earners to go back up to what they were under President Clinton, and reducing the value of tax deductions and other tax benefits that they get.
Before I get to how much can be raised by the second, let me just say the President is very, very supportive of curbing tax deductions for high-income households. It’s been a part of his plan from his very first budget. In fact, he was and remains the only major leaguer in Washington that has put forward a specific, explicit plan that would limit those tax benefits for high-income households that’s been examined by the Joint Committee on Taxation, which is the official referee for these issues in Congress.
That plan, though, doesn’t raise the revenue that you need. So out of the President’s $1.6 trillion, $950 billion comes from decoupling. Decoupling is the high-income rates going away, the middle-class tax cuts becoming permanent. That gets you $950 billion of revenue.
The question is could you plausibly replace that revenue just by limiting tax expenditures. There have been lots of different ideas out there. It’s always a little bit like Jell-O — you look over here, the problem with this one; well, how about this one; the problem with that could fix this, and you go back to the first one. Most of them — in fact, none of them that I’ve seen have been scored, as I said, by the official referees at the Joint Committee on Taxation.
But I’ll just quickly take you through one that Gene Sperling and I did a blog post on last week, and it’s been the one that I think we’ve heard the most in the public debate, which is let’s take the idea that you could take everyone’s tax deductions, limit them to $25,000. If you have more than $25,000 in deductions you wouldn’t get to take those extra deductions. It sounds like a reasonable idea. It sounds like most middle-class families wouldn’t be affected — $25,000 is quite a lot. And it’s been claimed that it could raise over a trillion dollars. So could you do that instead of what we’re talking about?
Well, then you start to look at the idea. It turns out 17 million middle-class families would see their taxes go up as a result of this proposal, households that make — married couples that make below $250,000. Forty percent of the revenue in this plan would come from those middle-class families. The President doesn’t want to raise taxes on those families. So you fix it — you start at $250,000 and now the proposal only raises $800 billion.
But it has a cliff: When your income goes from $249,999 to $250,000, your tax bill could jump way up. You can’t have features in the tax code like that. It’s something no one would ever want to write in. You protect against that cliff with a phase-in; now you’re down to only $650 billion of revenue.
Now let’s look at it from a public policy perspective: $25,000 — if you’re a high-income household, there’s a good chance your mortgage interest alone is going to be $25,000. Certainly once you take your mortgage interest and your state and local deduction, you’ve used that entire thing. That means you’re not getting any incentive to give to charity. There’s no reason for you to keep your receipts when you give to charity, no reason to turn them into the IRS. You’ve used your whole cap just on those other items.
You look at the top 1 percent of households in this country — under this proposal, 97 percent of them would lose any incentive at all to give additional money to charity. These are households that are responsible for one-third of tax-deductible giving. You take away their charitable deduction completely, you’re going to get $10 billion less a year going into charity according to the types of estimates CBO has done.
Fix the charity — you’re now down at $450 billion; $450 billion is a meaningful contribution to deficit reduction, it could be a meaningful part of tax reform. It doesn’t get you anywhere close to the amount of revenue you’re going to need to satisfy what it is the President has called for and to have a balanced plan that at the end of the day is going to get $4 trillion of deficit reduction.
I won’t walk you through the 18 other ideas that have been floated in some form or another in the public discourse, but all of them have this feature. A plan put forward by Marty Feldstein and Maya MacGuineas that some have cited, to cap the value at 2 percent, that also would raise about $500 billion to $600 billion. If you just applied it to households above $250,000 and if you protected charity that idea would also raise in the neighborhood of $400 billion to $500 billion. Other proposals would retroactively eliminate municipal bonds, all of those types of things.
So at the end of the day, that’s why where the President is coming from is a combination of those rates — having the tax cuts expire, doing tax expenditures — tax expenditures can play a role, but they can’t make up for the revenue that you would have gotten through rates.
MR. CARNEY: Now we’ll take some questions for Jason.
Q Jason, the Republicans are pointing to comments that the President made in 2011 in which he said we could raise $1.2 trillion in revenues without touching tax rates. I guess if it was an acceptable approach back then, why not now?
MR. FURMAN: First of all, there’s a different context for those discussions then and the discussions now, and that’s something Jay can elaborate on with you in a second.
Second of all, let’s look at how that agreement was structured. The agreement then was Republicans had offered decoupling. They had offered that on January 1st, 2013, the middle-class tax cuts would be made permanent and high-income taxes would go back to the Clinton-era rates if tax reform didn’t succeed. So if we weren’t able to accomplish through tax reform — if you put forward — and that could be you put forward a plan that got rid of the charitable deduction, that raised taxes on the middle-class families, that plan got voted down. Under that agreement then you would have had the type of decoupling that the President is calling for. It would have happened on the time scale as what the President is calling for.
The last point I’d make is that our argument centers around the plausibility and desirability of the tax reform. Is it politically plausible to raise taxes on the middle class to get rid of the charitable deduction? Is it economically desirable to do those things? It’s not saying it’s — the President, Jay, no one on the economic team has ever argued that it’s mathematically impossible to make up for that revenue. It’s just at the end of the day, you might have a question in a tax plan: Would you rather have a higher tax rate, or would you rather have a charitable deduction? I think most people, Democrats and Republicans, would rather have a slightly higher tax rate than eliminate the charitable deduction.
But you might want to talk about the context.
MR. CARNEY: Well, we’ll take some more questions.
Go ahead, Jake.
Q I’m following up on that, so if you want to weigh in on the political context.
MR. CARNEY: Well, I would simply, first of all, echo what Jason said, and that is that a key element that’s not being discussed by people who are putting forward that comment by the President is that the backstop of the deal — if there had been a deal, if the Republicans hadn’t refused it and walked away from it — was that the rates would go up on higher-income Americans when the Bush-era tax cuts expired, concurrent with a permanent extension of tax cuts for the middle class. The only way that wouldn’t have happened is if tax reform were achieved in a way that was politically feasible — in other words, that could pass Congress.
