Treasury Secretary Timothy Geithner offered Republican House Speaker John Boehner a proposal to avert an end-of-the-year fiscal cliff that would trade $1.6 trillion in tax increases for $400 billion in unspecified entitlement program cuts, a Republican aide said.
The proposal calls for a permanent increase in the U.S. debt limit that would avoid the need for congressional action, said the aide, who wasn’t authorized to speak publicly.
The plan was modeled on Obama’s budget proposal from February and includes at least $50 billion in economic stimulus spending for the current fiscal year, according to the aide.
After meeting today with Geithner, Boehner was dismissive, saying President Barack Obama must “get serious” about the fiscal cliff talks. Democrats haven’t offered “real spending cuts,” said Boehner, an Ohio Republican.
Still, the speaker said he remains “hopeful” about talks to avert more than $600 billion in spending cuts and tax increases scheduled to begin in January. Geithner, Obama’s lead negotiator, met separately today with each of the top four leaders in Congress in their first direct talks since Obama hosted the leaders Nov. 16 at the White House.
Republicans swiftly rejected the proposal. Senator Roy Blunt of Missouri said in a statement, “If the president is going to lead on this critical issue, he has to propose a plan that can actually pass. This is simply not a serious proposal.”
Republicans are seeking overhauls of entitlement programs such as Medicare in exchange for accepting higher tax revenue. They want a higher Medicare eligibility age and an alternative yardstick for calculating inflation that would reduce Social Security cost-of-living adjustments, according to a Republican aide who wasn’t authorized to speak publicly.
Senate Majority Leader Harry Reid, a Nevada Democrat, said today that Obama has made his position clear and that Democrats need a proposal from Republicans on what sort of spending cuts they want.
“This doesn’t have to be a cliffhanger,” House Minority Leader Nancy Pelosi of California told reporters. “The Senate has passed a bill to extend the middle-income tax cuts,” she said. “Why are you holding this up?” she said, referring to Boehner.
Geithner’s offer, as described by two Republican aides, is based on Obama’s fiscal 2013 budget and his 2011 proposal to the deficit-cutting supercommittee, which was unsuccessful last year in coming up with a plan all sides could accept.
It would raise taxes on top earners by $1.6 trillion over the next decade with higher rates on income, capital gains, dividends and estates, along with limits on tax breaks. It would call for about $400 billion in cuts to entitlement programs, which Republicans have deemed insufficient.
The plan would either extend or replace a payroll tax cut that is due to expire at the end of the year, according to the Republican aides. In addition, it would defer by a year the federal spending cuts scheduled to start taking effect in January.
The administration hasn’t taken a public position on the extension of the payroll tax cut, which reduces employees’ share of the tax for Social Security to 4.2 percent from 6.2 percent. The current break, which started in 2011, expires Dec. 31.
Geithner said in a Nov. 16 Bloomberg Television interview that the U.S. should abolish the debt ceiling, arguing that it enabled the threat of default in 2011. “The sooner the better,” he said.
The proposal seeks infrastructure spending similar to what Obama proposed in September 2011 in his American Jobs Act, which included $50 billion for roads, rails and airports and $30 billion for schools.
The Congressional Budget Office has warned that if Congress doesn’t avert the fiscal cliff, the economy might slip into recession next year and boost the unemployment rate to 9.1 percent in the fourth quarter of 2013, compared with 7.9 percent now.
At a briefing today, White House press secretary Jay Carney responded to questions about Republican complaints that the administration wasn’t offering specifics by holding up a proposal Obama presented in September 2011.
Carney said the plan “is very detailed” in how the White House would make cuts and “It is of a piece with his budget that he put forward in February 2012.”
“In terms of where we are missing specifics is anything specific, politically feasible, or substantial from the Republican side on revenues,” Carney said.
All On Wall Street articles are archived after 7 days. REGISTER NOW for unlimited access to all recently archived articles, as well as thousands of searchable stories. Registered Members also gain access to exclusive industry white paper downloads, web seminars, blog discussions, the iPad App, CE Exams, and conference discounts. Qualified members may also choose to receive our free monthly magazine and any of our daily or weekly e-newsletters covering the latest breaking news, opinions from industry leaders, developing trends and growth strategies.