Dems signal Obama flexibility on spending in talks

By David Espo

Associated Press

Published: Monday, Dec. 17 2012 2:56 p.m. MST

In this July 30, 2011, file photo, House Speaker John Boehner, R-Ohio, speaks at a news conference on Capitol Hill in Washington. President Obama and Speaker Boehner met at the White House today in search of a compromise to avert the economy-threatening "fiscal cliff."

Associated Press

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WASHINGTON — Republican House Speaker John Boehner is offering to let taxes rise on wealthy Americans' investment income and dividends as part of a deal to avert the "fiscal cliff," officials said Monday amid signs that President Barack Obama is ready to make a key concession of his own in urgent, high-level negotiations.

On a day the two men met for about 45 minutes at the White House, officials said they detected a receptiveness by the administration side to proposals to slow the growth of annual cost-of-living benefits paid to recipients of Social Security and other government retirement programs.

If so, it would show Obama's willingness to move toward Boehner in the secretive talks that are unfolding against a year-end deadline. Without legislation to the contrary, tax rates will rise for nearly all wage earners and spending cuts will begin at the Pentagon and in domestic programs across government.

Economists inside and outside the government have warned that the combination of the two could send the economy into recession.

Other major issues are part of the negotiations. Without action by Congress, for example, long-term unemployment benefits will expire for millions at the end of the year, and doctors will face a cut in the payments they receive for treating Medicare patients.

Democrat Obama has also called for assistance for hard-pressed homeowners as well as fresh economist stimulus measures, and some Democrats want to include a sizeable amount of disaster aid in any legislation to offset the cost of Superstorm Sandy.

Officials who disclosed developments in the cliff talks insisted on anonymity because they were not authorized to publicly describe the secret negotiations.

At the White House, spokesman Jay Carney sidestepped when asked about curbing cost-of-living increases for benefit programs. The president "is prepared to make tough choices. He also understands that his bill will not, as written, likely be what the final compromise, if there is one, looks like," he said.

"But he insists and will insist before he signed anything that there is the balance that he seeks that is fair and that seniors aren't bearing the burden so that the healthy bear less — those who can afford it most bear less."

A spokesman for Boehner declined comment on the tax proposals.

Obama and Treasury Secretary Tim Geithner met with Boehner and his top aides at the White House for less than an hour during the day. While neither side provided significant details, Republicans have made it clear in recent days that it is the president's turn to propose savings from Medicare and other benefit program following Boehner's agreement last week to let tax rates rise at incomes higher than $1 million.

Officials familiar with the talks said that under the Ohio Republican's proposal, the top tax rate on capital gains would go to 20 percent, up from the current 15 percent. The top rate on dividends also would climb, although it was not known what the new level would be, and the estate tax would also be adjusted to produce more government revenue.

Under current law, the top capital gains tax rate would rise to 20 percent automatically at the end of the year if the cuts enacted during George W. Bush's White House tenure were allowed to expire.

The tax on dividends would also rise. The estate tax would be 55 percent on estates after allowance for a $1 million exemption.

As the talks progress, Republicans across the party's spectrum are eager to turn public attention toward spending cuts, rather than remain bogged down in a politically debilitating debate about tax increases.

"Our problem isn't that we tax too little. It's that we spend too much! We must have serious spending cuts for a debt ceiling increase," tweeted Rep. Tom Price., R-Ga.

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