So there’s not a great distinction here between what we’re saying now. The difference is back then, January 1st, 2013 created some time to attempt to do tax reform. January 1st, 2013 is now less than a month away. And tax rates have to go up as part of any responsible, balanced plan that achieves the revenue targets that are necessary for a $4 trillion deficit reduction plan, which is what the President seeks.
He has said — he said yesterday in an interview that stage two of this process can and should involve tax reform. And what shape that takes will be decided by Congress and the White House as they work through the issues and evaluate some of these concerns that Jason is talking about. How much can we garner from capping deductions, closing loopholes? And there are limits on that amount, as Jason just explained, because not just — not because it’s not hypothetically possible in a think tank to achieve it, but because it’s not desirable economic policy and it’s not politically feasible.
Again, it’s hard to imagine that Democrats or Republicans would vote to eliminate the charitable tax deduction. It’s hard to imagine that anyone on Capitol Hill would vote for such substantial reductions or even an elimination of the mortgage interest deduction that it would severely raise taxes on the middle class. That’s unacceptable to the President, but I imagine it’s also unacceptable to many Republicans.
Q I’m afraid I just don’t see the difference other than the President feels like he’s in a different position in terms of negotiations, maybe that he feels that he has a stronger hand now because of the reelection and because the tax rates automatically go up. But, I mean, what he said was — I mean, the quote is — “What we said was give us $1.2 trillion in additional revenues, which could be accomplished without hiking tax rates, that could simply be accomplished by eliminating loopholes, eliminating some deductions, and engaging in a tax reform process that could have lowered rates.” It seems to me like here’s your solution right now: Just agree to this and we can all go home and have a Christmas vacation.
MR. CARNEY: I’m going to ask Jason to do some substance. I would remind you that the Republicans did not agree to that. They didn’t even come close for the third time —
Q It sounds like you don’t agree to it now either.
MR. CARNEY: No, but the thing is he said we could have a process to look at tax reform, to see if we can close loopholes and cap deductions. But the fundamental aspect of that potential agreement, which Republicans walked away from, was that rates would go up on high-income earners next month if tax reform was not achieved. And that required tax reform passing Congress.
I’ll turn it over to Jason.
MR. FURMAN: Yes, I mean, two things — one is I could just repeat the same example or switch over to a second or third or fourth example and walk through all of them, and explain why it is we have. And we’ve done a lot of work on this topic since last summer —
Q But the President changed his position.
MR. FURMAN: No. And the second thing is what we’re seeking to do is to lock in revenue this year, not have some vague process that may or may not add up to something in the future. And so we’re trying to pass something this month. We’re trying to pass something this month rather than launch some long process, some long discussion. We really need to see what those proposals are. The proposals we’ve seen all have these types of flaws that I’ve identified.
I don’t think there’s another proposal out there, because me and other members of the economic team spent enormous amounts of time on all of this. But if there are, they should bring them forward. We should see them. That’s what’s been so frustrating. They keep saying, let’s not do rates, let’s do this. Well, what is this? What is it? Point to it. Tell us what it is. Show us a score. Tell us how it locks in revenue — because you’re trying to actually pass a bill this year, not engage in some long process around tax reform, which we don’t have time to do by the end of this year.
Q Jason, can I ask, you get to $1.6 trillion not just by raising tax rates. How could you achieve those additional revenues without doing damage to the U.S. housing market or to hurting the charities and non-profits that the President talked about last night?
MR. FURMAN: In the President’s proposal you have the decoupling that gets you $950 [billion], and then he has an additional proposal where he takes the value of tax deductions and other tax expenditures, and limits their value to 28 percent, which is what you’d get if you were upper-middle class — in effect, you’d get 28 percent value for all of those. And so he trims them across the board and he saves several hundred billion dollars with that proposal. The exact amount depends on where the tax rate is and who’s doing the scoring.
He thinks that type of thing — targeted high-income households done in a way that trims things across the board, but doesn’t bluntly eliminate anything, would be sound economic policy and it’s something he’s defended over the last several years.
Q But Boehner’s people keep saying that they’re not eliminating the charitable deduction, and keep saying that, but that they want to limit it. Isn’t that a different —
MR. FURMAN: Okay, but I —
Q There’s a difference between — but you keep using the word “eliminate” —
MR. FURMAN: No, no, but I guess — I mean, but this is another —
Q I haven’t seen it on paper. You can tell me —
MR. FURMAN: I have heard them refer to a report by the Committee for Responsible Federal Budget and say — we sometimes ask, how do you get it? Well, often we’ll ask you guys, you’ll ask them, they’ll point you to this report. This report, I have it here, it has three plans in it. Two of those three plans eliminate the charitable deduction for the majority of high-income households in this country. So you can’t tell people you have a plan, point to a document that you say contains three different plans that could be like your plan, and then two out of three of those plans eliminate the tax deduction for the vast majority of high-income households.
Q Sure. I’ll let them defend that. But the point is in 2009 and 2011, the President himself proposed limiting the charitable deduction, all kinds of deductions — as you know, you probably wrote the plans — for the rich. And in 2009, he was asked at a news conference, isn’t this going to decimate charitable giving, and he said, no, we’ve looked at it and it won’t. So what’s changed? He put that on the table in 2009 to pay for health care and said it’s not going to hurt charities. Now Boehner puts it on the table and he says, oh, it’s going to kill charities.
MR. FURMAN: What’s changed is a few letters that are quite important — the difference between limit and eliminate. His —
Q Which do you say they’re going to limit again?
MR. FURMAN: His plan limits the charitable deduction. It does it in a gradual way. It does it in a way that we think is completely consistent with charitable giving. And, by the way, under his plan you’ve got a 28 percent tax incentive for charitable giving. That’s what you got under President Reagan when the top tax rate was 28 percent. Any Republican that supports a tax plan with 28 percent tax rate, even if they don’t limit tax deductions, that’s the value of tax deduction. So it’s a pretty standard value for tax deductions that we’ve had in the past in this country that people have proposed.
If you want to get to a trillion dollars on tax expenditures, let alone to the $1.6 trillion, most of the plans we’ve seen eliminated entirely. You don’t get 28 percent, you don’t get 15 percent, you don’t get the 12 percent you got in Bowles-Simpson. You get zero percent. That would have a major impact on charities — we estimated $10 billion a year using the CBO methodology.
