WASHINGTON – Still short of a “fiscal cliff” deal with the White House, top House Republicans are labouring to rally their rank-and-file behind an alternative plan that would prevent looming tax increases for everyone but those earning over $1 million a year.
House Speaker John Boehner’s so-called Plan B, which is aimed at letting GOP lawmakers vote to prevent New Year’s Day tax boosts on more than 99 per cent of taxpayers, was getting a cool reception from conservatives reluctant to boost anyone’s taxes, raising questions about whether it could pass the GOP-run House. Even if it could survive in the House, Senate Majority Leader Harry Reid, D-Nev., declared it dead in his chamber, and the White House rejected it as well.
After a day of manoeuvring, there was still no easy bipartisan pathway to heading off hundreds of billions worth of broad tax increases and budget-wide spending cuts due to be triggered in early January — the “fiscal cliff.” Economists generally agree that unless they are defused, the steep, abrupt tax boosts and budget cuts probably would shove the economy back into recession.
“The real cliff comes when the markets react, and they will at some point, if we’re not serious about deficits,” Rep. Jeff Flake, R-Ariz., said.
The backup plan by Boehner, R-Ohio, would do nothing to head off deep cuts in defence and domestic programs scheduled to begin taking effect in January. And it contains none of the spending reductions that both President Barack Obama and Boehner have proposed in their efforts to strike a compromise.
“The speaker is trying to get as much leverage as he can to deal with the president,” said Rep. Charles Boustany, R-La., describing the pressure Republicans were hoping it would put on the White House. But he added that he wasn’t sure the plan was the best way to get that leverage.
“I’m still trying to figure that out,” Boustany said.
Others were more supportive. Rep. Patrick Tiberi, R-Ohio, said Plan B would let Republicans vote to protect as many people as possible from tax hikes while leaving Democrats with the blame if it failed.
If the Senate decides not to vote on the House bill or ignores it, “That’s not our problem,” Tiberi said. “The ball’s in Harry Reid’s court.”
Besides letting tax rates rise only on incomes exceeding $1 million, Boehner’s Plan B also would boost the top rate on capital gains and dividends from their current 15 per cent to 20 per cent for earnings over $1 million, preventing higher increases. It would continue current tax levels on inherited estates — less than Obama wants — and prevent the alternative minimum tax from raising taxes owed by 28 million middle- and upper-class families.
Boehner unveiled his backup plan on Tuesday. He did so even though he and Obama have come tantalizingly close to finding a politically palatable combination of revenue increases and budget savings that could slice around $2 trillion from projected federal deficits over the coming decade.
Both sides say those efforts will continue.
Obama has reduced his demands for tax increases to $1.2 trillion over 10 years, to be imposed on incomes exceeding $400,000 annually. In so doing, the president abandoned his campaign season insistence that he would raise taxes on individuals earning over $200,000 and couples making more than $250,000.
Boehner has boosted his revenue offer to $1 trillion, including raising income tax rates on incomes over $1 million. That is a major concession from the leader of a party that has made opposition to higher rates a fundamental tenet for a quarter century.
“I think it’s a mistake for the Republican Party,” said Rep. Jim Jordan, R-Ohio, a leader of House conservatives. “So that’s what I think a lot of members are struggling with.”
Obama has also departed from his party’s orthodoxy by proposing smaller annual cost-of-living increases for Social Security recipients. The new formula for measuring inflation would affect other benefit programs as well and push more people into higher income tax brackets.
The president’s embrace of a plan that would over time cut Social Security benefits has aroused outcries from liberal groups that defend programs for the elderly and poor and that generally support Democrats.
“I promise you, seniors and their families will notice” the benefit reductions, said Pamela Tainter-Causey, spokeswoman for the National Committee to Preserve Social Security and Medicare, one of scores of groups mobilizing opposition to the proposal.
Obama also was pushing for extended unemployment benefits and billions in spending aimed at stimulating the economy.
The president says his plan would cut spending by $1.2 trillion over a decade, including saving $400 billion from health care benefits that could include Medicare for the elderly and Medicaid for the poor.
Boehner wants deeper Medicare savings. And he says Obama is more unbalanced, seeking $1.3 trillion more in taxes and $930 billion in lowered spending.
Besides lingering disputes with the president, the speaker’s efforts to reach an accord with Obama face another difficulty — uncertain support from Boehner’s own lieutenants. One opponent was the influential Rep. Paul Ryan, R-Wis., the party’s defeated vice-presidential nominee, said a House GOP aide. The aide was not authorized to publicly discuss the situation and spoke only on the condition of anonymity.
Associated Press writers Andrew Taylor, Jim Kuhnhenn and Stephen Ohlemacher contributed to this report.