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Lot of movement, no progress on ‘fiscal cliff’: Tax increases vs. spending cuts
Question of the Day
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.
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.
All sides are trying to head off the "fiscal cliff" — the expiration of the Bush-era tax cuts on Jan. 1, followed a day later by $110 billion in automatic spending cuts.
Going over the cliff and staying there likely would plunge the country into a short, sharp recession, though delaying the spending cuts and tax increases would mean deeper pain in the long run, according to the Congressional Budget Office.
The challenge for Mr. Obama and Congress is to try to spread the pain while doing the least harm to the economy.
Mr. Geithner's separate meetings with congressional leaders marked the first major get-together between top negotiators since Mr. Obama called the leaders to the White House two weeks ago.
At the time, Mr. Boehner; Mr. Reid; House Minority Leader Nancy Pelosi, California Democrat; and Senate Minority Leader Mitch McConnell, Kentucky Republican, met with Mr. Obama at the White House and emerged sounding optimistic about the chances of reaching a deal to extend tax cuts and replace the spending cuts, known as "sequestration," that were set into motion through last year's bipartisan deal to raise the nation's borrowing limit.
But on Thursday, Republicans struck a different note.
Mr. McConnell accused the Obama administration of being more interested in appealing to the "hard left" than having a "serious discussion about how we fix the economy, reduce the federal debt and return the country to a path of growth and prosperity for all."
Mr. Boehner said he is "disappointed" with the negotiations and warned that "there's a real danger of going off the fiscal cliff."
"Without spending cuts and entitlement reforms, it's going to be impossible to address our country's debt crises and get our economy going again and to create jobs," he said. "So right now, all eyes are on the White House."
The two parties also have staked out different positions on how best to increase the nation's $16.4 trillion debt limit, which the federal government could reach as early as next month. Mr. Reid said that any agreement in the "fiscal cliff" talks must include an increase in the borrowing limit, while Mr. Boehner said any increase has to be matched dollar for dollar with spending cuts.
Democrats said they see signs of cracks in the Republican opposition to raising tax rates.
They pointed to Rep. Tom Cole, the Oklahoma Republican who is calling on his party to extend the Bush-era tax cuts for families making less than $250,000 a year, and then return to the negotiating table to fight to extend current tax rates for those making more.
"As Tom Cole said, let's give a Christmas present to the American people," Mrs. Pelosi told reporters.
Sen. Charles E. Schumer, meanwhile, said Democrats don't expect "the Republicans to be enthusiastic and start cheerleading about a deal that includes higher rates on the wealthiest Americans."
"They're not going to openly concede on this point this far out from the deadline, but they see the handwriting on the wall," the New York Democrat said.
Other Republicans said the majority of the caucus does not agree with Mr. Cole's approach.
"I think he is wrong, and I think most of the conference thinks he is wrong," Rep. Raul R. Labrador, Idaho Republican, told CNN. "I think that he is a good man who has served here for a long time, but he is also a man who has voted for a lot of the increased spending in Washington, D.C."
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