Republicans’ new fiscal offer

(AP)

WASHINGTON (AP)

Republicans in the House of Representatives responded to President Barack Obama on Monday, proposing a new 10-year, $2.2 trillion blueprint for avoiding the looming “fiscal cliff.”

The Obama administration quickly rejected the plan, which was sent to the White House by House Speaker John Boehner as a counteroffer to a proposal the president made last week. The White House said the Republican plan fails “the test of balance.”

Obama and congressional Republicans have until Dec. 31 to reach an agreement on how to increase government revenue and cut spending to avoid big automatic tax increases on all Americans and massive cuts in government programs ranging from education to the military.

Economists predict that a failure to avoid both the rise in taxes and the mandated spending cuts would send the fragile economy back into recession and cause a spike in already stubbornly high unemployment.

The Republican plan calls for increasing the eligibility age for Medicare, the federal government’s health insurance program for older Americans, and lowering cost-of-living increases for Social Security pension benefits that go to Americans of retirement age.

It does not, however, meet Obama’s demand that tax rates be raised for American couples earning more than $250,000 a year and runs counter to his campaign promise to save Medicare from the chopping block.

White House communications director Dan Pfeiffer says the Republican proposal would lower tax rates for the wealthy and stick the middle class with the bill. He says the plan includes nothing new and provides no details on how it would achieve higher revenues.

Adding to the negative consequences of a negotiated outcome is the coincidence of the end to two other programs at the same time – a reduction in the payroll tax that Americans pay into the federal Social Security pension program and extended government benefits to the long-term unemployed.

The Boehner offer is in response to Obama’s offer last week to hike taxes by $1.6 trillion over the coming decade but largely exempt Medicare and Social Security from budget cuts.

The Republican plan also proposes to raise $800 billion in higher tax revenue over the decade but it would keep the former President George W. Bush-era tax cuts – including those for wealthier earners targeted by Obama – in place for now.

Boehner said the proposal is a “credible plan” for Obama and that he hopes the administration would “respond in a timely and responsible way.” The offer comes after the administration urged Republicans to detail their proposal to cut popular benefits programs like Medicare, Social Security and Medicaid.

“After the election I offered to speed this up by putting revenue on the table and unfortunately the White House responded with their la-la land offer that couldn’t pass the House, couldn’t pass the Senate and it was basically the president’s budget from last February,” Boehner told reporters.

The Boehner proposal revives a host of ideas from failed talks with Obama in the summer of 2011. Then, Obama was willing to discuss a so-called grand bargain, including politically controversial ideas like raising the eligibility age for Medicare, implementing a new inflation adjustment for Social Security cost-of-living adjustments and requiring wealthier Medicare recipients to pay more for their benefits.

The clock is ticking closer to the end-of-year deadline to avert the fiscal cliff, which is a combination of the expiration of Bush-era tax cuts and automatic, across-the-board spending cuts that are the result of prior failures of Congress and Obama to make a budget deal.

Last week, the White House delivered to Capitol Hill its opening proposal: $1.6 trillion in higher taxes over a decade, a possible extension of the temporary Social Security payroll tax cut and heightened presidential power to raise the national debt limit.

In exchange, the president would back $600 billion in spending cuts, including $350 billion from Medicare and other health programs. But he also wants $200 billion in new spending for jobless benefits, public works projects and aid for struggling homeowners. His proposal for raising the ceiling on government borrowing would make it virtually impossible for Congress to block him going forward.

Republicans said they responded in closed-door meetings with laughter and disbelief.

The Republican plan is certain to whip up opposition from Democrats opposed to any action now on Social Security, whose defenders say should not be part of any fiscal cliff deal. And Democrats also are deeply skeptical of raising the Medicare age.

Both ideas were part of negotiations between Boehner and Obama in the summer of last year.

Earlier Monday, Obama answered questions on Twitter for an hour as the White House sought to keep up the pressure on the issue.

In response to a question about his insistence on higher tax rates for the wealthiest earners, Obama said that “high end tax cuts do (the) least for economic growth & cost almost $1T.” By contrast, he said, “extending middle class cuts boosts consumer demand & growth.”

Obama said he was open to “smart cuts” in spending, but not in areas like research and development and education, which “help growth & jobs.” He also said he opposes spending cuts that would hurt the disabled or other vulnerable groups.

(Copyright 2012 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)

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