Q Can you clarify some of the terms you’re using? Because you both referred to what sounds like a two-step plan, but would you lay it out for us — why are you talking about this in two steps, Jason?
MR. FURMAN: Yes — because there is less than a month to go before the end of this year. And what the President is not going to do is put in place some type of process that may or may not come up with the revenue. We need to lock in a set of revenue right now. He’s proposed a very simple way to do it that, by the way, doesn’t need to require anyone to vote for a tax increase. It just requires them to vote to extend the middle-class tax cuts — that gets you a trillion. And then you have more time next year to —
Q Right, but the first step is Clinton rates.
MR. FURMAN: Yes, absolutely.
Q You go up with the Clinton rates. And then the second step he said you could —
MR. FURMAN: The second step would be —
Q — lower tax rates for everyone.
MR. FURMAN: Right. The second step would be tax reform. And as the President said in an interview the other day, consistent with what he said over the last several years, absolutely try to look [at] could you simplify the tax code, could you make it more fair, could you make it more efficient, could you lower rates — which is starting from that 39.6 percent rate. You’re also starting from a lot of tax expenditures still being out there so you have more scope to do things in tax reform than if you got rid of them all in stage one.
Q And that would be done next year?
MR. FURMAN: We had floated the idea of an August 1st deadline for that process because we think that’s the amount of time you’d need.
Q So when you’re talking about the Republicans talking about these vague ideas and you want some specifics, are you suggesting that they’re trying to put out there things that would score as revenue now and then get repealed down the line?
MR. FURMAN: My understanding is that they are saying here is something you could pass this year, that instead of the top rate going to 39.6, we could keep the top rate at 35, it’s not a long, complicated tax reform process, but it would lock in the revenue that you, Mr. President, wants. So you want guaranteed revenue, we can do that. You want it at a 35 percent rate, we can do that; here, go look, there is some think tank somewhere that has an idea for that. We go and look at the think tank and find that two of the three ideas eliminate the charitable deduction.
And a lot of this is just — I’m not characterizing anything in a back-and-forth in negotiations. I’m just saying the types of things, different types of people —
Q Are you negotiating with them?
MR. FURMAN: — these are conversations that are always going on.
Q Yesterday they were?
MR. FURMAN: Any time someone from there calls, someone from here is going to take that call and have a conversation with them.
Q They say they didn’t have any calls yesterday.
MR. FURMAN: Oh, I’m not saying whether there was a call yesterday.
MR. CARNEY: I can address this. As we’ve said repeatedly, the President is engaged, his team is engaged in broad discussions about how to move this process forward, how to address the fiscal cliff, how to address long-term deficit reduction. We’re not going to read out every conversation. We’re not going to read out every proposal. The fact of the matter is the President has an absolute principle here that he’s not going to abandon, which is that rates are going up on top earners. And this is not —
Q But you don’t dispute there were no conversations yesterday and there was no exchange of information.
MR. CARNEY: I have no conversations to report, and I can tell you that I’m not going to report out to you blow by blow —
Q Some of you guys are saying you want more detail and then not engaging in the conversation. So it’s a little —
MR. CARNEY: Again, I had somebody say the day after — and I had just said so publicly the President had spoken on the phone with Speaker Boehner — or maybe 36 hours, why isn’t the President speaking to Speaker Boehner? Well, he has several times. He spoke with the numerous lawmakers who were here in the White House several times. His team is very engaged in this process.
But here’s what we’re not going to do: We’re not going to negotiate against ourselves. We’re not going to take the flat refusal of Republicans to acknowledge what will happen, which is that rates are going up on top earners, as an incentive to negotiate with ourselves. The President has put forward, unlike the Republicans — contrary to what Ed has said — the Republicans have not put forward a single sentence that in any way provides some specifics on their proposal on revenue — not a single specific at all. The President has — and he’s done it on the spending side, too — he’s provided a substantial specificity when it comes to entitlement savings, both through our health care entitlement programs and other mandatory entitlement programs.
And the goal here — don’t forget the goal here: We focus on revenues. The President is engaged in this process because he believes broad-based deficit reduction to the tune of $4 trillion over 10 years is a desirable thing to achieve for the economy, for the American people. And he believes that in order to achieve that we need to do that in a balanced way that includes revenue on the order that he’s described.
Q Are you saying that before he will actually get in a room and sit down with Boehner and Cantor — which they asked him to do today — that they have to cry uncle on rates?
MR. CARNEY: Again, I’m not going to — as much as I understand there’s interest in it — read out to you our meeting schedules or every communication we have with congressional leaders. It is not a point of debate with the President that rates are going up on top earners. And I think — I understand that a lot of Republicans didn’t want him to win reelection and thought he was not going to, and so maybe they weren’t paying close attention, but he was extremely explicit about this every day, as those of you who traveled with us know. He did not hide the ball. And some people probably thought he was taking some political risk in being very clear with the American people that he believed, as a matter of sound economic policy and fairness, that tax cuts for middle-class Americans, for 98 percent of the American people ought to be extended and that tax rates for the top 2 percent had to go up.
And I think the American people spoke very clearly on this issue on November 6th. They very clearly, in the aftermath of November 6th, have expressed to your news organization and to others who have done surveys how they feel about the various proposals that are out there. They support the principle that the wealthiest need to pay a little bit more so that the burden of deficit reduction is not borne solely by the middle class or by seniors. And the President is going to stick to that principle.
When the Republicans are ready to acknowledge that rates are going up, we believe that — well, again, you’re focused on process. We believe that we’re going to continue to have conversations regardless and including conversations that the President just did with business leaders at the Business Roundtable, who have very much at stake here in this process. And he’ll continue to speak with leaders in Washington about this.
But once Republicans acknowledge that rates are going up for top earners, we believe that an agreement is very achievable. Why? Because unlike Republicans, the President has been very specific on both sides of the equation, both on revenues and on spending cuts. And he’s made clear that he wants to negotiate with Republicans, that he’s not expecting to get every item in his plan just the way he wants it, and that he’s going to be willing to make tough choices. But on the matter of the top 2 percent paying higher rates, that’s going to happen.
