Both sides agree that as a principle, keeping tax rates low while eliminating deductions is better than increasing tax rates. But 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 dramatically scaling back worthwhile deductions such as the one for charitable giving.
Last week, in a private meeting with Boehner, Geithner made the Obama administration’s opening bid in the fiscal cliff talks — largely a reprisal of policies the administration has already advocated. In addition to $1.6 trillion in new tax revenue, the proposal called for $600 billion in spending cuts, a majority of it from Medicare and Medicaid, as well as 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 Sunday. “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.”
The White House also has opened the door to a compromise that would increase rates on upper-income earners by less than the full amount they are scheduled to rise next year, when the top brackets rise from 33 to 35 percent and 35 to 39.6 percent. But Republicans have not agreed.
“It’s welcome that they’re recognizing that revenues are going to have to go up, but they haven’t told us anything about how far rates should go up, how far revenues should go up,” Geithner said.
Beyond openness to new revenues through an overhaul of the tax code, Republicans insist on significant savings from the nation’s health-care entitlements, as well as Social Security.
In talks with Boehner in the summer of 2011 over a deal to slow borrowing, Obama was willing to adopt a stingier formula for making cost-of-living adjustments to Social Security. But in this round of talks, the White House says it won’t make any changes to the program.
“We are prepared to, in a separate process, look at how to strengthen Social Security, but not as part of a process to reduce the other deficits the country faces,” Geithner said.