Parties present their offers
The Obama administration and House Republicans have released their opening offers in talks to avoid the fiscal cliff. The White House estimates its plan would carve $4.4 trillion from the deficit over the coming decade, including previously enacted cuts ($1 trillion) and savings from reduced costs for overseas military operations ($800 billion), as well as interest payments on the national debt ($600 billion).
Republicans say their plan would cut deficits by $2.2 trillion over 10 years, but they don't claim previous cuts, war savings or interest costs toward the total. Both plans block automatic spending cuts set to hit the economy in January and renew Bush-era tax cuts set to expire at the end of the month. Here are the highlights:
Obama: Increase taxes by $1.6 trillion over 10 years, raised by permitting tax rates on individual income exceeding $200,000 and family income over $250,000 to return to Clinton-era levels of 36 percent and 39.6 percent, up from 33 percent and 35 percent now. Increase taxes on dividend income and reduce the value of deductions and exemptions for those earning more than $200,000 and 250,000. Renew the 2 percentage point payroll tax holiday or a similar tax cut for workers. Return taxes on large estates to 2009 levels.
House GOP: Increase taxes by $800 billion over 10 years, raised through a comprehensive overhaul of the tax code that would curb various unspecified tax breaks while lowering tax rates overall. Extend all expiring Bush-era tax cuts on income, investments, married couples and families with children. Maintain the estate tax at current, more generous levels exempting estates up to $5.1 million from tax and sets a top rate of 35 percent. Permits payroll tax cut to expire.
Obama: Cut $350 billion over 10 years from Medicare and Medicaid, including lower Medicare drug costs and other cost curbs on health care providers.
House GOP: Cut $600 billion over 10 years. Includes unspecified cuts to health care providers and assumes an increase in the eligibility age for Medicare and increased Medicare costs for higher-income beneficiaries.
OTHER SPENDING CUTS
Obama: Cut the deficit by $250 billion through other spending cuts and new fees. Options include requiring federal workers to contribute more to their retirement, cutting farm subsidies and increasing airline security fees. Leaves in place existing “caps” on agency budgets passed by Congress each year.
House GOP: Deficit cuts of $300 billion through such cuts and fees from miscellaneous programs. Cut another $300 billion over the decade from agency operating budgets.
GOVERNMENT INFLATION MEASURE:
Obama: No proposal.
House GOP: Reduce deficits by $200 billion over 10 years by replacing the inflation adjustment for Social Security and income tax brackets with a less generous “chained CPI” that, on average, is 0.3 percentage points less than the current measure. Doing so would reduce Social Security cost-of-living increases and cause a greater portion of taxpayer income to be taxed at higher rates.
Obama: $200 billion in new economic “stimulus” initiatives, including payroll tax cuts, continued write-offs of business equipment purchases, extended unemployment benefits, help for borrowers “under water” on their mortgages and new spending on infrastructure.
House GOP: No proposal.
Obama: Permit the president to obtain increases in the government's borrowing cap, currently set at $16.4 trillion, without approval by Congress.
House GOP: Retain longstanding requirement that debt limit increases be enacted by Congress.
— Associated Press