President Obama has presented a new offer to House Speaker John Boehner, hoping to bridge the gap between the White House and Republicans and avoid falling off the "fiscal cliff".
As was reported by Digital Journal on Sunday, Speaker Boehner presented the White House with a new fiscal cliff proposal that would see a tax hike implemented on individuals making $1 million or more. After reviewing the proposal and speaking with Boehner on Monday, President Obama's newest proposal sees him back away from his call to increase taxes on those making $250,000 or more.
Instead, the President proposes to keep the lower tax rates now in place for anyone earning less than $400,000 a year. Although it falls short of Boehner's proposal, the offer does suggest that there is a narrowing in the gap between the two sides.
According to Politico, the White House's $2.4 trillion proposal is split nearly equally between revenue and spending cuts, something Boehner and the Republicans had demanded.
Sources told the Huffingtton Post that in order to meet the goal of $1.2 trillion in revenue, the President's proposal calls for a limit on the tax benefit of itemized deductions, reducing it from the current 35 percent down to 28 percent. The move would mean a return to the 2009 estate tax levels, taxing estates worth more than $3.5 million at a rate of 45 percent.
The White House is also prepared to abandon the idea of implementing a permanent means for a President to increase the U.S. debt limit. Instead, the proposal calls for a two-year increase in America's borrowing authority. The proposal also adds a measure that would decrease the cost of living adjustments for those on Social Security, something Boehner's proposal requested.
According to a CNN report, a Boehner spokesman has already rejected the proposal, saying it "cannot be considered balanced".
An email statement sent by Boehner spokeman Michael Steel says:
"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. 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."
If Boehner and the White House cannot agree to a deal, the current tax rates will expire on December 31st of this year. That would mean a higher tax rate not only for the wealthy, but for low and middle income American's as well. The prospect of the current tax rates expiring has already caused concern among investors in the U.S. and around the world, with the markets fluctuating up and down as news of a possible deal emerges.
Failure to reach a deal would also result in broad cuts to the military, food safety and U.S. embassy security. Approximate $129 million a year would be cut from the budget for security, construction and maintenance of U.S. embassies around the world. Defense Department spending would also be cut $54.7 billion a year. In September, Senate Minority Leader Mitch McConnell, a Republican, told the Wall Street Journal the cuts will have a "crippling effect on our nation's security and that there is
" urgent need for the president to work with congressional Republicans to replace these destructive cuts."
Democratic Senator Patty Murray countered by saying:
"What Republicans aren't saying when they are yelling and screaming about these cuts is that they helped pass them into law and that they can just as easily help make them go away. But thus far, they have been unwilling to face up to the reality that it will take a balanced approach to make that happen."