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Nation & World

White House proposes unidentified tax hikes, new stimulus spending; GOP rejects plan

(MCT) — WASHINGTON — The Obama administration Thursday offered to get the nation off the fiscal cliff with a package that includes $1.6 trillion in tax increases over 10 years, more controversial spending to stimulate the economy and a permanent solution to the fights over raising the nation’s debt ceiling.

The plan was quickly derided by Republicans, with Senate Minority Leader Mitch McConnell, R-Ky., branding the offer as “completely unrealistic.”

The proposal was offered by Treasury Secretary Timothy Geithner in a series of private meetings with congressional leaders on Capitol Hill. Unless the White House and Congress agree to an alternative plan, Bush-era tax cuts will expire at the end of the year and $109 billion in automatic spending cuts — called a sequester — will take effect Jan. 2.

Experts warn that the fiscal jolt from those two events could send the fragile economy back into recession.

President Barack Obama and congressional leaders met for an opening round of talks Nov. 16 but have not met since, and no meetings are planned. Obama will take his case to Pennsylvania on Friday, a trip Republicans bitterly criticized.

The Obama opening bid is a two-stage plan, according to congressional sources who released the details on condition of anonymity.

There would be an immediate increase in top marginal income tax rates on high incomes, as well as on capital gains and dividends. Current top rates are 33 percent and 35 percent; they would rise to 36 percent and 39.6 percent on Jan. 1. The marginal rates are applied to income above a certain threshold, not all of the taxpayer’s income.

Obama has long supported keeping the lower Bush-era rates for individual incomes below $200,000 and family income below $250,000.

Those changes would raise an estimated $960 billion over 10 years, according to the nonpartisan analysts. The plan also calls for unspecified “additional tax increases” of $600 billion, returning the estate tax to 2009 levels, extending current business tax breaks that expire as well as a fix to prevent the creeping alternative minimum tax from hitting 30 million households.

Under the president’s opening bid, the temporary 2 percentage point cut in the payroll tax, now set to expire at the end of next month, would either be extended or a new “alternative policy” would take its place.

Republicans have demanded that Democrats support big spending cuts, but such cuts appear to be largely missing from the Obama plan. He would defer the automatic cuts in the sequester for a year and offers “unspecified savings” from other spending.

And Obama suggests a new stimulus package with a $50 billion price tag, as well as a permanent increase in the debt limit. Since 1917, Congress has been able to vote on increasing the limit, and until recently did so with little controversy.

The government is expected to bump up against a $16.3 trillion debt ceiling in late December. Last year’s showdown over raising the limit went down to the final hours and nearly caused a default on government debt.

The debt-ceiling proposal builds on a Republican suggestion last year that the president can veto any congressional block of the raising of a debt ceiling, and Congress can override the president on a two-thirds majority vote.

Although there was little new “give” in the president’s offer, it represented a starting point for detailed talks.

“This represents moving away from political posturing, which has dominated since the election, to a proposal that will cause serious negotiations to start,” said Bruce Josten, vice president and chief lobbyist for the influential U.S. Chamber of Commerce, whose members have much at stake in any eventual deal.

A second stage of the Obama plan presented Thursday would involve overhauling the tax code and unspecific changes in Medicare and other entitlement programs totaling $400 billion.

The White House vigorously defended its proposal.

“Right now, the only thing preventing us from reaching a deal that averts the fiscal cliff and avoids a tax hike on 98 percent of Americans is the refusal of congressional Republicans to ask the very wealthiest individuals to pay higher tax rates,” said spokeswoman Amy Brundage.

Republicans were unimpressed. After meeting with Geithner on Thursday and talking to Obama by phone Wednesday night, Boehner questioned if Obama and the Democrats are serious about cutting federal entitlement program spending.

“I’m disappointed in where we are, and disappointed in what’s happened over the last couple weeks,” Boehner said. “But going over the fiscal cliff is serious business. And I’m here seriously trying to resolve it. And I would hope the White House would get serious as well.”

McConnell agreed.

“To date, the administration has remained focused on raising taxes and attending campaign-style events with no specific plans to protect Medicare and Social Security or reduce our national debt in a meaningful way,” McConnell said.

Democrats, though, insisted Republicans have come up with no serious plan of their own. After his meeting with Geithner, Senate Majority Leader Harry Reid, D-Nev., defended Obama and congressional Democrats.

“Really, now is the time for the Republicans to move past this happy talk about revenues, ill-defined, of course, and put specifics on the table. The president has made his proposal; we need a proposal from them,” Reid said.


(Staff writers William Douglas and Lesley Clark contributed.)

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