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As White House and Republicans bicker, the fiscal cliff draws nearer

Published December 2, 2012 11:14 pm

Politics • Lawmakers, congressional aides say there's a probability no deal will be reached in time.
This is an archived article that was published on sltrib.com in 2012, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

Washington • As the White House and Republican leaders enter the final month of negotiations to avoid a year-end "fiscal cliff," both sides struck an uncompromising tone Sunday, as warnings mounted that they will be unable to forge an agreement to stop an automatic series of deep spending cuts and large tax hikes that could push the economy into recession.

After private meetings last week, the senior negotiators for the White House and Republicans took to the airwaves Sunday to accuse the other side of intransigence and to demand that the opposition concede on the central question of how much to raise taxes on the wealthy.

"Right now, I would say we're nowhere, period. We're nowhere," House Speaker John Boehner, R-Ohio, said on "Fox News Sunday." Boehner added that the Republicans have offered a compromise on an overhaul of the tax code that would limit deductions that disproportionately benefit the rich.

But Treasury Secretary Timothy Geithner rejected that proposal Sunday, insisting that the wealthy pay higher tax rates and that Republicans come forward with a plan that meets that requirement. "There's no path to an agreement that does not involve Republicans acknowledging that rates have to go up on the wealthiest Americans," he said on NBC's "Meet the Press."

While it had always seemed likely that the two sides would reach a stalemate before finally coming to agreement, lawmakers and congressional aides tracking the back-and-forth said there's a growing probability that no deal will be reached in time to avoid the fiscal cliff.

"I think we're going over the cliff," Sen. Lindsey Graham, R-S.C., said on CBS' "Face the Nation."

The debate over how to raise taxes on the wealthy is part of the discussion on how to reduce federal borrowing during the next decade. At the end of the year, tax rates are scheduled to increase on nearly all Americans, raising hundreds of billions of dollars of new tax revenue but costing the average family about $2,000 a year in take-home pay.

Obama wants to freeze tax rates for most Americans while allowing them to rise as high as 39.6 percent for the wealthiest people — defined as earning more than $250,000 per year, which will reduce federal borrowing by about $1 trillion over a decade.

"There's just no reason why 98 percent of Americans have to see their taxes go up because some members of Congress on the Republican side want to block tax rate increases for 2 percent of the wealthiest Americans," Geithner said.

Then next year, Obama wants to overhaul the tax code to clean out deductions and loopholes that benefit the rich and some sectors such as the financial industry. The administration estimates it would generate $600 billion in savings over a decade.

Republicans, meanwhile, do not want to raise taxes on anyone. But in the wake of their electoral defeat last month, they have acknowledged that the wealthy will have to pay more. They want to raise about $800 billion in new revenue over the decade through an overhaul of the tax code that limits deductions. Higher rates, they say, will dissuade work and investment, hurt small businesses and be a drag on economic growth.

Democrats say it's not possible to preserve enough spending on government programs without raising well over$1 trillion in new tax revenues during the next decade — and they don't believe it's possible to do that without raising rates on the wealthy, raising taxes on the middle class or scaling back deductions.

Last week, in a meeting with Boehner, Geithner made the Obama administration's opening bid in the fiscal cliff talks — in addition to $1.6 trillion in new tax revenue, the proposal called for $600 billion in spending cuts, most of it from Medicare and Medicaid, and a new policy to allow the president to raise the statutory limit on federal borrowing without a majority of Congress approving. That would come on top of $1 trillion in spending cuts that were agreed to in 2011 and $800 billion in savings from the end of the wars in Afghanistan and Iraq.

Republicans dismissed the proposal as laughable. "I was flabbergasted. I looked at him and said, 'You can't be serious,'" Boehner said. "I've just never seen anything like it. You know, we've got seven weeks between Election Day and the end of the year, and three of those weeks have been wasted with this nonsense."