WASHINGTON (AP) -
By JIM KUHNHENN
Associated Press
WASHINGTON (AP) - Just two weeks before the
economy-threatening "fiscal cliff" is due to kick in, both President
Barack Obama and House Speaker John Boehner are making significant
concessions, backing off what had once been ironclad positions on how to
avoid the huge automatic spending cuts and tax increases.
The moves signal a new stage in the negotiations,
which picked up steam Monday with Obama's offer to drop his long-held
insistence that taxes rise on individuals earning more than $200,000 and
families making more than $250,000. He is now offering a new threshold
of $400,000 and lowering his 10-year tax revenue goals from the $1.6
trillion he had argued for a few weeks ago.
Obama's move follows concessions by Boehner on higher tax rates for the wealthy.
In the new proposal, Obama abandoned his demand for
permanent borrowing authority. Instead, he is now asking for a new debt
limit that would last two years, putting its renewal beyond the
politics of a 2014 midterm election.
And in a move sure to create heartburn among some
congressional Democrats, Obama is proposing lower cost-of-living
increases for Social Security beneficiaries, employing an inflation
index that would have far-reaching consequences, including pushing more
people into higher income tax brackets.
Those changes, as well as Obama's decision not to
seek an extension of a temporary payroll tax cut, would force higher tax
payments on the middle class, a wide swath of the population that Obama
has repeatedly said he wanted to protect from tax increases.
As public posturing has given way to pragmatism,
both sides still seem willing to lock in on a substantial agreement
rather than just putting off a fiscal day of reckoning. To that end,
Obama has conceded that a big bargain would require giving up some of
his proposals.
"I understand that I don't expect the Republicans
simply to adopt my budget," he said during his post-election news
conference last month. "That's not realistic. So, I recognize we're
going to have to compromise."
The talks, facing a looming deadline, seek to avoid
across-the-board tax hikes for nearly all wage-earners as well as
spending cuts at the Pentagon and in domestic programs that are set to
kick in at the start of the new year. Economists inside and outside the
government have warned that the combination of the two - the "fiscal
cliff" - could stall a weak recovery and threaten a new recession.
Obama's steps toward Boehner came after the House
speaker took a plunge in a call to Obama on Friday - while the nation
was focused on the horror of a mass murder in Newtown, Conn. - and
agreed to accept an increase in tax rates for taxpayers who earn more
than $1 million. Boehner's plan would raise about $1 trillion in taxes
over 10 years.
That was a barrier-breaking moment, changing the
negotiations from a fundamental debate over whether tax rates should
rise at all to quibbling over who should pay them.
There are still plenty of disputes to iron out. And
people familiar with Obama's proposal were careful not to describe it
as his final offer.
The Obama plan seeks $1.2 trillion in revenue over
10 years and $1.2 trillion in 10-year spending reductions. Boehner aides
say the revenue is closer to $1.3 trillion if revenue triggered by the
new inflation index is counted, and they say the spending reductions are
closer to $930 billion if one discounts about $290 billion in lower
estimated debt interest.
"Any movement away from the unrealistic offers the
President has made previously is a step in the right direction," Boehner
spokesman Brendan Buck said. "But a proposal that includes $1.3
trillion in revenue for only $930 billion in spending cuts cannot be
considered balanced."
Either way, though, there is no doubt Obama has
moved in Boehner's direction after Boehner opened the door to a tax rate
increase.
Obama's plan, like Boehner's, would also raise
taxes on dividends and capital gains from 15 percent to 20 percent. Both
would also reduce the number of deductions and exemptions that wealthy
taxpayers can claim. Obama's proposal also would let estate taxes revert
to 55 percent on estates after allowance for a $1 million exemption.
In making his offer, Obama stiff-armed Republican
demands to increase the eligibility age for Medicare from 65 to 67, a
goal Democrats strongly reject. He also sought to contain cuts in
Medicare and other health care programs to about $400 billion over 10
years, less than what Republicans want. And he is continuing to seek
spending on unemployment assistance and on public works projects.
Obama's willingness to reduce future cost-of-living
increases in Social Security would also mean smaller annual increases
in government pensions and veterans' benefits. Annual adjustments to
income tax brackets would be smaller, pushing more people into higher
tax brackets.
Over time, because annual adjustments to the
poverty level would be smaller, the new index could reduce the number of
people eligible for programs such as Medicaid, Head Start, food stamps,
school lunches and home heating assistance.
To avoid some of that risk, Obama wants
lower-income recipients to receive protection against any loss from
scaling back future cost-of-living increases, people familiar with his
plan said.
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Copyright 2012 The
Associated Press. All rights reserved. This material may not be
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(ABC News)
