Obama makes 'fiscal cliff' offer. Are contours of a deal emerging? (+video)
In fiscal cliff negotiations, President Obama is now proposing that tax hikes could begin with households earning $400,000, not the $250,000 that he has long called for.
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The president's latest position is that tax hikes on wealthy Americans could begin with households earning $400,000, not the $250,000 that he has long called for. He also signaled willingness to support a new way of measuring inflation when calculating yearly cost-of-living increases in Social Security benefits.
Mr. Obama's offer, as summarized in news reports Tuesday morning, also includes backing away from a call for the executive branch to have permanent borrowing authority in an era of chronic deficits. Instead, he is now seeking a deal that raises the US debt limit high enough that it would not need to be revisited by Congress until after the 2014 midterm elections.
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His proposals stir strong opposition from some members of his own party, who hoped for a firmer stand on high-income tax hikes and for stiff resistance to a new inflation gauge for entitlement benefits (a move that would also reduce annual increases in pensions for military veterans and federal retirees).
And, by itself, the Obama offer doesn't move the bargaining into its final stage. House Republican leaders promptly said Obama's moves haven't gone far enough.
"Not there yet" is how House Speaker John Boehner described the state of play Tuesday morning. "We do not have a balanced plan" when the president is proposing $1.3 trillion in tax hikes and $850 billion in net spending reductions over the next decade, he said.
Still, with each step that the two parties take toward each other, the potential for a fiscal agreement draws nearer. Both sides agree that the fiscal cliff – tax hikes and spending cuts scheduled for Jan. 1 – represents a severe and unneeded shock to consumer activity, which could push the nation into recession. So the two sides have continued to negotiate, with the goal of finding a way to reduce future deficits without doing much near-term harm to a fragile economy.
Obama's offer follows concessions by Speaker Boehner, who on Friday opened the door to letting tax rates for wealthy Americans revert to Clinton-era levels. Boehner said the tax hike should affect households with incomes above $1 million.
The parameters of a deal may have begun to emerge in recent days. Republicans, with an eye on polls showing a majority of Americans in Obama's camp on tax hikes for the rich, have started to bend toward allowing Bush-era tax rates to expire for many of America's wealthiest taxpayers. The new revenue would be matched by a still-to-be-agreed-upon level of spending cuts.
And near-term legislation could be paired with a pledge by both sides to take further steps next year, perhaps including efforts on tax reform or restraining Medicare costs. Taken together, the steps would aim to curb a rising federal debt and reassure investors that the US economy rests on a solid fiscal foundation.