WASHINGTON — Republican congressional leaders countered President Barack Obama’s deficit reduction proposal with a plan to cut the deficit by $2.2 trillion over the next decade by raising $800 billion in revenue and cutting $1.2 trillion in spending.
Another $200 billion in savings would come from changing the way the government calculates inflation, which would slow benefit increases in programs from Medicare to Social Security and raise taxes by slowing the rise in tax brackets.
The White House declared the Republicans still weren’t ready to “get serious” and again vowed tax rate increases will be in any measure Obama signs to prevent the government from the cliff’s automatic tax increases and sharp spending cuts. Administration officials also hardened their insistence that Obama is willing to take the nation over the cliff rather than give in to Republicans and extend the tax cuts for upper-income earners.
House Speaker John Boehner, who has been under pressure to come up with a Republican alternative to the president’s proposal, called his offer “a credible plan that deserves serious consideration from the White House.” He dismissed what he described as Obama’s “ La La-Land offer” as something that couldn’t pass the Democratic Senate much less the Republican House. Sen. Mitch McConnell of Kentucky, the Senate Republican leader, said that he too backed Boehner’s approach.
The counteroffer represented a quickening in negotiations to head off about $600 billion in automatic tax increases and spending cuts next year that would begin to bite in January. The president’s offer - forwarded to congressional leaders by Treasury Secretary Timothy Geithner last week - stuck almost word for word with the budget proposal the Obama administration released nearly a year ago.
Boehner’s offer also reflects his earlier proposals, calling for half as much additional tax revenue as Obama and doing so by limiting tax breaks rather than raising rates.
The plan contains few specifics and anticipates that myriad details will have to be filled in next year in legislation overhauling the tax code and curbing the growth of benefit programs.
Boehner emphasized that he viewed his proposal as compromise, saying that he could have come back with anew plan reflecting the House Republicans’ true policy wishes. Instead, he said, his counteroffer sticks to numbers offered by Erskine Bowles, the Democratic co-chairman of the president’s deficit reduction task force.
Bowles, in a statement, said he was flattered but the GOP plan does not represent his proposal.
Still, he added, “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.”
The Republican plan would keep the Bush-era tax cuts - including those for the highest earners targeted by Obama - in place for now.
But under the offer, tax revenue would rise by $800 billion over 10 years, through closing provisions and ending or curtailing deductions and tax credits. Boehner did not specify Monday which tax breaks would be curtailed.
The White House complained the latest offer was still short on details about what provisions would be closed or deductions eliminated, and it insisted that any compromise include higher tax rates for upper-income earners.
“Until the Republicans in Congress are willing to get serious about asking the wealthiest to pay slightly higher tax rates, we won’t be able to achieve a significant, balanced approach to reduce our deficit our nation needs,” White House Communications Director Dan Pfeiffer said in a statement.
Asked directly whether the country would go over the cliff unless GOP lawmakers backed down, administration officials said yes. Officials said they remained hopeful that scenario could be avoided, saying the president continues to believe that going over the cliff would be damaging to the economy. And they signaled that Obama wouldn’t insist on bringing the top tax rate all the way back to the 39.6 percent rates of the Clinton era. The officials spoke on condition of anonymity because they were not authorized to speak publicly about internal White House deliberations.
Another $600 billion in deficit reduction would come from changes to federal healthcare programs like Medicare, Medicaid and the president’s health-care law.
Under the Republican proposal, increases in Social Security benefits would be reduced under a new method of calculating cost-of-living increases. The so-called chained consumer price index would also apply to cost of living adjustments for government pensions and to setting income-tax brackets.
The plan would raise the eligibility age for Medicare recipients, currently 65, although it didn’t specify the size of the increase. That would save $100 billion, according to an excerpt of Bowles’s Nov. 1, 2011, congressional testimony attached to the letter sent to Obama.
Cuts to other programs that are not under the purview of annual congressional spending bills - mandatory programs - would total $300 billion. And discretionary programs, already cut by nearly $1 trillion through last year’s Budget Control Act, would be reduced by another $300 billion.
Those numbers are very different from the president’s plan, which foresees $1.6 trillion in new revenue over the next decade, $960 billion of that from the expiration of Bush-era tax breaks for the top 2 percent of wage-earners beginning next month. The president wants between $400 billion and $600 billion in spending cuts, largely from Medicare. But he also wants upfront spending increases to kick-start the economy through new infrastructure spending and help to homeowners still struggling with their mortgages.
House Democratic Leader Nancy Pelosi of California called the Republican proposal “another assault on the middle class, seniors and our future.”
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 top earners, Obama said that “high end tax cuts do [the] least for economic growth & cost almost [$1 trillion].” 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 R&D” and education, which “help growth & jobs.” He also said he opposes spending cuts that would hurt the disabled or other vulnerable groups.
Information for this article was contributed by Jonathan Weisman of The New York Times; by Andrew Taylor, Matthew Daly and Julie Pace of The Associated Press; and by James Rowley and Heidi Przybyla of Bloomberg News.
Front Section, Pages 1 on 12/04/2012