In exchange for the higher rates for millionaires, Boehner is demanding changes to federal health and retirement programs, which are projected to be the biggest drivers of future federal borrowing. Boehner wants $1 trillion in total savings, starting with adoption of a less generous way of calculating inflation that would save $200 billion over the next decade — about two-thirds of it by reducing Social Security cost-of-living adjustments.
Obama has offered $600 billion in spending cuts, with $350 billion coming from health programs and none from Social Security. Many congressional Democrats adamantly oppose dragging the program into the year-end talks.
Still, if Republicans make an offer on higher tax revenue that Democrats consider big enough, senior Democrats have signaled that they are open to the change in how inflation is calculated for the tax code and other federal programs, known as chained CPI.
The tax issue also remains problematic. Obama has called for the Bush tax cuts to expire for income over $250,000 a year, a move that would raise about $830 billion over the next decade, according to the Joint Committee on Taxation. He also wants higher taxes on inherited estates and new limits on tax breaks for the wealthy, to bring total new taxes to $1.6 trillion.
White House officials last week dropped their tax demand to $1.4 trillion and may be willing to go lower, Democrats said. But setting the income threshold for tax rate hikes at $1 million, as Boehner proposed, would sacrifice too much money, they said, adding that a threshold of $375,000 or even $500,000 might be more acceptable.
If a pact were reached, people in both parties say it likely would include a postponement of $100 billion in automatic spending cuts from the Pentagon and other agency budgets next year.
With many lawmakers still hoping for a resolution by Christmas, people close to the talks cautioned that much work remains to be done before Obama and Boehner could seal a deal.