Q Just to clarify something — no, not on that, but another subject —
MR. CARNEY: I don’t have any — I know Bill is particularly interested in this and whether or not — and when the next meeting is. I don’t have a schedule to read out to you.
Q No, no, no. In answer to Laura’s question, was that a yes?
MR. CARNEY: No, my answer to that question was conversations will continue, I have no doubt. But —
Q Even before they give up on rates?
MR. CARNEY: Well, an agreement won’t be reached until they understand that rates have to go up.
Q But I just want to clarify. Today you’re saying — you’re no longer saying the math doesn’t add up. You’re saying it’s politically unfeasible and bad policy. Those are two different things.
MR. FURMAN: No, no, no — but math isn’t remotely sound. And the President, in his first press conference after the election, I’m pretty sure said something very similar that I’ve certainly seen Jay say something very similar, and to the degree I’ve had conversations with a number of you.
This is — during the campaign, there was an argument about a tax plan with a 28 percent rate that would have required a tax increase of $2,000 on middle-class families. That argument was about pure mathematics. Even if you get rid of 100 percent of everything, it would still require this to work.
Here our argument is if you want to protect the middle class, if you want to not eliminate the charitable deduction, if you want to not retroactively, entirely eliminate and destroy a several trillion-dollar municipal bond market, then you can’t do this.
Q Can I just —
MR. FURMAN: And those all seem like perfectly reasonable premises to us, and if somebody thinks you should retroactively eliminate the muni market, they should come forward with a proposal.
Q But when you say you’re not going to talk about process, or process isn’t important, with two weeks left — or however many weeks — process does become important. And for you to say to Ed, well, we — you to ask us, we ask you, you go back and ask them, that seems ridiculous. Why not call them into a room and say, explain how this works, what are you willing to do, instead of doing this?
MR. FURMAN: We would love to see — there is no secret from any conversation that’s happened in any format that we would love to see details of a proposal to limit tax expenditures. The only proposal that’s fully fleshed out, fully scored, fully worked out, is the President’s proposal. It’s a good proposal. It doesn’t raise enough revenue for what we need to bring the debt down.
Q Are you going to ask them for the details?
MR. FURMAN: Absolutely, we’ve consistently asked for details. And what we generally get referred to is a paper by the Committee for Responsible Federal Budget. They’re an excellent think tank. Things that think tanks do have all sorts of interesting ideas. They tend — all think tanks — to not be the same degree of rigor and analysis, that something would go through if it went through the official resources that Congress has at its disposal through the Joint Committee on Taxation that we have at our disposal through the Treasury and the White House.
When you put proposals through things like that, you discover things like having these types of cliffs doesn’t work. You discover how many people lose their — you discover all that. That’s why it’s so important to see something real. Again, I have no doubt you can have a sound proposal that raises hundreds of billions of dollars. To raise $1.6 trillion, to raise even the $1 trillion that we’re calling for out of decoupling, we don’t see something plausible or desirable without rates going up.
Q What is the meaningful revenue target that you are aiming for? The President today said at the BRT, “But there is a bottom line amount of revenue that is required in order for us to get a real, meaningful deficit reduction plan that hits the numbers for us to stabilize our debt.” He said that in two different forums. So what is the target? It sounds like you’re saying —
MR. FURMAN: I’m sure Jay negotiates the details with you all every day, but I don’t think that’s what he brought me here for. We have $1.6 trillion in our budget; $950 [billion] is what you’d lock in through decoupling right away. We’re trying to get to $4 trillion in total. Those are all some of our touchstones.
But obviously the President said he’s open to other ideas. He’s open to compromise. But even that $950 billion — and that wouldn’t be enough — but even that $950 billion you can’t get through a plausible, desirable tax reform that doesn’t raise rates in a format that we’ve seen.
MR. CARNEY: Can I just say — I just want to make the point here that — two points. One, this is a discussion about a broad-based deficit reduction package that the President seeks. Republicans should — I think it would be helpful — engage in this process because the process envisions $4 trillion in deficit reduction. This is not just about the revenue figure.
But the obstacle continues to be an adamant refusal by Republican leaders to this point to accept the premise that rates need to go up on the wealthiest 2 percent, and the willingness to do all sorts of other things. Last summer it was default on the full faith and credit of the United States; this year it’s allow taxes to go up on middle-class families, all for the sake of protecting tax breaks for millionaires and billionaires — tax breaks that the overwhelming majority of the American people do not believe we can afford, do not believe are good economic policy.
And so, as Jason has been making clear, if the Republicans believe that they have an alternative proposal that achieves the kind of revenue that’s necessary, they ought to put it on paper.
And I think the reason they haven’t is because they know, as Jason has just explained, that there isn’t a plausible proposal that produces the amount of revenue necessary that could pass Congress or that makes economic sense. So rates are going to go up on the top 2 percent, and we look forward to Republican leaders agreeing with every day more and more of their colleagues, every day more and more business leaders who have made the statement publicly that we need to get this done, we need to acknowledge that rates are going up, and that a lot of the arguments Republicans have traditionally put forward about why we can’t possibly ask the wealthiest 2 percent to pay top marginal rates at the level that they paid under Clinton are spurious.
I think the CEO of FedEx said as much recently. Senator Coburn has said so, Senator Snowe, Representative Cole. The FedEx Chairman and CEO, Fred Smith, said I think just the other day that there’s a lot of mythology in Washington, and among that mythology is that if you raise the rates on the top 2 percent you’ll kill jobs. We know that’s not true because those were the rates that were in place in the 1990s when this economy created more jobs than we’ve ever seen created in that period of time in our lifetimes.
So we believe that, despite obvious resistance to what has to be the framework of a deal here, that progress is being made and that a compromise is possible, a way to reach an agreement is possible. But it requires some seriousness by Republican leaders on this very important issue.
MR. CARNEY: Kristen.
