Mike Shedlock

House speaker John Boehner made an incremental move in Obama's direction in regards to tax hikes.

Specifically, Boehner offered to raise income tax rates on households earning more than $1 million a year in exchange for containing the cost of federal entitlement programs.

Discussion are private, and president Obama rejected the offer. Specifically, the president wants hikes on those making more than $250,000. Obama also wants to avoid making significant reductions in entitlement programs such as Social Security and Medicare.

Blame Game Posturing

On the surface, this appears to be a major change in attitude by Boehner. Previously, Boehner wanted to avoid all tax hikes, instead offering the closing of loopholes to raise revenue.

Is this move a sign of capitulation or blame game posturing?

I suggest the latter. Public opinion polls show a majority of people behind some tax hikes on the wealthy. Boehner now has an offer on the table.

There may be one more move in Obama's direction to something like tax hikes on those making $500,000 or more. However, each move Boehner makes in the president's direction will likely require (and should require), a move by Obama in Boehner's direction.

It would be easy enough for Boehner to demand so much reduction in entitlement programs that the president will not go along.

Indeed, if  Boehner makes incremental steps from no tax hikes to tax hikes on $1,000,000 or more, to tax hikes on $750,000 or more to tax hikes on $500,000 or more ... then if Obama rejects the offer, Republicans can rightfully pin this on the president.

That is the game in play at the moment. If Boehner plays the game properly, Republicans can either get a reasonable deal, or avoid the blame if the whole thing collapses.

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Mike Shedlock

Mike Shedlock is a registered investment advisor representative for Sitka Pacific Capital Management.