Susan Davis and Aamer Madhani
7:07PM EST November 29. 2012 - WASHINGTON - House Speaker John Boehner flatly rejected a $4 trillion Obama administration plan to avoid going over the fiscal cliff that was presented by Treasury Secretary Timothy Geithner in a private meeting Thursday.
Publicly, Boehner said he is "disappointed" with the offer, but he offered no details. Privately, three Republican congressional aides familiar with the president's offer cast it as an "outrageous" proposal that surprised the speaker and has set back negotiations on how to avoid the "fiscal cliff" coming at the end of the year, when all of the Bush-era tax rates expire and the first of $1.2 trillion in spending cuts over 10 years are triggered.
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The combined effect of the two - without action by Washington - threaten to push the U.S economy back into a recession.
White House spokeswoman Amy Brundage countered that GOP lawmakers are "the only thing preventing us from reaching a deal that averts the fiscal cliff" and a tax hike for most Americans.
"The President has already signed into law over $1 trillion in spending cuts and we remain willing to do tough things to compromise, and it's time for Republicans in Washington to join the chorus of other voices...who support a balanced approach that asks more from the wealthiest Americans," Brundage said.
Senate Majority Leader Harry Reid, D-Nev., also offered a different take Thursday on his private meeting with Geithner, which he described as "nice" and agreeable. "Democrats are on the same page," he said.
Obama and Boehner are viewed as the chief negotiators for their parties on reaching a deal.
The GOP aides, who spoke on background because they are not authorized to speak on the record, described the administration's proposal as a non-starter that was not reflective of the ongoing conversations since congressional leaders had their one and only meeting with President Obama two weeks ago. Their message was clear: Thursday was a step back to solving the "fiscal cliff."
The $4 trillion package includes a number of requests that stand have little no chance of passing the GOP-controlled House, because Republicans continue to oppose raising individual tax rates.The package also includes spending cuts that are considered insignificant to Republicans, who want more concessions on spending for entitlement programs such as Medicare and Medicaid.
The president's proposal includes a two-stage process that requests a legislative package before the end of the year that includes key provisions such as:
- $1.6 trillion in revenues, including $960 billion from raising the top marginal rates on wealthy Americans as well as higher taxes on capital gains and dividends and an additional $600 billion from unspecified revenue sources.
- An extension of the Social Security payroll tax break and unemployment insurance benefits.
- One-year deferral of "sequestration," the $1.2 trillion spending cuts over 10 years.
- A multiyear stimulus package with at least $50 billion for the 2013 fiscal year.
- A White House proposal to refinance underwater mortgages.
- A permanent increase in the debt limit that would change current law, which requires congressional approval.
The second stage of the proposal calls for a tax overhaul next year that would be consistent with the president's request for $1.6 trillion in additional revenue, as well as a promise to support $400 billion in savings from Medicare and other entitlements that are outlined in Obama's budget.
Republicans dispute the administration's claim of $4 trillion in deficit reduction because it assumes the $1 trillion in savings already achieved in a previous 2011 budget agreement between the White House and Congress. The administration also counts as savings items that Republicans consider budget gimmicks, such as the money saved from drawing down war efforts abroad.
The proposal is largely consistent with Obama's budget, which failed to pass Congress. One of the aides said the offer was as unrealistic as Republicans presenting Budget Chairman Paul Ryan's budget, which includes a plan to rework the entire Medicare system, and has been soundly rejected by Democrats.
"If on the first day of this we would have said, 'Our offer is the Ryan budget,' you guys would have laughed at us. You would have laughed at us, and reported that the offer was laughable. This is the equivalent of that," the aide said.
The aides said there are no meetings with the president scheduled. It is undecided whether Boehner will offer a counter-proposal.
As broader negotiations continue, Reid has proposed to pass an extension of the Bush-era tax cuts that affect 98% of American households to assuage concerns that middle-class earners will see a tax hike in their first 2013 paycheck unless Washington acts. "If it happens, it'll be under the leadership of the speaker of the House of Representatives, John Boehner," Reid said.
Republicans want to couple any revenue hikes with spending cuts, and they continue to oppose any increases in individual rates.
Complicating the negotiations is a further disagreement over whether any deal should include an increase in the debt ceiling, which needs congressional approval. The $16.4 trillion borrowing limit is expected to hit in mid-February, and Obama has said he wants to head off another painful fight with Congress that threatens to rattle markets.
The president's proposal to circumvent congressional approval to lift the debt ceiling is one of the more unacceptable provisions for Boehner, who continues to maintain his position that any increase in the debt ceiling must be paired dollar-for-dollar with spending cuts. He views those cuts as separate from the spending cuts he is seeking in the fiscal cliff deal.
"I continue to believe that any increase in the debt limit has to be accompanied by spending reductions that meet or exceed it," he reiterated Thursday.
Reid made clear that the debt limit had to be part of a fiscal cliff agreement. "There will be an agreement on the debt ceiling, or there will be no agreement," he said.
Earlier in the afternoon, before the House aides released details of the administration's proposal, White House spokesman Jay Carney pushed back against Boehner's suggestion that any increase in the debt limit would have to be matched by further spending cuts.
"Asking that a political price be paid in order for Congress to do its job to ensure the United States of America pays its bills and does not default on its bills is deeply irresponsible," Carney said.
The speaker's insistence on cuts echoed the rhetoric of last year's standoff on the debt limit that ultimately led to the current standoff over automatic spending cuts set to be triggered on Jan. 1, Carney said.
"As I told the president a couple of weeks ago," Boehner said, "there's a lot of things I've wanted in my life, but almost all of them had a price tag attached to them."
Carney warned that the repeat of such talk was also politically dangerous for the GOP.
"It would be a terrible mistake," Carney said. "The harm done was done mostly to the American middle class -- we had our economy downgraded, we had consumer confidence plunge, all because of this brinksmanship that is entirely inappropriate. We hope we won't see that again."