Q Jay, thanks. The President gave a warning today to Republicans that they shouldn’t use the debt limit as a bargaining chip if the bulk of this work goes past the January 1st deadline. Realistically, is there anything that he could do or that he’s prepared to do to stop it from happening?
MR. CARNEY: The President made clear today at the Business Roundtable that he will not engage in that kind of gamesmanship with Republicans. We are highly skeptical that Republican leaders believe it would be wise as a matter of economic policy or political strategy to hold the American and global economy hostage again for the sake of tax cuts for wealthy Americans, a position that is wildly unpopular in the United States and among the very constituents that sent members of Congress to Washington.
It is wildly irresponsible to suggest that that is the appropriate approach to take. It is simply Congress’s duty to pay its bills, to pay for the expenses that Congress itself authorized. And we expect Congress to take action. The President is absolutely firm on this. Congress needs to act without drama, without delay, to ensure that we do not default. It would be wildly irresponsible to do otherwise.
Q And you say you were engaged. Does that suggest that you would consider raising the debt limit unilaterally? I know that that was something that was discussed in 2011.
MR. CARNEY: Again, I just think it’s highly unlikely that Republicans would want to go down that road again. Not only was what happened in the summer of 2011 terrible for the American economy, terrible for the American middle class, terrible for American business, it was terrible for the Republican Party. It was bad politics. I believe it was shortly after that debacle that public approval ratings of Congress dipped into the single digits.
So putting aside doing the right thing, putting aside wise economic policy, putting aside the idea that you should put the country and the economy first, as pure politics, it just doesn’t seem plausible to me that they would want to travel that road.
Q But they maintained their majority, right? I mean, this is the argument we have with them all the time, and they say, look, 12 percent and we got reelected with that. So I don’t quite understand why you guys are so convinced that there’s political pressure bearing down on them when they’ve retained their majority.
MR. CARNEY: Again, I think you have heard and seen public statements by business leaders, some of — or many of whom are not necessarily natural allies of the Democratic Party or the President of the United States, who are extremely alarmed by that kind of talk being put forward by some Republicans in Congress.
I don’t believe you’ve seen any Republican leaders embrace that strategy. And it’s funny because some of who are apparently suggesting this to the press describe it as a doomsday strategy, which is ironic indeed because the doom would befall the country and the economy, and does not seem like wise politics.
Q Jay, some government agencies are saying that they are being asked by the White House to prepare for sequestration cuts. Is this a government-wide directive? Can you talk more about that?
MR. CARNEY: I can and I will. The administration remains focused on reaching agreement as we’ve been discussing on a balanced deficit reduction plan that avoids sequestration. Leaders of both parties have pledged to work together in the coming weeks, and we are confident, as I just said, that we can reach an agreement.
However, with less than one month left before a potential sequestration order would have to be issued, the Office of Management and Budget must take certain steps to ensure the administration is ready to issue such an order should Congress fail to act.
Earlier this week, OMB issued a request to federal agencies for additional information, to finalize calculations on the spending reductions that would be required. This action should not be read — to anticipate your next question — as a change in the administration’s commitment to reach an agreement and avoid sequestration. OMB is simply ensuring that the administration is prepared, should it become necessary to issue such an order. OMB will continue to consult with agencies and will provide additional guidance as needed. This is just acting responsibly because of the potential for this happening.
Q Should companies put out layoff notices then? Because before the election, companies were being told, don’t put out layoff notices to scare people. If the administration is now doing this, should people be notified about potential layoffs?
MR. CARNEY: Well, again, we believe firmly that a deal is possible. I think that you’ve seen again and again in recent days Republicans agreeing with the principle that we ought to extend tax cuts for the middle class. That alone, by passing the Senate bill, would mitigate a substantial portion of the so-called fiscal cliff.
Obviously, there would be more work to do. But taking that action would, as I said earlier, overcome what seems to be the largest obstacle to a near-term agreement and the first stage of what would be a two-stage agreement that would ensure that rates went up for the top 2 percent, that that revenue would be locked in, commitments for spending cuts would be in place, and commitments to engage in a process of both tax reform and entitlement reform would be in place.
And I think that this is an opportunity for Democrats and Republicans to do something very significant, do something important that represents goals that this President has and that Republican leaders have, which is to put our economy on sounder fiscal footing and do it in a way that helps the — that allows the economy to continue to grow and create jobs.
Q Can I ask you a question not about the —
MR. CARNEY: We spent a lot of time here. I’ll make it to Peter. I’ll come back this way.
Q I get that you think that the idea of using the debt ceiling is a bad idea, bad politics, and all that. What is the last view today, though, of the 14th Amendment argument? Is there a constitutional power vested in the President to do this by executive authority as far as you all are concerned?
MR. CARNEY: I have no update on that view. I’d refer you to the questions I answered about this back at the time.
Q You said at the time there wasn’t enough time to know.
MR. CARNEY: I’m not sure that’s what I said, but I will ask you to refresh your memory and I will refresh mine.
Q Jay, let me follow that question up by asking if you and the team think it is so unlikely that the Republicans are going to go down that road again, why did the President feel compelled to be so explicit and vehement about this?
MR. CARNEY: Because we have seen some inclinations by some Republicans again — as far as I know, disavowed by leaders — to engage in that game again.
Q Speaker Boehner did say if you guys want to increase the debt limit, there will be a price for it. I assume that’s what the President was talking about.
MR. CARNEY: Well, I think I said very explicitly in response to that — and I speak for the President — that to do so, to demand a political price for Congress to do its job responsibly, which is to ensure that the United States of America pays its bills, would be wildly irresponsible.
Q So you are taking that threat seriously.
MR. CARNEY: Well, we have to prepare. We have to answer questions and state clearly what our views on this are. I don’t believe in the end that Republicans want to do that, not because we’re telling them it’s a bad idea, but because doing great harm to the American economy, doing great harm to American business does not seem like a step that they would want to take, especially when you have a process in place here and an opportunity to work with this President to lock in substantial savings, to lock in substantial deficit reduction, and to do so in a way that is balanced and fair.
