News24

Republicans reject fiscal cliff proposal

2012-11-30 10:45

Washington - Republicans rejected as "ridiculous" on Thursday a White House plan to raise $1.6 trillion in new taxes over the next decade, as crunch talks on the US deficit took a turn for the worse.

A congressional Republican aide familiar with the White House proposal - presented by Treasury Secretary Timothy Geithner in talks with House Speaker John Boehner - said the offer was a rehash of President Barack Obama's budget request.

"The White House keeps saying it wants a 'balanced approach' but this offer is completely unbalanced and unrealistic," the aide said, as talks stalled on how to avert looming tax hikes and automatic federal spending cuts.

"It calls for $1.6 trillion in tax hikes - all of that upfront - in exchange for only $400bn in spending cuts that come later," he added.

Boehner himself made no comment on the specifics, but told reporters he was "disappointed" with the offer.

"Going over the fiscal cliff is serious business," said Boehner.

Double whammy

"I'm here seriously trying to resolve it. And I would hope the White House would get serious as well," he said, adding that "no substantive progress has been made" since negotiations began more than two weeks ago.

The $1.6 trillion is nearly double what would be raised if tax breaks for the wealthiest 2% of Americans were to expire, which means the White House is seeking hundreds of billions of dollars in additional revenues over the next 10 years.

It is also double the amount the White House hoped to raise in tax revenue through a "grand bargain" that fell through in July of 2011, when Democrats and Republicans clashed over raising the US debt ceiling.

The White House and the Republicans must reach an agreement by the end of the year that lowers the ballooning US deficit by $1.2 trillion over 10 years, as mandated in a poison pill deal agreed last year.

If they don't, tax cuts in place since the presidency of George W Bush will expire and $500bn in across-the-board spending cuts would kick in - a double whammy that could knock the US economy back into recession.

The White House estimates most American households would be hit with $2 200 in additional taxes.

Social Security reform

"While $1.6 trillion is the White House's public position, it is ridiculous to offer that amount two weeks after negotiations began - and less than a month before we must have a solution," the Republican aide said.

There is broad agreement that Bush-era tax cuts should remain for everyone making less than $250 000 per year, but while Obama's Democrats want the cuts to expire for the wealthiest 2%, Republicans are opposed.

Republicans have also demanded action on reform of entitlement programmes such as Social Security, the national pension program for the elderly.

The White House proposal also features new stimulus spending and a permanent end to congressional control over federal borrowing limits - the issue at the heart of last year's spending fight.

Boehner complained of a lack of progress, but Senate Majority Leader Harry Reid, who met separately with Geithner, shot back that Democrats have seen no "serious offer" from Republicans, who are divided over whether to agree quickly on keeping rates low for middle-income families.

Democrats pushed through legislation in the Senate that would let the top tax rate rise from 35% to 39.6% while keeping middle-class rates unchanged, and have urged the Republican-controlled House to pass the bill.

Essential fact

Boehner has refused to bring it to the floor, despite some calls for the bill from within his party.

Congressman Tom Cole made waves when he broke ranks recently to urge fellow Republicans to extend the middle-class tax cuts now, and thrash out a deal on top earners next year.

Both sides have spoken of their desire for a long-term agreement that would tackle the chronic national deficits and debt, but they were still far apart on Thursday.

Senate Minority Leader Mitch McConnell said the White House "took a step backward, moving away from consensus and significantly closer to the cliff".

White House spokesperson Jay Carney insisted there had been some progress on the idea of revenues, but income tax rates remained a problem.

Republicans had yet to "accept the essential fact" that rates will "have to go up", Carney said.

Comments
  • derek.bredenkamp.3 - 2012-11-30 11:58

    They just don't see the obvious solution, cut the military spending to only cover homeland security, problem solved.

      michael.i.wright - 2012-11-30 13:49

      Lots of luck with that approach. The US will be eaten alive by social programs that replaced industry. http://online.wsj.com/article/SB10001424127887323353204578127374039087636.html?mod=hp_opinion

      dane.herbst.5 - 2012-11-30 16:26

      michael you are talking a load of rubbish, clearly a romney and obama fan, derek is right, what you said is what ron paul preached, but america will never listen

      michael.i.wright - 2012-11-30 19:00

      Nice going Dane. Your ability to judge someones belief system is surpassed only by Juliaas Malema's skill in woodworking. Oh yes, Ron Paul's ideas are great. Unfortunately twenty years too late. At this point, anything they do amounts to re-arranging the deck chairs on the Titanic. Bear in mind, their military while costing a fortune, to a large degree protects their economic interests. It isn't just for fun that they have bases all over the world.

      jon.jones.90663894 - 2012-11-30 19:20

      Michael and Dane you are both half correct. And should therefore be nice to each other. The USA's problems have got nothing whatsoever to do with 'social programs' or defense spending. Their problems can be solved in two words. MAKE THINGS. Actually these two words will solve not only the USA's problems but a heck of a lot of other countries as well. Including curiously enough a country at the tip of Africa. Forget what it's called but it's the one with the burning fuse attached to it.

  • duncan.gill1 - 2012-11-30 21:04

    It's obvious that the US resembles two panicking fools trying to bail out their boat with tea cups all the while squabbling as they sink lower and lower into disaster...what's to discuss your country is in dire straits and you better come up with a plan that will work or else your days are numbered..China will prop up your borrowing needs long enough to extract itself and the whole worlds economies from your Dollar..why else do countries begin to hoard gold...you don't need to be a rocket scientist to see what's coming!

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