Just two weeks from an economy-threatening deadline, fiscal cliff talks hit a lull Tuesday as House Speaker John Boehner announced that Republicans would also march ahead with their own tax plan on a separate track from the one he’s been pursuing with President Barack Obama.
The White House and leading congressional Democrats immediately rejected Boehner’s “Plan B,” which would extend soon-to-expire Bush-era tax cuts for everyone making less than $1 million but would not address huge across-the-board spending cuts that are set to strike the Pentagon and domestic programs next year.
“Instead of making tough choices today House Republicans are threatening to abandon serious negotiations,” said Senate Majority Leader Harry Reid, D-Nev.
Reid added: “Everyone should understand Boehner’s proposal will not pass the Senate.”
Boehner’s surprise move came after significant progress over the past several days in talks with Obama — talks that produced movement on tax rate hikes that have proven deeply unsettling to GOP conservatives and on cuts to Social Security benefits that have incensed liberal Democrats.
Just Monday, Obama offered concessions, including a plan to raise top tax rates on households earning more than $400,000 instead of the $250,000 threshold he had campaigned on.
And the two sides had inched closer on the total amount of tax revenue required to seal the agreement.
Obama now would settle for $1.2 trillion over the coming decade while Boehner is offering $1 trillion.
By contrast, protecting income below $1 million from a hike in the top tax rate from 35 per cent to 39.6 per cent would raise only $269 billion over the coming decade.
But the outlines of a possible Obama-Boehner agreement appeared to have shaky support at best from Boehner’s leadership team and outright opposition from key Republicans like vice-presidential nominee Paul Ryan, R-Wis., a House GOP aide said. That aide spoke only on condition of anonymity because the aide was not authorized to discuss the situation publicly.
Though Obama spokesman Jay Carney had nothing good to say about Boehner’s new option, he said, “The president is willing to continue to work with Republicans” toward a broader agreement.
The narrower Plan B faced plenty of opposition. Democrats announced they would oppose it, and many conservative Republicans continued to resist any vote that might be interpreted as raising taxes. Republicans were refining the measure Tuesday in hopes of building support among the GOP rank and file, but passing the measure exclusively with GOP votes could prove difficult.
“I think it’s a terrible idea,” said Rep. Raul Labrador, R-Idaho. “For a lot of reasons.”
Democrats said Boehner’s move made it clear he was abandoning efforts to reach an agreement with Obama — much as he quit talks with Obama 18 months ago.
“Plan B is yet another example of House Republicans walking away from negotiations,” said Rep. Chris Van Hollen, D-Md., top Democrat on the Budget Committee.
Boehner, however, said Obama is the one proving to be too inflexible, even as he held out hope that talks with Obama might yet bear fruit.
“He talked about a ’balanced’ approach on the campaign trail,” Boehner said. “What the White House offered yesterday — $1.3 trillion in revenue for only $850 billion in spending cuts — cannot be considered balanced.”
Just Monday, the Capitol bristled with optimism that Boehner and Obama might strike a bargain.
In a new offer, Obama dropped 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 originally sought.
The new 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 a 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.
The two sides also differ on the estate tax, extending unemployment benefits and how to address the need to raise the government’s borrowing cap to prevent a first-ever U.S. default and a re-run of last year’s debt crisis.
The White House was facing its own backlash, with labour, liberal and elderly advocacy groups mounting an organized campaign against any adjustments in cost-of-living for Social Security beneficiaries.
“President Obama and other Democrats campaigned saying Social Security doesn’t affect the deficit,” said Roger Hickey, co-director of the liberal Campaign for America’s Future. “Social Security recipients are going to notice and they are either going to blame John Boehner or President Obama.”
The change would reduce annual cost-of-living increases for beneficiaries of Social Security and other government programs. It also would push more people into higher tax brackets by making smaller annual adjustments to brackets.
The administration appeared confident that most Democrats would reluctantly vote for the idea in an attractive enough budget package.
White House spokesman Carney described the inclusion of the inflation adjustment as “a technical change” that was “not directed at one particular program.” He also said that if instituted, the administration would ensure that the most vulnerable beneficiaries would not be affected.
“As part of an effort to find common ground, with the Republicans, the president has agreed to put this in his proposal,” Carney said.