And that’s where we are today. Some of the ideas that have been floated about engaging in this process suggest that Republicans would simply vote to extend middle-class tax cuts, let the Clinton-era rates rise for the high-wage earners, and then engage in debt ceiling brinkmanship. And one has to ask, since the reason why they would do that as opposed to reach a deal now is because they oppose letting the rates go up doesn’t make a lot of sense to me strategically.
Q Here’s what you said last time. You said, “You can have an esoteric —
MR. CARNEY: That was very fast. (Laughter.)
Q “You can have an esoteric discussion about constitutional law and what could or should not be, but we don’t have the luxury or the time. The law is as it is.” You didn’t have time then. It’s been a year. Is there any study that’s been done by the administration since then?
MR. CARNEY: Not that I’m aware of. So what I said then stands to this day.
Q Is it theoretically possible that you could get a solution in the short term where the rates go up, but not all the way to 39.6, and you can — by limited capping of deductions, you could make up the revenue you need without doing full-scale tax reforms?
MR. FURMAN: I mean, the President has been clear that rates need to go up. The President has been clear that there is a plan that works extremely well, which is to let those rates go back up to the Clinton rates and then do additional tax reform on top of that. It’s important not just that you’re trying to replace the revenue from decoupling, but you’re putting yourself in a position where there’s still scope to do tax reform.
So you wouldn’t want to do something where any additional tax reform, the only tax expenditures left, would be those for the middle class. So what tax reform became was an exercise in raising taxes on the middle class, because that’s not something we’d want to do. It’s not something that Congress would want to do.
But the President has always said — wants to hear ideas, engage in a discussion of those ideas. But whether you could design any of those in a way that again meets that plausible, desirable leaving room for the type of tax reform that we think we need to do as a country, do that all in the next couple of weeks, is something that we haven’t seen.
MR. CARNEY: Can I get one more for Jason? I’m going to let him go and then stay if you have questions on other subjects. Anybody have — for Jason?
Q I was curious. This is more of a question for Jay, but going back to the — sorry. But going back to the summer of last year and the $1.2 million that the President agreed that you could raise without increasing the rates, was there anything that was different? I mean, did he really think at that time that you could have tax reform in an election year? It seemed very — that we would be back here at the same place we are right now with the Bush-era tax cuts ready to expire — because it’s an election year and we all know in Washington that a lot doesn’t go on, and tax reform is a big thing to take on.
MR. FURMAN: I think two things. One is that there are two sets of issues when you have to do tax reform. One is some of the most controversial issues about how much revenue, what the distribution of that revenue is. And then, a second set of things that are also really complicated and controversial about how you put that whole plan together. The goal of those talks was to try to settle some of the biggest, most controversial questions in stage one so that stage two would have become a more technical exercise, admittedly an incredibly fraught and incredibly political, and incredibly complicated one, but one that some of the very biggest questions had been settled at the leadership level.
And two, the President’s attitude has always been that he wants to get done the things that we need to get done in this country. And if Republicans were willing to do tax reform in the year 2012 that would have raised revenue, he absolutely would have been willing and thrilled to do that with them. And that’s why he was engaged in those negotiations. It’s gotten until now to the point where you have any indication of a willingness to —
Q Was he kicking it down the road, though, the tax reform part, to see who won the election and then whoever gets the leverage?
MR. FURMAN: I mean, we weren’t — Speaker Boehner was the one that withdrew from those talks, not President Obama. President Obama went the extra mile to try to make those talks succeed, because he thought it was important for the economy and important for our long-term economic growth. So —
Q When you say the “extra mile,” do you mean moving the goal post the extra mile? Because that’s how they —
MR. FURMAN: Absolutely not. I mean, Hans, he was —
Q I mean, we can get into this dispute on where the numbers were and how close they were.
MR. FURMAN: I mean, I don’t — there’s like a lot of history books one can already start reading about last summer, and I personally have avoided reading any of them. But we’ve always been clear — I mean, our central things have been the amount of debt reduction we need to get the debt on a downward slope have been protecting the middle class — households that make up to $250,000 a year; have been a balanced plan in which revenue is making a meaningful contribution. Those were consistent when the President ran in 2008. They were consistent in the talks last time. They were consistent in this campaign. And that’s where he’s approaching it from now.
Q The only thing that’s changed is that you all have won the election and there’s a dynamic that’s changed. So are you saying that now the President has the political capital and a mandate to raise the taxes right now?
MR. FURMAN: First of all, I’ll let Jay answer questions of that nature. But let me also say we’ve done a lot of work in the last year. We didn’t just sort of sit here twiddling our thumbs. We’ve known that we were going to be in this type of conversation in November and December. So just at a purely analytical level, we know more about tax reform. We know more about tax expenditures. We know more about all of those topics now than we’ve known before. And all of that understanding, all of the types of math I walked you through inform the positions the President has taken. And the positions he’s taken are we need $4 trillion, we need balance, we need this amount of revenue. And then, you do a bunch of math and you spend a bunch of time on it, and it turns out you don’t see a way to get that without higher rates.
Q I’m sorry to belabor this, but are you saying that you didn’t know some of the things you know now, that you didn’t back then that you know now?
MR. FURMAN: No, I’m not that saying that now. I’m just saying I’m giving you — first of all, as I said then, there was always this structure that if tax reform didn’t succeed — and one of the ways it wouldn’t have succeeded is if it raised taxes on the middle class or eliminated the charitable deduction — that as of January 1st, 2013, the top rates would have reverted to what they were in the Clinton era. So that was built into the agreement then. There was time to explore something else.
Now we’re talking about trying to pass that something else in the next month. Everything we know about what it would mean to pass that something else in the next month tells us that it can’t plausibly be done without higher rates. Every argument to the contrary has had flaws in it — very, very serious flaws, like eliminating completely the charitable deduction. We’re still open for hearing more of those ideas. We’re not very optimistic that somebody is going to come up with some, because we have, as I said, looked at this even more over the course of the past year. But of course we’re always open to hearing ideas.
MR. CARNEY: Really quickly, one more. Last one.
