President Obama delivered to Speaker John A. Boehner a new offer on Monday to resolve the pending fiscal crisis, a deal which would raise revenues by $1.2 trillion over the next decade but keep in place the Bush-era tax rates for any household with earnings below $400,000.
The offer is close to a plan proposed by the speaker on Friday, and both sides expressed confidence that they were closing in on a major deficit-reduction plan that could be passed well before January, when more than a half-trillion dollars in automatic tax increases and spending cuts would kick in.
Senior Republican aides said the speaker was to meet with House Republicans on Tuesday morning to discuss the state of negotiations. But they cautioned that obstacles remained.
“Any movement away from the unrealistic offers the president has made previously is a step in the right direction,” said Brendan Buck, a spokesman for Mr. Boehner. “We hope to continue discussions with the president so we can reach an agreement that is truly balanced and begins to solve our spending problem.”
The two sides are now dickering over price, not philosophical differences, and the numbers are very close.
Mr. Boehner had offered the president a deficit framework that would raise $1 trillion over 10 years, with the details to be settled next year by Congress’s tax-writing committees and the Obama administration. In response, Mr. Obama reduced his proposal to $1.2 trillion from $1.4 trillion on Monday at a 45-minute meeting with the speaker at the White House. That was down from $1.6 trillion initially.
The White House plan would permanently extend Bush-era tax cuts on household incomes below $400,000, meaning that only the top tax bracket, 35 percent, would increase to 39.6 percent. The current cutoff between the top rate and the next highest rate, 33 percent, is $388,350.
On spending, the two sides are also converging.
The White House says the president’s plan would cut spending by $1.22 trillion over 10 years, compared with $1.2 trillion in cuts from the Republicans’ initial offer. Of that, $800 billion is cuts to programs, and $122 billion comes from adopting a new measure of inflation that slows the growth of government benefits, especially Social Security. The White House is also counting on $290 billion in savings from lower interest costs on a reduced national debt.
Of the $800 billion in straight cuts, the president said half would come from federal health care programs; $200 billion from other so-called mandatory programs, like farm price supports, not subject to Congress’s annual spending bills; $100 billion from military spending; and $100 billion from domestic programs under Congress’s annual discretion.
To make all this happen, Mr. Obama proposed fast-track procedures to help Congressional tax writers overhaul the individual and corporate tax code and make changes to other programs.
Senior Republican aides made it clear that differences remain. For instance, they say the president is still pressing for $1.3 trillion in higher taxes because the change in the way inflation is calculated would not only slow the growth of spending but also raise more revenue by slowing the rate at which tax brackets rise each year with the cost of living. That would mean that incomes would probably grow faster than the rise in tax brackets, pushing people more quickly into higher tax rates.
They also disagree with the president over counting lower interest payments on the national debt as savings.
“A proposal that includes $1.3 trillion in revenue for only $930 billion in spending cuts cannot be considered balanced,” said another spokesman for Mr. Boehner, Michael Steel, using the Republicans’ calculation for the president’s offer.
The president is also insisting on some protections for what he has called the “most vulnerable populations,” which Republican aides said they had not been expecting. The new inflation calculations, for instance, would probably not affect wounded veterans and disabled people on Supplemental Security Income.
And Mr. Obama is sticking by his request for additional upfront spending on infrastructure and an extension of expiring unemployment benefits.
He would also secure some tax and policy changes long sought by both parties but unattainable in the context of smaller budget deals. His proposal would permanently extend popular business tax breaks like the credit for corporate research and development, permanently stop the expansion of the alternative minimum tax so it does not affect more of the middle class, and stop a long-planned and deep cut to Medicare health providers, which Congress has never had the stomach to allow it to kick in.
To keep the country from returning to fiscal showdowns, Mr. Obama wants the government’s borrowing limit to rise high enough to take the issue off the table for two years, although he said that Congress could periodically weigh in and try to override a presidential lifting of the debt ceiling, should it want to.
Senior Republican aides made it clear on Monday night that the plan was not what the speaker had wanted. He had proposed higher income tax rates on income over $1 million. That revenue would be supplemented by reinstating a provision in the tax code — phased out by the Bush-era tax cuts — that automatically limit tax deductions and credits for the affluent. The speaker was also ready to accept a White House proposal from Mr. Obama’s first days in office that would limit tax deductions to 28 percent, trimming back deductions for charitable giving and other activities from the top rate paid by the giver, 35 percent currently.
Source: The New York Times