Lot of movement, no progress on ‘fiscal cliff’: Tax increases vs. spending cuts

President Obama’s top aides floated a budget framework to Republicans on Thursday that would call for $1.6 trillion in tax increases coupled with a promise for future spending trims in order to head off the “fiscal cliff,” an offer GOP leaders immediately rejected, saying the White House needs to “get serious” about spending cuts.

The overture by the White House marks the beginning of real, detailed discussions after weeks of negotiating over principles.

Republicans say they already have moved by agreeing to allow the government to raise revenue and that they are looking for Democrats to agree that major entitlements such as Medicare will have to be cut. But Democrats say Republicans have yet to lay out any specific taxes they will raise, nor have they given their own list of spending cuts.

“Now is the time for the Republicans to move past this happy talk about revenues — ill-defined, of course — and put specifics on the table,” Senate Majority Leader Harry Reid, Nevada Democrat, said at a news conference, surrounded by his leadership team. “The president has made his proposal. We need a proposal from them.”

The White House wish list included billions of dollars more in stimulus spending, a call to curtail Congress‘ control over the federal debt limit, a rise in the estate tax and an increase in taxes on dividends. Those last two items specifically would undo parts of President Bush’s 2001 and 2003 tax plans and are likely to be contentious among some Democrats, as well as with Republicans.

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Treasury Secretary Timothy F. Geithner enters the U.S. Capitol in Washington on ... more >

In exchange, Mr. Obama repeated his pledge to find up to $400 billion in entitlement spending cuts later, as well as to undertake an overhaul of the tax code.

Speaking with reporters after hearing the offer from Treasury Secretary Timothy F. Geithner, House Speaker John A. Boehner, Ohio Republican, said they are no closer to a deal.

“No substantive progress has been made in the talks between the White House and the House over the last two weeks,” Mr. Boehner said.

The White House has signaled some flexibility. Though Mr. Obama has called for tax rates on upper-income earners to rise from 35 percent to 39.6 percent — the same rate during the Clinton administration — he and his aides privately have told key players that they would be willing to accept something less than the 39.6 percent rate.

Still, they have said that rates will have to rise somewhat.

White House spokesman Jay Carney said Republican leaders must “accept the essential fact” that tax rates on the nation’s top earners must go up as part of a deficit-reduction deal.

“The president will not sign any legislation that extends the Bush-era tax cuts for the top earners in this country,” he said.

Congressional Republicans said that is out of the question. Instead, they want the additional government revenue to come from ending tax breaks and closing loopholes.

“I’ve made clear that we’ve put real concessions on the line by putting revenues on the table right upfront,” said Mr. Boehner. “Unfortunately, many Democrats continue to rule out sensible spending cuts that must be part of any significant agreement that will reduce our deficit.”

But Mr. Boehner has not laid out what specific tax breaks he would end, nor have Republicans proposed spending cuts as part of these negotiations. Instead, Mr. Boehner pointed reporters back to the House Republican budget for a list of ideas.

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