'Cliff' movement? Obama, Boehner trade proposals

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Associated Press

Posted on December 12, 2012 at 1:00 AM

Updated Wednesday, Dec 12 at 1:00 AM

WASHINGTON (AP) — President Barack Obama and House Speaker John Boehner sought an elusive compromise Tuesday to prevent automatic economy-damaging tax increases and spending cuts at year's end, conferring by phone after a secretive exchange of proposals.

Many economists say failure to reach a deal that would pull the U.S. economy back from the Jan. 1 "fiscal cliff" that would trigger a combination of tax increases and spending cuts could push the country back into economic recession.

Details were sparse and evidence of significant progress scarcer still, although officials said the president had offered to reduce his initial demand for $1.6 trillion in higher tax revenue over a decade to $1.4 trillion.

There was no indication Obama was relenting on his insistence — strongly opposed by most Republicans — that tax rates rise at upper incomes.

Both sides say they want a deal to prevent damage to the economy, but that stated commitment has been accompanied by a fierce battle to gain the political high ground in negotiations — and the occasional comment that one side or the other would be willing to let the deadline pass without a deal unless it got acceptable terms.

Republicans acknowledge that Obama has an advantage in one respect, citing his re-election last month after a race in which he made higher taxes on the wealthy a centerpiece of his campaign.

At the same time, Republicans hold powerful leverage of their own, the certainty that by spring the president will be forced to ask Congress to raise the government's borrowing authority. It was just such a threat that previously allowed them to extract $1 trillion in spending cuts from the White House and Democratic lawmakers, a situation that Obama has vowed he won't let happen again.

Boehner sounded unimpressed by the White House negotiating position in remarks on the House floor at midday.

"The longer the White House slow-walks this process, the closer our economy gets to the fiscal cliff," he said, declaring that Obama had yet to identify specific cuts to government benefit programs that as part of an agreement that also would raise federal tax revenue.

The house speaker made his comments well before he and the president talked by phone about attempts to avert a "fiscal cliff."

In rebuttal, the White House swiftly detailed numerous proposals Obama has made to cut spending, including recommendations to cull $340 billion from Medicare, the government program that provides health care to the elderly, over a decade and an additional $250 billion from other government benefit programs.

Boehner's office took the step — unusual in secretive talks — of announcing that Republicans "sent the White House a counteroffer that would achieve tax and entitlement reform to solve our looming debt crisis and create more American jobs."

Obama dispatched a top aide, Rob Nabors, to the Capitol for talks afterwards.

Democrats have watched with satisfaction in recent days as Republicans struggle with Obama's demands to raise taxes, but Senate Majority Leader Harry Reid has privately told his rank and file they could soon be feeling the same distress if discussions grow serious on cuts to benefit programs.

Coincidentally, in an ABC interview, Obama did not reject a Republican call to raise the age of Medicare eligibility from 65 to 67, a proposal that many Democrats strongly oppose.

The proposal is "something that's been floated," Obama said, not mentioning that he had tacitly agreed to it in deficit-reduction talks with Boehner more than a year ago that ended in failure.

In his noontime remarks on the House floor, Boehner said, "Let's be honest. We're broke. The plan we offered is consistent with the president's call for a balanced approach."

Obama's plan would raise $1.6 trillion in revenue over 10 years, in part by raising tax rates on incomes over $200,000 for individuals and $250,000 for couples. He has recommended $400 billion in spending cuts over a decade.

He also is seeking extension of a payroll tax cut due to expire on Jan. 1, a continuation in long-term unemployment benefits and steps to help hard-pressed homeowners and doctors who treat Medicare patients.

The White House summary noted that Obama last year signed legislation to cut more than $1 trillion from government programs over a decade, and was proposing $600 billion in additional savings from benefit programs.

It also noted that the health care law that Obama signed into law showed savings of $100 billion. Much or all of that funding came from Medicare, even though Obama's aides insisted during his successful campaign for re-election that he had not made any cuts in that program.

Boehner's plan, in addition to calling for $800 billion in new revenue, envisions $600 billion in savings over a decade from Medicare, Medicaid and other government health programs as well as $300 billion from other benefit programs and another $300 billion from other domestic programs.

It would trim annual increases in Social Security payments to beneficiaries, and it calls for gradually raising the eligibility age for Medicare from 65 to 67, beginning in a decade.

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Associated Press writers David Espo, Ben Feller, Jim Kuhnhenn and Donna Cassata contributed to this story.

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