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Tuesday, Dec 4, 2012 6:11 PM UTC

GOP “fiscal cliff” plan echoes failed budget talks

The Republican plan revives proposals John Boehner supported last year VIDEO

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Topics: Video, aol_on, From the Wires, John Boehner, Fiscal cliff, Barack Obama, Erskine Bowles,

GOP (Credit: AP Photo/J. Scott Applewhite)

WASHINGTON (AP) — Republicans are proposing a “fiscal cliff” plan that revives ideas from failed budget talks with President Barack Obama last year, calling for raising the eligibility age for Medicare, lowering cost-of-living hikes for Social Security benefits and bringing in $800 billion in higher tax revenue.

The counter to a White House plan last week relies more on politically sensitive spending cuts and would raise half the $1.6 trillion in revenue proposed by Obama over the coming decade.

The 10-year, $2.2 trillion proposal from House Speaker John Boehner, R-Ohio, resembles a framework similar to what Boehner supported last year, but Obama is pressing for additional tax increases and appears to be balking at spending cuts discussed in those talks and since.

Administration officials from Obama on down say it’ll take money from raising tax rates on the rich — instead of GOP proposals to simply curb their deductions — to win Obama’s approval of any plan to avoid the “fiscal cliff.”

It has been nearly a week since Obama and Boehner talked directly about the looming cliff, though their staffs have been in contact. Boehner attended a congressional holiday party at the White House Monday night, but avoided the photo line where members get their picture taken with the president and have a few minutes to talk.

Obama met with a bipartisan group of governors, who sought assurances that any cuts in spending as part of an agreement on the fiscal cliff wouldn’t shift the burden onto states. The governors said they wanted flexibility from the federal government on certain mandated programs like Medicaid to allow them to do more with less.

“We asked for flexibility on how the federal money is passed down to the states and the cuts that are passed down, that we could have some flexibility to do what’s in the best interest of our states,” said Oklahoma Gov. Mary Fallin, a Republican.

The governors said they were not endorsing any particular proposal but said they wanted to share their ideas on ways that states could play a role in helping reduce the deficit. The governors were meeting later in the day with congressional leaders and said they planned to work with Vice President Joe Biden in the coming weeks.

The governors said that states need certainty as they craft their budget proposals but Obama expressed to them an interest in reaching an agreement with congressional Republicans.

The Republican proposal Monday, while intended to break a stalemate in place since the administration last week angered Republicans with a $1.6 trillion plan that largely exempted Medicare and Social Security from budget cuts, sparked a predictable round of partisanship.

“To protect the middle class while reducing the deficit, simple math dictates that tax rates must rise on the top 2 percent of taxpayers next year,” Senate Majority Leader Harry Reid, D-Nev., said in a statement. “The sooner Republicans grasp that reality, the sooner we can avoid the fiscal cliff.”

The fiscal cliff is a combination of expiring Bush-era tax cuts and automatic, across-the-board spending cuts due to take effect in January. The cliff is a result of prior failures of Congress and Obama to make a budget deal.

The GOP proposal itself revives a host of ideas from failed talks with Obama in the summer of 2011. Then, Obama was willing to discuss politically risky ideas such as 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.

Boehner called that a “credible plan” and said he hoped the administration would “respond in a timely and responsible way.” The offer came after the administration urged Republicans to detail proposals to cut popular benefit programs like Medicare, Social Security and Medicaid.

But Obama and his Democratic allies are less willing to look to these benefit programs for cuts after his re-election last month and believe Obama possesses far more leverage now than he did in secret budget talks with Boehner last year.

Monday’s Republican plan contains few specifics and anticipates that myriad details would have to be filled in next year in legislation overhauling the tax code and curbing the growth of benefit programs.

Though the GOP plan proposes to raise $800 billion in higher tax revenue over the same 10 years, it would keep the Bush-era tax cuts — including those for wealthier earners targeted by Obama — in place for now.

GOP aides said their plan was based on one presented by Erskine Bowles, co-chairman of a deficit commission Obama appointed earlier in his term, in testimony to a special deficit “supercommittee” last year.

“The new revenue in the Bowles plan would not be achieved through higher tax rates, which we continue to oppose and will not agree to in order to protect small businesses and our economy,” Boehner and fellow Republicans said in a letter to Obama. “Instead, new revenue would be generated through pro-growth tax reform that closes special-interest loopholes and deductions while lowering rates.”

By GOP math, the plan would produce more than $2 trillion in budget savings over the coming decade: $800 billion in higher taxes; $600 billion in savings from costly health care programs like Medicare; $300 billion from other proposals such as forcing federal workers to contribute more toward their pensions; and $300 billion in additional savings from the Pentagon budget and domestic programs funded by Congress each year.

Boehner signaled in discussions with Obama in 2011 that he was willing to accept up to $800 billion in higher tax revenues, but his aides maintained that much of that money would have come from so-called dynamic scoring — a conservative approach in which economic growth would have accounted for much of the revenue. Now, Boehner is willing to accept the estimates of official scorekeepers like the Congressional Budget Office, whose models reject dynamic scoring.

Using the administration’s math, GOP aides said, the plan represents $4.6 trillion in 10-year savings. That estimate accounts for earlier cuts enacted during last year’s showdown over lifting the government’s borrowing cap and also factors in war savings and lower interest payments on the $16.4 trillion national debt.

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 without the approval of Congress.

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.

One of the few things the White House and Capitol Hill Republicans can agree on is a framework that would make a “down payment” on the deficit and extend all or most of the expiring Bush-era tax cuts but leave most of the legislative grunt work until next year.

Other participants in the Tuesday meeting between Obama and the governors included Republicans Gary Herbert of Utah and Scott Walker of Wisconsin and Democrats Mike Beebe of Arkansas and Mark Dayton of Minnesota.

 

More Andrew Taylor.

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