EagleTribune.com, North Andover, MA

December 17, 2012

President's new 'fiscal cliff' offer moves toward Republican ideas

DAVID ESPO and JIM KUHNHENN
Associated Press

---- — WASHINGTON (AP) — President Barack Obama has agreed to curtail future cost-of-living increases for recipients of Social Security and softened his demand for higher taxes at upper income levels as part of accelerating negotiations with House Speaker John Boehner to avoid a “fiscal cliff,” people familiar with the talks said Monday.

Speaking a few hours after Obama and Boehner met at the White House, these people said the president was now seeking a higher tax rate beginning at incomes over $400,000, up from the levels of $200,000 for individuals and $250,000 for couples that were cornerstones of his successful campaign for re-election.

Obama’s willingness to reduce future cost-of-living increases in Social Security, government retirement and numerous other programs marked another clear concession to Boehner, although it came with an asterisk. The president wants lower-income recipients to receive protection against any loss from scaling back future cost-of-living increases, these officials said.

Nor did Obama’s offer include raising the age of Medicare eligibility from 65 to 67, a Republican goal that has drawn particularly strong objections from Democratic liberals.

Several officials also said during the day that Boehner’s offer late last week to accept higher tax rates included provisions that would mean higher taxes on investment income and dividends earned by wealthy Americans and also in the estate tax.

The people who described the talks did so on condition of anonymity, citing the secretive nature of the discussions.

The maneuvering is aimed at reaching an agreement that would include cancellation of a scheduled year-end hike in taxes for nearly all wage-earners as well as spending cuts at the Pentagon and in domestic programs across the government.

Economists inside and outside the government have warned that the combination of the two, set to begin at year’s end, could send the economy into recession.

Other major issues are part of the negotiations. Without action by Congress, for example, long-term unemployment benefits will expire for millions at the end of the year, and doctors will face a cut in the payments they receive for treating Medicare patients.

Obama has also called for assistance for hard-pressed homeowners as well as fresh economic stimulus measures, and some Democrats want to include a sizeable amount of disaster aid in any legislation to offset the cost of Superstorm Sandy.

On other points, Obama’s latest offer dropped his earlier proposal to extend a payroll tax cut due to expire at year’s end, and he agreed to find more savings in government spending than in his earlier offer.

The new offer that was given to Boehner at the White House closed the gap between the two men considerably on a framework for a deal.

At the same time, with rank and file conservatives distressed about over higher taxes, aides to the Ohio Republican were quick to find fault with Obama’s latest offer.

Brendan Buck, a spokesman, said that “a proposal that includes $1.3 trillion in revenue for only $930 billion in spending cuts cannot be considered balanced. We hope to continue discussions with the president so we can reach an agreement that is truly balanced and begins to solve our spending problems.”

Earlier, at the White House, spokesman Jay Carney sidestepped when asked about curbing cost-of-living increases for benefit programs. The president “is prepared to make tough choices. He also understands that his bill will not, as written, likely be what the final compromise, if there is one, looks like,” he said.

“But he insists and will insist before he signed anything that there is the balance that he seeks that is fair and that seniors aren’t bearing the burden so that the healthy bear less — those who can afford it most bear less.”

A spokesman for Boehner declined comment on the tax proposals.

Obama and Treasury Secretary Tim Geithner met with Boehner and his top aides at the White House for less than an hour during the day. While neither side provided significant details, Republicans have made it clear in recent days that it is the president’s turn to propose savings from Medicare and other benefit program following Boehner’s agreement last week to let tax rates rise at incomes higher than $1 million.

Officials familiar with the talks said that under the Ohio Republican’s proposal, the top tax rate on capital gains would go to 20 percent, up from the current 15 percent. The top rate on dividends also would climb, although it was not known what the new level would be, and the estate tax would also be adjusted to produce more government revenue.

Under current law, the top capital gains tax rate would rise to 20 percent automatically at the end of the year if the cuts enacted during George W. Bush’s White House tenure were allowed to expire.

The tax on dividends would also rise. The estate tax would be 55 percent on estates after allowance for a $1 million exemption.

As the talks progress, Republicans across the party’s spectrum are eager to turn public attention toward spending cuts, rather than remain bogged down in a politically debilitating debate about tax increases.

“Our problem isn’t that we tax too little. It’s that we spend too much! We must have serious spending cuts for a debt ceiling increase,” tweeted Rep. Tom Price., R-Ga.

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Associated Press writers Ben Feller, Andrew Taylor and Stephen Ohlemacher contributed to this story.