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| President Barack Obama, flanked by National Governors Association (NGA) Chairman, Delaware Gov. Jack Markell, and NGA Vice Chair, Oklahoma Gov. Mary Fallin, meets with the NGA executive committee regarding the fiscal cliff, Tuesday, Dec. 4, 2012, in the Roosevelt Room at the White House in Washington. Treasury Secretary Tim Geithner is at right. |
WASHINGTON
(AP) -- Bluster and hot rhetoric aside, the White House and House
Republicans have identified areas of significant overlap that could form
the basis for a final agreement after "fiscal cliff" posturing gives
way to hard bargaining.
Both sides now concede
that tax revenue and reductions in entitlement spending are essential
elements of any deal. If the talks succeed, it probably will be because
House Speaker John Boehner yields on raising tax rates for top earners
and the White House bends on how to reduce spending on Medicare and
accepts some changes in Social Security.
The
White House and Boehner kept up the ridicule of each other's negotiating
stances on Tuesday. But beneath the tough words were the possible
makings of a deal that could borrow heavily from a near-bargain last
year during debt-limit negotiations.
Then,
Obama was willing to reduce cost-of-living increases for Social Security
beneficiaries and increase the eligibility age for Medicare, as Boehner
and other top Republicans have demanded. On Tuesday, Obama did not shut
the door on Republican ideas on such entitlement programs.
"I'm
prepared to make some tough decisions on some of these issues," Obama
said, "but I can't ask folks who are, you know, middle class seniors who
are on Medicare, young people who are trying to get student loans to go
to college, I can't ask them to sacrifice and not ask anything of
higher income folks."
"I'm happy to entertain other ideas that the Republicans may present," he added in an interview with Bloomberg Television.
At
the core, the negotiations center on three key points: whether tax
rates for upper income taxpayers should go up, how deeply to cut
spending on entitlements such as Medicare and how to deal with raising
the government's borrowing limit early next year.
White House spokesman Jay Carney dismissed Boehner's proposals as "magic beans and fairy dust."
Boehner
countered: "If the president really wants to avoid sending the economy
over the fiscal cliff, he has done nothing to demonstrate it."
Tax
rates have emerged as one of the most intractable issues, with Obama
insisting the rates on the top 2 percent of earners must go up and
Boehner standing steadfast that they must not.
Boehner, instead, has proposed raising $800 billion through unspecified loophole closings and limits on tax deductions.
On
Tuesday, the president said he would consider lowering rates for the
top 2 percent of earners - next year, not now - as part of a broader tax
overhaul effort that would close loopholes, limit deductions and find
other sources of government revenue. "It's possible that we may be able
to lower rates by broadening the base at that point," Obama said.
On
Medicare and Social Security, the Republican proposals would do
relatively little to curb the deficit over the next decade, but the
impact would grow over the longer term.
Raising
the Medicare retirement age from 65 to 67, for instance, would wring
$148 billion from the program over 10 years, according to a
Congressional Budget Office estimate last year, about one-fourth of the
savings House Republicans hope to claim from federal health programs.
Another
idea that gained currency during the Obama-Boehner talks last year
would change the annual inflation measure used for Social Security
cost-of-living increases and the indexation of tax brackets for
inflation.
Many economists and government
budget specialists believe the system is a more accurate measure of
inflation because it takes into account changes in purchasing behavior
This
"chained consumer price index" idea makes modest cuts to Social
Security benefits at first - curbing program costs by $112 billion over a
decade according to the 2011 CBO report. But those reductions build up
more over time in a fashion comparable to the way compound interest
builds personal savings.
The White House has
not foreclosed the idea of addressing Social Security cost-of living
changes in a new deal, but it has not embraced it because Obama's aides
argue Social Security is not contributing to the federal deficit.
The
stingier inflation measure also could raise tax revenue by $87 billion
over the coming decade. Taxes would slowly increase because annual
adjustments to income tax brackets would be smaller, pushing more people
into higher brackets.
But the alternative
inflation measure, while a favorite of budget hawks, has run into fierce
opposition from defenders of Social Security.
"I've never been a part of that," said Senate Majority Leader Harry Reid, D-Nev., a top Obama ally.
The
two sides are also close, at least in theory, on curbing spending on a
host of miscellaneous programs, as well as new fees. These could lead to
higher airline ticket prices, for example, an end to Saturday mail
delivery, fewer food stamps and lower farm subsidies.
Republicans claim they could glean $300 billion from such cuts and fees over 10 years; the White House promises $250 billion.
So
far, the public seems ready to hold Republicans responsible if
negotiations fail. A new Washington Post-Pew Research Center poll shows
that 53 percent say the Republicans would deserve blame if the nation
tips over the fiscal cliff, and only 27 percent of those surveyed say
Obama would be to blame.
Forty-nine percent don't believe Obama and Congress will reach a deal by Jan. 1, whereas 40 percent are more optimistic.
Republicans
were quick to say on Tuesday that Boehner's plan was attracting
criticism from the right, particularly from Republican Sen. Jim DeMint
of South Carolina, a leader of tea party conservatives, and as such
represented more of a compromise than Obama's stance. DeMint said
Boehner's plan "will destroy American jobs and allow politicians in
Washington to spend even more."
