White House Offers New Fiscal Plan, Prodding G.O.P.

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WASHINGTON -- House Republicans said on Thursday that Treasury Secretary Timothy F. Geithner presented the House speaker, John A. Boehner, a detailed proposal to avert the year-end fiscal crisis with $1.6 trillion in tax increases over 10 years, an immediate new round of stimulus spending, home mortgage refinancing and a permanent end to Congressional control over statutory borrowing limits.

The proposal, loaded with Democratic priorities and short on detailed spending cuts, was likely to meet strong Republican resistance. In exchange for locking in the $1.6 trillion in added revenues, President Obama embraced $400 billion in savings from Medicare and other entitlements, to be worked out next year, with no guarantees.

He did propose some upfront cuts in programs like farm price supports, but did not specify an amount or any details. And senior Republican aides familiar with the offer said those initial spending cuts might well be outnumbered by upfront spending increases, including at least $50 billion in infrastructure spending, mortgage relief, an extension of unemployment insurance and a deferral of automatic cuts to physician reimbursements under Medicare.

"The Democrats have yet to get serious about real spending cuts," Mr. Boehner said after the meeting. "No substantive progress has been made in the talks between the White House and the House over the last two weeks."

Beneath the outward shows of frustration and rancor, Democrats said a deal could still come before hundreds of billions of dollars in automatic tax increases and spending cuts threaten the fragile economy next year. Senator Charles E. Schumer, Democrat of New York, pointed to conservative Republicans who have publicly suggested that the House quickly pass Senate Democratic legislation extending the expiring tax cuts for income below $250,000.

"All you have to do is just listen to what's happening out there, and you realize there is progress," he said.

But publicly, the leaders of neither side were giving an inch. And Republican aides said the details of the White House proposal pointed to a re-elected president who believes he can bully Congress.

"They took a step backward, moving away from consensus and significantly closer to the cliff," said Senator Mitch McConnell of Kentucky, the Republican leader.

The president's proposal does stick to the broad framework of the deal Mr. Boehner wants: an upfront deficit-reduction "down payment" that would serve to cancel the automatic tax increases and spending cuts while still signaling seriousness on the deficit, followed by a second stage when Congress works next year on overhauling the tax code and entitlements to secure more deficit reduction.

But the details show how far the president is ready to push House Republicans. The upfront tax increases in the proposal go beyond what Senate Democrats were able to pass earlier this year. Tax rates would go up for higher-income earners, as in the Senate bill, but Mr. Obama wants their dividends to be taxed as ordinary income, something the Senate did not approve. He also wants the estate tax to be levied at 45 percent on inheritances over $3.5 million, a step several Democratic senators balked at. The Senate bill made no changes to the estate tax, which currently taxes inheritances over $5 million at 35 percent.

Administration negotiators also want the initial stage to include an extension to the payroll tax cut or an equivalent policy aimed at working-class families, an extension of a business tax credit for investments and the extension of a number of expiring business tax credits, like the research and development tax credit.

To ensure that there are no more crises like last year's impasse, Mr. Geithner proposed permanently ending Congressional purview over the federal borrowing limit, Republican aides said. He said that Congress could be allowed to pass a resolution blocking an increase in the debt limit, but that the president would be able to veto that resolution. Only if two-thirds of lawmakers overrode that veto could Congress block a higher borrowing limit.

In total, Mr. Geithner presented the package as a $4 trillion reduction in future deficits, but that too was disputed. The figure includes cuts to domestic programs agreed to last year that the White House put at $1.2 trillion but Republicans say is about $300 billion less. And it counts savings from ending the wars in Iraq and Afghanistan, even though no one has proposed maintaining war spending over the next decade at the current rate.

"Listen, this is not a game," Mr. Boehner said. "Jobs are on the line. The American economy is on the line. And this is a moment for adult leadership."

Senate Democratic leaders left their meeting with Mr. Geithner ecstatic. They said the president and Democrats had made their offer for a down payment on deficit reduction that should be enough to cancel the automatic tax increases and spending cuts and start broader efforts next year to overhaul the tax code and entitlements.

If the Republicans want additional spending cuts in that down payment, the onus is on them to put them on the table, said Senator Harry Reid of Nevada, the Democratic leader.

"We've come down with ours," Mr. Schumer said. "We're still waiting for theirs. That's the status of the negotiations."

They have pointed to comments by Representative Tom Cole, Republican of Oklahoma, that the House should quickly pass the Senate legislation extending middle-class tax cuts, then fight out the fate of the rest of the Bush-era tax cuts later.

The comments of Mr. Cole, a former chairman of the National Republican Congressional Committee, could be a harbinger. Representative Tim Scott, Republican of South Carolina and a prominent conservative, said on CNN that the Senate bill, if put up for a vote, would pass the House, although he would not support it.

Representative Robert Dold, a moderate Republican from Illinois defeated for re-election, backed the Cole position.

"Tom Cole is talking about passing the ones that are out there, so there could be more certainty, and I think that would be a positive step," he told The National Journal. "Let's make sure we aren't raising the taxes on the vast majority first."

Said Representative Charlie Bass of New Hampshire, another defeated moderate Republican, "No question, if we go over the fiscal cliff and Congress allowed it to happen because we would not let taxes go up on the top 2 percent, that is not a battle we are likely to win."

Democrats said such sentiment mattered. Republican leaders are not about to publicly give in on higher tax rates a month from the deadline, but the ground they stand on may be washing away.

Mr. Boehner made it clear he did not want to let all the tax cuts expire en masse, even though many Republicans say Democrats would.

"I'm going to do everything I can to avoid putting the American people and the American economy through this fiasco, which would be going over the fiscal cliff," he said.

nation

This article originally appeared in The New York Times.


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