Jim Kuhnhenn and Julie Pace of the Associated Press report:
President Barack Obama and House Speaker John Boehner pushed ahead on negotiating a broad deal to avert the “fiscal cliff,” even as the GOP leader readied a backup plan Tuesday to pressure the White House with little time left to avoid a double hit on the economy.With exactly two weeks until automatic tax hikes and spending cuts kick in, Boehner offered a measure, dubbed “plan B,” that would cancel tax increases due to take effect Jan. 1 on everyone earning $1 million or less, while allowing tax increases on those earning more than that amount.
Boehner said his plan would address the burgeoning deficits and that the president has failed to produce a balance plan in weeks of post-election negotiations.
But the speaker’s alternative was a nonstarter with the White House and Democrats, and — perhaps more damaging to its prospects — it got a frosty reception from rank-and-file House Republicans in a morning closed-door meeting.
GOP aides said the leadership strategy is to pass the alternative plan in the House and send it to the Senate. There, Republicans would use their clout to block Democratic alternatives.
Even as he offered his alternative plan, Boehner indicated that negotiations with Obama continue. Economists inside and outside the government have warned that the combination of spending cuts and tax hikes could stall a weak recovery and threaten a new recession.
“I continue to have hope that we can reach a broader agreement with the White House” that would cancel the tax increases and spending cuts now poised to begin in early January, Boehner, R-Ohio, told reporters.
But he said when it comes to offering a package that balances tax increases with spending cuts, “The president is not there yet.”
Boehner presented his alternative to his GOP caucus, which reacted coolly to any plan that includes an increase in the tax rate. Conservatives and tea partyers signaled that Boehner faces a tough time rounding up the votes.
Rep. Jason Chaffetz, R-Utah, said he is in favor of preventing tax hikes for as many taxpayers as possible, but he’s not ready to support Boehner’s plan: “I didn’t see enough specificity to support it.”
Rep. Jim Jordan, the outgoing chairman of the conservative Republican Study Committee, said Boehner’s plan crosses a dangerous line by enacting higher tax rates for anyone.
“I think it’s a mistake for the Republican Party, so that’s what I think a lot of members are struggling with,” said the Ohio Republican.
About ‘plan B’
In addition to allowing a tax increase for million-dollar earners, the Boehner plan would prevent an expansion of the alternative minimum tax that would otherwise hit 28 million middle- and upper-class Americans with an average $3,700 increase on their 2012 tax returns.
The plan also would extend the current maximum 35 percent tax rate on inheritance, exempting the first $5 million. That tax rate is slated to rise to 55 percent Jan. 1, with only a $1 million exemption.
Under the plan, the automatic, across-the-board spending cuts of $1.09 trillion to domestic and defense programs would go into effect.
Boehner said GOP efforts to cull savings from Medicare by increasing the eligibility age from 65 to 67 could wait until next year.
Obama and Boehner each have made significant concessions in recent days.
Boehner’s latest move is an attempt to give Republicans political cover if Washington fails to reach a deal before the end of the year and taxes increase on all income earners.
In the negotiations, the president has dropped his long-held insistence that taxes rise on individuals earning more than $200,000 and families making more than $250,000. He is now offering a new threshold of $400,000 and lowering his 10-year tax revenue goals from the $1.6 trillion he had argued for a few weeks ago.
Obama and Boehner met privately at the White House on Monday, then spoke again on the phone later that night. Boehner huddled with House GOP members on Capitol Hill on Tuesday morning to discuss the status of the talks.
“We have to stop whatever tax rate increases we can,” Boehner said in the meeting, according to prepared remarks released by an aide.
Compromises from each
Unless Congress acts, tax rates will increase on all income earners Jan. 1. Boehner first opposed raising rates on any income earners, but agreed Friday to accept an increase in tax rates for taxpayers who earn more than $1 million. Boehner’s plan would raise about $1 trillion in taxes over 10 years.
In return, Obama also abandoned his demand for permanent borrowing authority. Instead, he is now asking for a new debt limit that would last two years.
And in a move sure to create heartburn among some congressional Democrats, Obama is proposing lower cost-of-living increases for Social Security beneficiaries, employing an inflation index that would have far-reaching consequences, including pushing more people into higher income-tax brackets.
Those changes, as well as Obama’s decision not to seek an extension of a temporary payroll tax cut, would force higher tax payments on the middle class.