Q In your studies, and you said you looked at over the course of the last year since the last time we went through these negotiations — the last time we went through these negotiations the President was open to the so-called chained CPI of Social Security. What has changed — or, I mean, is Social Security in better shape now than it was a year and a half ago? Why is the President taking it off the table? What has changed other than the political calculation?
MR. FURMAN: I’ll let Jay answer a certain amount to that. But in a negotiation there is always a give-and- take. And right after those negotiations ended the President put out his plan for the super committee, which if the super committee had adopted would have averted all of these problems. His plan for the super committee reflected where he’s coming from, what he thinks are the best policies to move this country forward, protect the middle class. That plan did not include superlative CPI or H67 for Medicare. And that was in September of last year that that was put forward.
MR. CARNEY: And if I could just, Mike, just add that the President has made clear what his — the way that he would achieve health care entitlement savings to the tune of — well, total entitlement savings, additional $600 billion, a substantial portion of that from health care entitlements. It’s in his plan. And he has made clear that when it comes to spending cuts and further savings, he understands that he would be negotiating with Congress and is open to other ideas, and is willing to make tough choices.
I’m not going to get into specifically what would or wouldn’t be part of that discussion, but it is certainly the case that the President recognizes that that would be a negotiation, and that it would require tough choices by both sides.
What I would note, however, is that the President has put forward, in detail, specific entitlement savings, and we have not seen that yet — at least not to the same level of specificity — from the Republicans. I would also note that on the two measures that you talked about, they alone raise — would save far less than what the President has proposed in that 10-year window.
So the President is serious about it. He’s serious about balance in his approach. And he’s serious about the goal of attaining, when you combine everything together, deficit reduction, long-term, to the tune of $4 trillion, and that requires tough choices by everyone. The tough choice that we have not yet seen from the Republican Party is, at least at the leadership level, the acknowledgment that rates have to go up in order to achieve the revenue levels, as Jason has so amply laid out, that are required for a balanced package.
Q — slight adjustment that Social Security could be in the second step that you were discussing with Jessica earlier?
MR. CARNEY: Let me let Jason go. Thank you. I know he has meetings and stuff. I’ll attempt to answer questions on this subject even in his absence.
But, I’m sorry. Go ahead.
Q Jessica — you and Jessica were talking earlier about the two-step process. It could be back on the table, this adjustment to Social Security in the second step.
MR. CARNEY: Entitlement reforms would explicitly be on the table, and —
Q But not just Medicare and Medicaid, but also Social Security?
MR. CARNEY: Well, let’s back up. On Social Security, we have said that, when we’re talking about deficit reduction, what economists acknowledge, which is that Social Security is not a driver of our deficits. And having said that, the President has always expressed interest in working with Congress to take steps to further strengthen Social Security because it’s such a vital program for our senior citizens and it needs to be in place for generations to come. And he has been willing, and is willing, to have those conversations on a separate track, but it is not the case that Social Security is a driver of the deficits that we are trying to address through a long-term deficit reduction package.
Q So wait, you talk about them at the same time so long as they are not on the same track?
MR. CARNEY: Well, I’m not going to — we did go through this a little bit back in 2011, and our position hasn’t changed. As a matter of economic fact, Social Security does not — is not a driver of our deficits. Health care entitlements certainly are — Medicare and Medicaid. Tax expenditures and a lack of revenue from high-income Americans is certainly a factor, and those are issues that would be addressed in the package that we’re talking about.
But the President is very interested, as he’s always said, in having conversations and working on proposals that would strengthen Social Security for the long term.
Q Just to change the subject for a second, what qualities does the President look for when he’s going to pick an ambassador? Especially to an important ally like France — France or the U.K.
Q Someone very well dressed. (Laughter.)
MR. CARNEY: I anticipated the question you’re asking, and I can tell you in advance — I will answer the question, but that I have no personnel announcements. I’m not going to engage in speculation about possible personnel announcements. I think that the President, in all of his personnel appointments, looks for talent, wisdom and character in his appointees, and he would do that regardless of the position.
Q Is it important for a diplomat to be diplomatic?
MR. CARNEY: One of the — (laughter) — I mean, another way of addressing that is to answer the question that there have been enormously effective diplomats in this country’s history who have not necessarily risen through the diplomatic corps. Now, we have enormously talented —
Q I mean, just even in their personal lives, or pop culture, you are —
MR. CARNEY: I think —
Q I mean —
MR. CARNEY: I don’t know — I understand that that’s a rhetorical question, and diplomacy is effectively performed by diplomats. But we had one of the greatest diplomats of his generation pass away not long ago — Richard Holbrooke — and I think everyone who knew him or who sat across the table from him would agree that he was not by anyone’s traditional definition particularly diplomatic.
Q No, but he was also a brilliant negotiator and —
MR. CARNEY: So they come in all types and sizes and approaches.
Q Has the President seen “The Devil Wears Prada”? (Laughter.)
Q Before we go to — question, you don’t deny that Anna Wintour can become ambassador from the United States —
MR. CARNEY: I will not engage in any speculation about personnel announcements. I just won’t.
Q And what’s your — what’s the White House reaction to the situation in Egypt at this moment?
MR. CARNEY: Well, that’s a broad question that I’m happy to address. As you know, we remain concerned with the continuing lack of consensus regarding the recent constitutional declarations and the handling of the draft constitution in Egypt. As Secretary Clinton said earlier today, the current situation in Egypt indicates that dialogue between all Egyptians is urgently needed and that it must be a two-way dialogue that includes a respectful exchange of the concerns of the Egyptian people themselves about their constitutional process and the substance of their constitution.
The Egyptian people want and deserve a constitutional process that is open, transparent and fair, and does not unduly favor one group over any other. Democracy depends on strong institutions and the important checks and balances that provide accountability. We would note the demonstrations supporting both sides of the issues so far have been large and generally peaceful. As Egyptians continue to express their views, we look to the government of Egypt to respect the freedoms of peaceful expression and assembly, and to exercise restraint. We also continue to call on demonstrators and political parties to take all possible measures to avoid confrontation and violence.
We encourage the implementation of a constitution that is seen as legitimate by a broad cross section of the Egyptian people, across the political spectrum, and that upholds Egypt’s international human rights commitments, including respect for the rights of women, minorities, and Egyptians of all faiths.
