Fiscal Cliff: John A. Boehner Offers Another Way

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The White House and Republican leaders remain at a negotiations impasse as the year-end “fiscal cliff”looms closer.

Both sides took uncompromising tones on Sunday, making less likely for any sort of immediate deal that would avert the automatic series of deep spending cuts and large tax hikes that could push the economy into recession.

Following private meetings last week, the senior negotiators for the White House and the Republicans took to the airwaves Sunday to accuse the other side of intransigence and to demand that the opposition concede on the central question of how much to raise taxes on the wealthy.

“Right now, I would say we’re nowhere, period. We’re nowhere,” House Speaker John A. Boehner (R-Ohio) said on “Fox News Sunday.”

Boehner added that the Republicans have offered a way to break the stalemate by compromising on an overhaul of the tax code that would limit deductions that disproportionately benefit the rich.

But Treasury Secretary Timothy F. Geithner rejected that proposal Sunday, insisting that the wealthy pay higher tax rates and that Republicans come forward with a plan that meets that requirement.

“There’s no path to an agreement that does not involve Republicans acknowledging that rates have to go up on the wealthiest Americans,” he said on NBC’s “Meet the Press.”

Most believe that a deal will eventually get done as neither side has any interest in seeing the dire economic and political fallout that would be the result of their failure to do so.

The tax increases, along with spending cuts, would cut the projected federal budget deficit nearly in half, but would also threaten millions of jobs, especially those dependent on government contracting, and risk a return to recession, accord.

The extreme partisanship and unwillingness to yield even an inch to their opponents pretty much sums up Washington as a whole for much of the last two years.

“I think we’re going over the cliff,” Sen. Lindsey O. Graham (R-S.C.) said on CBS’s “Face the Nation.”

Geithner appeared on five Sunday morning news shows and Boehner on one as both sides have begun an intense public-relations blitz related to the fiscal cliff. President Barack Obama made his first domestic trip since winning re-election to the Philadelphia suburbs on Friday to press Republicans, while Boehner followed with a news conference of his own.

This week, Obama will gather with governors and make a speech to the Business Roundtable, a lobby group representing big business, to urge lawmakers to embrace his tax proposals. Boehner will meet with governors and rally with small-business owners against tax increases.

The debate over how to raise taxes on the wealthy is part of the broader discussion over how to reduce federal borrowing over the next decade. Already extended once, the Bush-era tax cuts are set to expire at the end of the year, meaning that tax rates will increase on nearly all Americans. The will assure the raising hundreds of billions of dollars of new tax revenue, but it will cost the average family about $2,000 a year in take-home pay.

Obama wants to freeze tax rates for most Americans while allowing them to rise as high as 39.6 percent for the wealthiest people – defined as earning over $250,000 per year. That will reduce federal borrowing by about $1 trillion over a decade.

“There’s just no reason why 98 percent of Americans have to see their taxes go up because some members of Congress on the Republican side want to block tax rate increases for 2 percent of the wealthiest Americans,” Geithner said Sunday.

The Senate has already voted to extend the Bush cuts for incomes under 250,000, while allowing the others to expire.

More than 230 GOP representatives and 40 senators have pledged to oppose tax increases, and the man behind that pledge – conservative activist Grover Norquist – told reporters he hoped Congress and the administration would extend the Bush tax cuts a second time.

Obama wants to overhaul the tax code next year, cleaning out deductions and loopholes that benefit the rich and some sectors such as the financial industry. The administration estimates that would generate about $600 billion in savings over a decade.

Republicans, meanwhile, do not want to raise taxes on anyone. But, in the wake of their electoral defeat last month, they have acknowledged that the wealthy will have to pay more. They want to raise about $800 billion in new revenue over the decade through an overhaul of the tax code that limits deductions. Higher rates, they say, will dissuade work and investment and hurt small businesses, and thus be a drag on economic growth.

Both sides agree that as a principle, keeping tax rates low while eliminating deductions is better than increasing tax rates. But Democrats say it’s not possible to preserve enough spending on government programs without raising well over $1 trillion in new tax revenues during the next decade –  and they don’t believe it’s possible to do that without raising rates on the wealthy, raising taxes on the middle class, or dramatically scaling back worthwhile deductions such as the one for charitable giving.Last week, in a private meeting with Boehner, Geithner made the Obama administration’s opening bid in the fiscal cliff talks – largely a reprisal of policies the administration has already advocated. In addition to $1.6 trillion in new tax revenue, the proposal called for $600 billion in spending cuts, a majority of it from Medicare and Medicaid, as well as a new policy to allow the president to raise the statutory limit on federal borrowing without a majority of Congress approving.That would come on top of $1 trillion in spending cuts that were agreed to in 2011 and $800 billion in savings from the end of the wars in Afghanistan and Iraq.Republicans dismissed the proposal as laughable.“I was flabbergasted. I looked at him and said, ‘You can’t be serious,’ ” Boehner said Sunday. “I’ve just never seen anything like it. You know, we’ve got seven weeks between Election Day and the end of the year, and three of those weeks have been wasted with this nonsense.”

The White House also has opened the door to a compromise that would increase rates on upper-income earners by less than the full amount they are scheduled to rise next year, when the top brackets rise from 33 to 35 percent and 35 to 39.6 percent. But Republicans have not agreed.

“It’s welcome that they’re recognizing that revenues are going to have to go up, but they haven’t told us anything about how far rates should go up, how far revenues should go up,” Geithner said.

Beyond openness to new revenues through an overhaul of the tax code, Republicans insist on significant savings from the nation’s health-care entitlements, as well as Social Security.

In talks with Boehner in the summer of 2011 over a deal to slow borrowing, Obama was willing to adopt a stingier formula for making cost-of-living adjustments to Social Security. But in this round of talks, the White House says it won’t make any changes to the program.

“We are prepared to, in a separate process, look at how to strengthen Social Security, but not as part of a process to reduce the other deficits the country faces,” Geithner said.

 

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