WASHINGTON A Republican proposal Monday to shave $2.2 trillion off projected budget deficits sets up a "fiscal cliff" showdown with the White House because the plan includes reductions in the very tax rates that Democrats seek to raise.
The Obama administration's opening offer sought to raise $1.6 trillion in taxes over 10 years, much of it from higher income-tax rates on the wealthy. Republican leaders in the House of Representatives countered Monday with their own offer, saying their plan would raise $800 billion in new tax revenue but basing that on cuts in tax rates coupled with limits on deductions that would make more income taxable.
The plan, contained in a three-page letter signed by seven House Republican leaders, is a counteroffer to last week's Obama administration proposal. Aimed at jump-starting stalled talks, the proposal instead sharpens the battle lines with just four weeks to go until temporary tax cuts expire for all Americans and automatic spending reductions start going into effect.
The Republican offer included:
$1.2 trillion cut from projected spending over the coming decade.
$800 billion in new tax revenue.
$200 billion from changes to a wide variety of federal programs that might include new ways of calculating cost-of-living increases.
No money is included for economic stimulus; the Obama plan sought $50 billion in one year. Nor is any mention made of increasing the nation's debt limit.
That's significant, because the White House is seeking an easier way to approve increases that allow new debt to be issued to cover existing obligations. The federal government is expected to start bumping up against the $16.3 trillion debt ceiling late this month, and measures to move money around could buy another two months, three at most, before the United States defaults on some of the debt it owes.
The White House panned the proposal as unbalanced.
"In fact, it actually promises to lower rates for the wealthy and sticks the middle class with the bill," White House spokesman Dan Pfeiffer said in a statement. "While the president is willing to compromise to get a significant, balanced deal and believes that compromise is readily available to Congress, he is not willing to compromise on the principles of fairness and balance that include asking the wealthiest to pay higher rates."
House Speaker John Boehner, R-Ohio, argued Monday that the White House offer couldn't pass in either house.
The $800 billion in tax revenue, which Republicans say is a significant concession, wouldn't be achieved through higher tax rates, the House Republicans' letter said.
"Instead, new revenue would be generated through pro-growth tax reform that closes special interest loopholes and deductions while lowering rates," they argued.
The White House's proposal seeks to raise $600 billion over a decade by eliminating tax deductions and $960 billion over 10 years by raising marginal tax rates for the top 2 percent of income earners.