White House and congressional sources are reporting movement towards a jagged bundle of tax hikes and spending cuts that would avert January’s fiscal cliff.
But the deal may fall apart, partly because it calls for substantial sacrifices by each political faction.
It also may be insufficient to head off a financial crisis in the next few years, because it would still increase the federal government’s $16.3 trillion debt by up to another $7 trillion over the next 10 years.
The latest turn in the negotiations came Monday afternoon, when President Barack Obama offered House Speaker John Boehner a 10-year plan that boosts the federal government’s take of the national economy by roughly $1.3 trillion, while trimming spending by only $930 billion, according to GOP aides.
White House aides say the plan would increase taxes by $1.2 trillion, and cut spending by $1.2 trillion.
Obama’s plan calls for a two-year increase on the ‘debt limit, delaying another debt limit crisis until after the 2014 mid-term elections.
The package would supplant the legislatively scheduled fiscal cliff, which will automatically impose a package of spending cuts and tax increases in January. If not countered, those automatic changes will drain $500 billion from the economy in 2013.
GOP spokesmen did not spurn Obama’s proposal. (RELATED: Conservative group launches campaign to remove Boehner from speakership)
“Any movement away from the unrealistic offers the president has made previously is a step in the right direction, but a proposal that includes $1.3 trillion in revenue for only $930 billion in spending cuts cannot be considered balanced,” said a statement from Boehner’s office.
“We hope to continue discussions with the president so we can reach an agreement that is truly balanced and begins to solve our spending problem,” the statement said.
Obama’s proposed $1.3 trillion take includes a tax-rate hike on people earning more than $400,000 a year, plus a complex rejiggering of tax rules to trim many tax breaks used by wealthy Americans.
That’s a climb-down from his call for $1.6 trillion in tax increase on entrepreneurs, executives and professionals earning more than $250,000.