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Republicans counter with their own 'fiscal cliff' plan

Their proposal, rejecting tax hikes for the wealthy and calling for Medicare and Social Security cuts, is swiftly dismissed by the White House.

December 03, 2012|By Lisa Mascaro and Michael A. Memoli, Washington Bureau
  • House Speaker John A. Boehner (R-Ohio) presented a "fiscal cliff" solution that was swiftly dismissed by the White House.
House Speaker John A. Boehner (R-Ohio) presented a "fiscal cliff"… (Alex Wong, Getty Images )

WASHINGTON — Under pressure from the White House to make a specific deficit reduction proposal, House Speaker John A. Boehner on Monday countered with one that rejects higher tax rates for the wealthy and deeply cuts Medicare, Social Security and other safety net programs.

The offer from the Republican leader was swiftly dismissed by the White House as not meeting the "test of balance." President Obama, seemingly confident that the public is on his side, has insisted that the nation can no longer afford to continue tax breaks for the wealthy.

With four weeks remaining before the so-called fiscal cliff of automatic tax increases and spending cuts takes effect, the two proposals now on the table illustrate the stark divide between the two sides.

Obama seeks $1.6 trillion in new revenue over a decade with a tax increase on the wealthy and a broader overhaul of the tax code, while Boehner's proposal would raise half that amount.

At the same time, Boehner proposed $1.4 trillion in spending cuts to Medicare, Social Security and other programs favored by Democrats. Obama has offered $400 billion in cuts.

Obama is also seeking new investments to stimulate the economy and wants to continue long-term unemployment insurance and the temporary reduction in the payroll tax. Republicans did not address them.

On Monday, Boehner ridiculed Obama's proposal as "la-la land" and portrayed his party as willing to compromise. "What we're putting forth is a credible plan that deserves serious consideration," he said.

In a letter sent to the president, Boehner and his top lieutenants noted that the offer did not include a proposal to dramatically restructure Medicare, as some conservatives have advocated. Rep. Paul D. Ryan of Wisconsin, the chairman of the House Budget Committee and the 2012 vice presidential nominee, had urged the use of a voucher-like program in future years to push Medicare recipients toward considering private insurance.

"We recognize it would be counterproductive to publicly or privately propose entitlement reforms that you and the leaders of your party appear unwilling to support in the near-term," they wrote. Ryan was among those signing the letter.

But Democrats appeared in no rush to engage, knowing they have forced Republicans into the politically uncomfortable position of fighting to preserve tax rates for the wealthy while proposing cuts to popular entitlement programs. Boehner's proposal suggests increasing the Medicare eligibility age, asking wealthier seniors to pay more for Medicare premiums and trimming cost-of-living adjustments for Social Security beneficiaries.

"While the president is willing to compromise to get a significant, balanced deal and believes that compromise is readily available to Congress, he is not willing to compromise on the principles of fairness and balance that include asking the wealthiest to pay higher rates," said White House Communications Director Dan Pfeiffer.

The GOP modeled its proposal on one suggested by Democratic budget hawk Erskine Bowles, a former White House chief of staff. Bowles' response Monday was muted.

"Every offer put forward brings us closer to a deal, but to reach an agreement, it will be necessary for both sides to move beyond their opening positions," he said in a statement.

The Republican proposal offers a slightly larger long-term deficit reduction package, $2.2 trillion over the next 10 years, than the White House unveiled last week.

Instead of raising the top marginal rate from 35% to 39.6%, as is set to happen in the new year, Republicans instead proposed capping deductions for top earners — and launching a tax reform process in 2013 that would lead to lower rates for all.

Studies have shown that almost as much revenue, about $800 billion, could be generated by the GOP plan to limit deductions as by Obama's proposal to raise rates on the wealthiest 2% of Americans. But that revenue might never be realized if next year's tax code overhaul results in lower rates, as the GOP proposes. Democrats appear unwilling to take that risk.

"While we finally have a proposal on paper from House Republicans, it once again represents a lopsided approach that benefits the wealthiest at the expense of the middle class, seniors and vital investments in our future," said Rep. Chris Van Hollen, the top Democrat on the House Budget Committee.

Obama's own proposal was similarly dismissed by Republicans when it was presented by Treasury Secretary Timothy F. Geithner last week. Obama then made a trip to a Pennsylvania toy factory to sell his plan. Congressional Republicans were pressed into proposing their own detailed offer.

One senior Republican congressional aide who requested anonymity to discuss the details of that proposal said Monday that his party sought a framework "both sides equally detest" as a way to push negotiations forward.

And Boehner spokesman Brendan Buck said, "If the president is rejecting this middle-ground offer, it is now his obligation to present a plan that can pass both chambers of Congress."

The Republican plan was also silent on raising the nation's borrowing limit — a must-have component of a deal for Democrats.

No additional talks were scheduled. Congress took the evening off to attend the White House holiday reception, but Boehner noted that he and Obama could speak then.

lisa.mascaro@latimes.com

michael.memoli@latimes.com

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