Obama taking tough stand on fiscal cliff

2012-12-03 12:02
(File, AP)

(File, AP)

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Washington — President Barack Obama is ready to cut federal spending to reduce the nation's spiralling debt but won't make any deal with Republicans until they first agree to raise taxes on wealthy Americans and specify their own demands for reducing government outlays for a vast array of programmes, Treasury Secretary Timothy Geithner said in interviews that aired on Sunday, explicitly outlining a tough administration negotiating position for avoiding the looming "fiscal cliff".

If the White House and Congress can't reach agreement by 1 January, the income tax rate for all Americans will rise significantly and deep cuts in government spending will be triggered, events that economists say would drive the US economy back into recession and cause a spike in already stubbornly high unemployment.

Past legislation has set the 1 January deadline for the expiration of George W Bush-era tax cuts and the implementation of steep across-the-board federal spending cuts, amounting to hundreds of billions of dollars sliced out of federal programmes for everything from education to the military.

"The ball really is with them now," Geithner, one of the White House's chief negotiators with congressional Republicans, said during appearances on five Sunday television talk shows.

On Thursday, Geithner presented congressional leaders with Obama's postelection blueprint, but House Speaker John Boehner, leader of the Republican-controlled lower chamber of Congress, dismissed the plan as "not serious", merely a Democratic wish list.

As outlined by administration officials, the plan calls for nearly $1.6 trillion in new tax revenue over the next decade, while making $600bn in spending cuts, including $350bn from the Medicare system that provides healthcare coverage to the elderly and other health programmes.

'You can't be serious?'

But it also contains $200bn in new spending on jobless benefits, public works and aid for struggling homeowners — and would make it virtually impossible for Congress to block Obama's ability to raise the debt ceiling.

"I was just flabbergasted," Boehner said, describing his meeting with Geithner. "I looked at him and I said, 'You can't be serious?" The speaker, noting the short time between the 6 November election and the new year, said time has been lost so far "with this nonsense".

But Geithner, in interviews that were taped on Friday, offered a somewhat rosier view. "I think we're far apart still, but I think we're moving closer together," he said.

He called the back-and-forth "normal political theatre", voicing confidence a bargain can be struck in time, and said all that's blocking it is Republican acceptance of higher tax rates on the wealthy.

"It's welcome that they're recognising that revenues are going to have to go up. But they haven't told us anything about how far rates should go up ... [and] who should pay higher taxes?" Geithner said.

He said so far, Republican proposals demonstrate "political math, not real math".

Path to agreement

House Democratic Leader Nancy Pelosi said on Sunday that she will try to force a vote on a Senate-passed bill favoured by Democrats to avert a fiscal cliff. But she was unlikely to line up enough Republicans to succeed.

The Senate bill would extend many of the expiring tax cuts for middle-income families, while letting tax cuts expire for individuals who make more than $200 000 and married couples making more than $250 000.

Republican leaders have said they will accept higher tax revenue overall, but only through what they call tax reform — closing loopholes and limiting deductions — and only coupled with tough measures to curb the explosive growth of Medicare, Medicaid and Social Security.

Medicaid is the government health insurance programme for the poor. Social Security is the federal pension available to retirees.

But Geithner insisted that there's "no path to an agreement [without] Republicans acknowledging that rates have to go up for the wealthiest Americans". He also said the administration would only discuss changes to Social Security "in a separate process", not in talks on the fiscal cliff.

As to spending, Geithner said if Republicans don't think Obama's cutting enough spending, they should make a counter-proposal. "They might want to do some different things. But they have to tell us what those things are," he said.

Sympathy for Republicans

Republicans have also rejected Obama's debt ceiling proposal. Geithner noted it was Senate Minority Leader Mitch McConnell who first suggested it, as a temporary measure in the summer 2011 deficit deal. The administration would make it permanent. "It was a very smart way by a senator with impeccable Republican credentials to ... lift this ... periodic threat of default," Geithner said. "And that's an essential thing for us."

Under current laws, Congress must approve raising the government's ability to borrow. Until last year's standoff, which resulted in a lowering of the country's credit rating, the debt ceiling had been raised as a matter of course regardless of which party controlled the White House or Congress.

Geithner voiced sympathy for Republicans leaders, saying they're caught between the voters' endorsement of higher taxes on the rich and a House Republican caucus that thinks all tax increases are job-killers.

"They really are in a difficult position," he said. "And they're going to have to figure out their politics of what they do next."

In the past week, Obama has held a series of campaign-style appearances — including one in a swing district in Pennsylvania — urging lawmakers to accept a measure passed by the Democratic-controlled Senate extending the tax cuts enacted during the administration of President George W Bush for all but the top 2% of wage-earners. He'll continue the effort when he meets with state governors on Tuesday and speaks to the Business Roundtable on Wednesday.

- AP
Read more on:    barack obama  |  us
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