The proposal to avert the "fiscal cliff" was offered by Treasury Secretary Timothy Geithner in a series of private meetings with congressional leaders on Capitol Hill.
WASHINGTON — Treasury Secretary Timothy Geithner presented the House speaker, John Boehner, a detailed proposal Thursday to avert the year-end fiscal crisis with $1.6 trillion in tax increases over 10 years, $50 billion in immediate stimulus spending, home-mortgage refinancing and a permanent end to congressional control over statutory borrowing limits.
The proposal, loaded with Democratic priorities and short on detailed spending cuts, met strong Republican resistance. In exchange for locking in the $1.6 trillion in added revenues, President Obama embraced the goal of finding $400 billion in savings from Medicare and other social programs to be worked out next year, with no guarantees.
Obama’s plan did propose some upfront cuts in programs, such as farm-price supports, but it did not specify an amount or details. Senior Republican aides familiar with the offer said those initial spending cuts might be outweighed by spending increases, including at least $50 billion in infrastructure spending, mortgage relief, an extension of unemployment insurance and a deferral of automatic cuts to physician reimbursements under Medicare.
“The Democrats have yet to get serious about real spending cuts,” Boehner said after the meeting. “No substantive progress has been made in the talks between the White House and the House over the last two weeks.”
- Kam Chancellor’s forced fumble and K.J. Wright’s illegal batted ball help Seahawks stop Lions
- Reaction: National media reacts to controversial call on Kam Chancellor-forced fumble in Seahawks-Lions game
- Evergreen senior’s death, other player injuries renew football-safety debate
- Many homeowners stuck owing more than their houses are worth
- Our state’s greatest gift to the nation just got canceled
Most Read Stories
Geithner also offered the proposal in a series of private meetings with other congressional leaders on Capitol Hill.
Amy Brundage, an administration spokeswoman, said: “Right now, the only thing preventing us from reaching a deal that averts the ‘fiscal cliff’ and avoids a tax hike on 98 percent of Americans is the refusal of congressional Republicans to ask the very wealthiest individuals to pay higher tax rates.”
Beneath the outward shows of frustration and rancor, Democrats said a deal could be reached before hundreds of billions of dollars in automatic tax increases and spending cuts go into effect, threatening the fragile economy. Sen. Charles Schumer, D-N.Y., pointed to conservative Republicans who have suggested the House quickly pass Democratic legislation in the Senate extending the expiring tax cuts for income below $250,000.
“All you have to do is just listen to what’s happening out there and you realize there is progress,” he said.
But publicly, the leaders of neither side were giving an inch. And Republican aides said the details of the administration proposal pointed to a re-elected president who believes he can bully Congress.
“They took a step backward, moving away from consensus and significantly closer to the cliff,” said Sen. Mitch McConnell of Kentucky, the Senate Republican leader.
The president’s proposal sticks to the broad framework of the deal Boehner wants: an upfront deficit-reduction “down payment” that would serve to cancel the automatic tax increases and spending cuts while still signaling seriousness on the deficit, followed by a second stage in which Congress would work next year on overhauling the tax code and social programs to secure more deficit reduction.
But the details show how far the president is ready to push House Republicans. The upfront tax increases in the proposal go beyond what Senate Democrats were able to pass this year.
Tax rates would go up for higher-income earners, as in the Senate bill, but Obama wants their dividends to be taxed as ordinary income, something the Senate did not approve. He also wants the estate tax to be levied at 45 percent on inheritances more than $3.5 million, a step several Democratic senators balked at. The Senate bill made no changes to the estate tax, which now taxes inheritances over $5 million at 35 percent.
Administration negotiators also want the initial stage to include an extension of the payroll tax cut or an equivalent policy aimed at working-class families, an extension of a business tax credit for investments and the extension of a number of other expiring business tax credits, like the one on research and development.
To ensure that there are no more crises like the debt-ceiling impasse last year, the administration also proposed permanently ending congressional purview over the federal borrowing limit, Republican aides said. Geithner said that Congress could be allowed to pass a resolution blocking an increase in the debt limit, but that the president would be able to veto that resolution. Congress could block a higher borrowing limit only if two-thirds of lawmakers overrode the veto.
The debt-ceiling proposal builds on a Republican suggestion.
In total, Geithner presented the package as a $4 trillion reduction in future deficits, but that too was disputed. The figure includes cuts to domestic programs agreed to last year that the administration put at $1.2 trillion but that Republicans say is about $300 billion less. And it counts savings from ending the wars in Iraq and Afghanistan, even though no one has proposed maintaining war spending over the next decade at the present rate.
“Listen, this is not a game,” Boehner said. “Jobs are on the line. The American economy is on the line. And this is a moment for adult leadership.”
Although there was little new “give” in the president’s offer, it represented a starting point for detailed talks.
“This represents moving away from political posturing, which has dominated since the election, to a proposal that will cause serious negotiations to start,” said Bruce Josten, vice president and chief lobbyist for the influential U.S. Chamber of Commerce, whose members have much at stake in any eventual deal.
Material from McClatchy Newspapers is included in this report.