Obama Makes New Offer to Narrow Gap on Cliff

By Carrie Budoff Brown and John Bresnahan, Politico

18 December 12

resident Barack Obama and House Speaker John Boehner made significant progress Monday toward a fiscal cliff deal, as Obama's new offer on tax rates moved the two sides closer to an agreement.

But questions remained over whether Boehner could sell the key points to Republicans at a pivotal meeting Tuesday. The progress is fragile, and the next 24 hours are critical as lawmakers from both parties and interest groups on all sides weigh in.

Senior Republican aides described the latest offer as a positive step but said the speaker has rejected the president's counteroffer as "unbalanced."

The president's $2.4 trillion proposal marks the first time that he has given ground on income tax rates. He would raise rates on household income above $400,000 - up from $250,000 - as part of a plan delivered Monday to Boehner, according to a source familiar with the talks.

Obama made another important move in Boehner's direction by addressing the speaker's demand for an equal amount of spending cuts to new revenue - a concession that could prove instrumental in reaching a final deal, although the speaker's aides are disputing the White House claim of a dollar-for-dollar match.

Obama proposed $1.2 trillion in new revenue, down from his previous offer of $1.4 trillion. And he offered $1.2 trillion in spending cuts, including $400 billion in entitlement savings - an increase of $50 billion.

Boehner is seeking $1 trillion in new revenue, in part by raising tax rates on income above $1 million, and $1 trillion in entitlement cuts.

The president's proposal is not a final offer, but the White House views it as something that should get the two sides close to a deal because they have met Republicans more than halfway on spending and halfway on revenues, the source said.

But Boehner and other top Republicans have already rejected the Obama offer as inadequate, and they disputed some of the savings that the White House was counting in its dollar-for-dollar ratio on spending cuts versus new revenue.

"Any movement away from the unrealistic offers the President has made previously is a step in the right direction, but a proposal that includes $1.3 trillion in revenue for only $930 billion in spending cuts cannot be considered balanced," Boehner spokesman Brendan Buck said in a statement. "We hope to continue discussions with the President so we can reach an agreement that is truly balanced and begins to solve our spending problem."

Republican aides said the total savings are actually lower than $930 billion because Obama is seeking $50 billion in new infrastructure spending and $30 billion for extending unemployment benefits.

The White House gets close to $1.22 trillion in spending reductions by slicing $400 billion from health care entitlements, $200 billion from other mandatory spending programs, $100 billion from defense programs and $100 billion from other discretionary programs.

It then closes the gap by counting savings on interest payments and using a less generous cost-of-living calculator for government benefits - two elements that the speaker's office says aren't cuts.

Boehner has not agreed to those proposals, Republican aides said.

And the president's request to raise the debt limit for two years is likely to draw GOP resistance. Obama proposed a procedure that would give him the authority to extend the borrowing limit and Congress the ability to block him by passing a resolution of disapproval. Republicans feel such a move - although initially crafted by Senate Minority Leader Mitch McConnell (R-Ky.) to avert the 2011 debt limit showdown - would mark a serious change in the balance of power between the president and Congress.

"The issues are not technically difficult to resolve. There's not hundreds of moving parts," one GOP staffer said. "But they might be fundamental issues that are difficult to resolve, not because they are technically difficult."

Obama rejected Boehner's request for raising the Medicare eligibility age, but he is already angering the Democratic base by pushing smaller cost-of-living increases for Social Security beneficiaries. The president would attempt to protect the most-vulnerable populations.

MoveOn.org issued a statement Monday invoking Senate Majority Leader Harry Reid's earlier statements that he would block any cuts to Social Security.

"MoveOn members overwhelmingly oppose cuts to Social Security, Medicare and Medicaid benefits, and they've made clear that they would see any fiscal agreement that cuts such benefits as a betrayal that sells out working and middle-class families," MoveOn.org Executive Director Justin Ruben said. "If such a deal were proposed by the president and speaker, MoveOn members would expect every Senate and House Democrat to do everything in their power to block it. Senate Majority Leader Reid would play a crucial role, as MoveOn members would count on him and other senators to remain true to their repeated promises to keep Social Security benefits off the table."

The president would also agree to delay across-the-board spending cuts, known as the sequester, from taking effect until Congress can pass an overhaul of the Tax Code. And Obama is seeking a permanent fix for the alternative minimum tax, which hits upper middle-income Americans, and the annual cut in reimbursements rates for doctors that serve Medicare patients.

There are sure to be a number of other sticking points.

It's going to be difficult for Obama to add any infrastructure spending into a year-end deal. House Republicans would want the spending offset - and they don't trust the administration on spending tax dollars wisely after the stimulus.

But in a concession to Republicans, Obama abandoned his call for a renewal of the payroll tax cut or an equivalent tax break.

The new threshold of $400,000 for higher-income tax rates will also be tricky for Boehner, who will need to talk to his Republican Conference before going lower than the $1 million threshold from his offer.

Republicans also were concerned about changes in personal and itemized deductions that hit high-income Americans under Obama's latest plans. Boehner, though, may support the president on allowing these provisions to change.