That plan generally mirrors previous deficit-reduction plans Obama has submitted to Congress. In all, it would reduce borrowing over the next decade by $4.5 trillion, officials said. However, Obama is proposing to dedicate about $200 billion of those savings to new measures to boost the sluggish economy, including additional unemployment benefits and extension of a temporary payroll tax cut for most workers.
The overall figure includes about $1.2 trillion in savings already in force as part of previous spending agreements with the Republican House. The White House proposes to raise $1.6 trillion in fresh revenue, with about $1 trillion coming in January, with the expiration of the George W. Bush tax cuts for high earners.
An additional $600 billion in revenue would be generated next year through a rewrite of the tax code. And $600 billion in fresh savings would come next year, with a little more than half coming from Medicare and Medicaid changes, such as higher premiums for high-income beneficiaries.
To ensure that Congress acts by Aug. 1, Obama is proposing to delay automatic spending cuts only through that date. The so-called sequester would then act as a new trigger to force congressional action. Delaying the sequester for eight months would cost about $80 billion, officials said. They recommended covering that cost with new spending cuts and tax hikes, but did not specify which ones.
Taken as a whole, the president’s offer contains $2.50 in spending cuts for every $1 in new taxes, officials said. However, revenue far outweighs spending cuts in new savings, with $1.6 trillion in taxes paired with a little more than $600 billion in cuts.
Still, the ratio is slightly better than what was described by senior Republican aides, who offered details of the plan after Geithner’s meeting with GOP leaders Thursday. At that time, GOP aides said the president had offered only $400 billion in spending cuts.
House Speaker John A. Boehner said earlier Friday that the negotiations over the fiscal cliff had reached a “stalemate” after Obama accused Republicans of holding the middle class “hostage” and declared that tax rates must rise for the wealthy as part of any deal.
Following up on his pledge to bring his case to the American people, Obama traveled to a toy factory in Hatfield, Pa., to insist that Republicans must agree to freeze taxes for the middle class while allowing tax rates on the wealthy to increase. Republicans have insisted that although they will agree to raise taxes, they will not increase rates.