Q Does the President fully support President Morsi?
MR. CARNEY: Well, the President has an important relationship — well, the United States has a very important relationship with Egypt. The President has worked effectively with President Morsi on key issues, including recently the negotiated ceasefire in Gaza.
We are monitoring the situation, as I just discussed, in Egypt, and we call on all sides to allow for a peaceful process and to pursue a result that is a constitution that both reflects the will of the Egyptian people and upholds Egypt’s international human rights responsibilities and commitments, including respect for the rights of women, minorities, and Egyptians of all faiths.
Q Has President Obama called President Morsi, or does he plan to?
Q Can I follow up on that?
MR. CARNEY: I have no foreign leader calls to read out.
Q Can I follow up on that? Can you talk about — has the December 17th visit by President Morsi been postponed, delayed, changed?
MR. CARNEY: Well, I don’t have any information to provide to you about a foreign leader visit at this time.
Q Is he still coming?
MR. CARNEY: Again, I just don’t have any information on that for you.
Q Jay, today The New York Times reported that the White House or the President was going to request from Congress $45 billion to $55 billion in disaster relief money. Is that report accurate?
MR. CARNEY: I can tell you that the administration has already obligated more than $2.3 billion to support response and recovery efforts. The administration is working closely with our partners in the states and in Congress, and is in the process of developing a request for a supplemental. But that process has not been completed and it would be premature to speculate on a specific number or even on a numerical range.
Q Should there be offsets to pay for that, or would that add to the deficit?
MR. CARNEY: I’m not going to get ahead of this process. I would anticipate that we would get a request up this week, and we can certainly discuss it further then.
Yes, in the back.
Q On immigration, what’s the White House reaction to the surprising participation of former President Bush in the debate between Republicans on immigration?
MR. CARNEY: I don’t have a White House reaction beyond noting what I have in the past, which is that President George W. Bush supported comprehensive immigration reform, both as Governor and as President. It’s something that President Obama notes ruefully, which is that in the past there had been leading Republicans who supported comprehensive immigration reform, including President Bush, including Senator McCain, who coauthored legislation that would have achieved that with Senator Kennedy, and that he hopes and anticipates that we will see Republican leaders — elected leaders in Congress look to engage in that process because he believes that comprehensive immigration reform is very important. It’s important for our economy and it’s obviously important for very many people in a community that has been looking to Washington to act on this important issue.
Q Talking about Senator McCain, why do you think he has been changing his position on immigration?
MR. CARNEY: I would have to direct you to Senator McCain.
Q Jay, I want to go back to something we haven’t talked about for a while. There’s been a renewed call for President Obama to issue that executive order barring federal contractors from discriminating against LGBT workers. Over the weekend, Steve Elmendorf, one of his prominent supporters in the election, said he’s — the first six months — first six months of next year. Will President Obama revisit this idea as he begins his second term?
MR. CARNEY: Our position on that hasn’t changed, and we point to, as you and I have discussed, the process that led to the effective repeal of “don’t ask, don’t tell” as a model for the way to approach these issues. I don’t have any updates for you on our approach. The President supports an inclusive ENDA that would provide lasting and comprehensive protections for LGBT people across the country, regardless of whether they happen to work for a government contractor. And we look forward to continuing to support that process and that legislation.
Q So does that rule out the possibility of that order happening in the first six months of next year?
MR. CARNEY: Well, again, I’m not going to speculate on a hypothetical situation. I would simply point to what our position has been on the avenue that we believe is the best to pursue broad-based protections for LGBT people.
Q Given that Republicans still control Congress, though, after Election Day, isn’t leaving this up to the legislative process — isn’t that condemning LGBT people who have no federal —
MR. CARNEY: Many people say just that, even though it was in the prior Congress, about repeal of “don’t ask, don’t tell.” And we believe that the country has moved dramatically on issues like this, and that this President is committed to civil rights and to building on the protections that are necessary for LGBT people, as he is for all Americans.
Q One last question on this. President Obama —
MR. CARNEY: I think you may have gotten all I can give.
Q President Obama in May said, when he endorsed marriage equality, that he had spoken with servicemembers who were discharged under “don’t ask, don’t tell,” and he had spoken with same-sex couples who were looking to marry. Has he ever spoken to a victim of LGBT workplace discrimination?
MR. CARNEY: I don’t know that he has or hasn’t. I just don’t have a conversation to read out to you.
Q Can you get back to me on that?
MR. CARNEY: I’m not going to ask him about every conversation he’s had.
Q Jay, there are reports out of Syria that the rebels are making advances, but part of those advances are being aided by militias, some of which have suspected ties to al Qaeda. What is the administration doing to make sure that those types of groups do not take over or pose a danger to the U.S. going forward, or even to the Syrian people?
MR. CARNEY: Well, as you know, Donovan, it’s long been our position to work with our international partners to support the Syrian opposition, and in supporting the Syrian opposition, to support those groups that are committed to a more democratic future for Syria. And we are, of course, mindful of the fact that not all elements of the opposition share those democratic aspirations or share the kinds of universal values that we support and try to advance in connection with the work that our partners do.
We are monitoring the situation in Syria very closely at many levels, and we’ve talked recently yesterday about disposition of chemical weapons. We’ve talked about the fact that the opposition has made advances and our concern that the Assad regime out of desperation would make the extremely foolhardy decision to attempt to use chemical weapons, and we have warned strongly against that.
We continue to work with our partners to support the opposition and support those elements of the opposition that we believe have Syria’s and — the best interest of Syria and Syrians at heart, and who aspire to a more inclusive and democratic country.
Q Is there any effort to encourage them not to include al Qaeda in that? Or how — it seems like a —
MR. CARNEY: Oh, I think we’re very clear in expressing our views about who we believe has the best interests of the Syrian people in mind and who — when we talk about working with the opposition, we work with members of the opposition and groups within the opposition now as well as the Syrian opposition group that has been formed that commit themselves to a brighter and more democratic future for Syria and the Syrian people.
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