The differences over how to resolve the “fiscal cliff” narrowed significantly on Monday night as President Barack Obama made a counter-offer to Republicans that included a major change in position on tax hikes for the wealthy, according to a source familiar with the talks.
The move, which the source stressed was not Obama’s final offer, was welcomed, albeit with reservations, by a spokesman for Republican House of Representatives speaker John Boehner, who met earlier in the day with Obama as the two hammered out a way to avert steep tax hikes and indiscriminate spending reductions set for the beginning of 2013.
Considerable work remains as both sides now try to bridge the gaps between them and then sell a package to their respective allies in the US Congress.
In its most dramatic change in position yet, the White House proposed leaving lower tax rates in place for everyone except those earning $400,000 and above, the source said on condition of anonymity. That’s up from the $250,000-threshold the president has been demanding for months, but still far from Boehner’s preference of $1 million.
Obama also moved closer to Boehner on the proportion of a ten-year deficit reduction package that should come from increased revenue, as opposed to cuts in government spending. Obama is now willing to accept a revenue figure of $1.2 trillion, down from his previous $1.4-trillion proposal.
Boehner’s latest proposal calls for $1 trillion in new tax revenue, which would come from raising rates and limiting deductions that the wealthiest can take.
Some of the savings in spending proposed by Obama would come from reducing the size of cost-of-living increases for all but the most “vulnerable” recipients of the Social Security retirement programme, the source said, through the use of a different formula to calculate the regular raises called “chained Consumer Price Index”.
Obama and Boehner remained apart on the politically explosive issue of how and when to raise the government debt ceiling to permit the government to borrow more money.
Boehner has proposed a one-year boost in the debt ceiling, tied to spending cuts. Obama, as of Monday night, was pushing for a two-year increase, potentially a major concession that many congressional conservatives may find hard to swallow since they have used it to extract spending cuts from the White House.
Missing entirely from Obama’s offer was an extension of the so-called “payroll tax holiday”, which comes to an end on January 1 with an immediate negative