House Speaker John Boehner offers to take debt limit off table

 

Washington

House Speaker John Boehner has offered to push any fight over the federal debt limit off for a year, a concession that would deprive Republicans of leverage in the budget battle but is breathing new life into stalled talks over the year-end "fiscal cliff."

The offer came Friday, according to people in both parties familiar with the talks, as part of the latest effort by Boehner, R-Ohio, to strike a deal with President Barack Obama to replace more than $500 billion in painful deficit-reduction measures set to take effect in January.

With the national debt already bumping up against a $16.4 trillion cap set last year, Congress risks a government default unless it acts to raise the debt ceiling in the next few months. Some Republicans had argued that party leaders should use the threat of default to demand additional spending cuts from Obama.

Boehner's offer signals that he expects a big deal with sufficient savings to meet his demand that any debt limit increase be paired dollar-for-dollar with spending cuts. That would permit him to keep a key vow to his party — and head off a potentially nasty debt-limit fight — at least until the end of next year.

"Our position has not changed," Boehner spokesman Michael Steel said Sunday. "Any debt limit increase would require cuts and reforms of a greater amount."

Boehner's offer also includes a proposal to raise tax rates for millionaires, generating as much as $460 billion over the next decade — about half what Obama has demanded from the wealthy, according to official estimates.

The White House rejected the offer, saying it would raise too little cash to significantly dent record budget deficits and do nothing to extend emergency unemployment benefits into the new year, according to a Democrat familiar with the talks.

But the tax offer was viewed as a breakthrough, the Democrat said. Senior White House officials remained in contact with Boehner's staff throughout the weekend in a sign that serious negotiations had finally begun after weeks of stalemate and partisan posturing.

"Recognizing the importance of raising tax rates is a big, positive and important step," said former White House economic adviser Lawrence Summers, who emphasized that he was not speaking for the Obama administration.

"The evaluation of any deal should depend on how much total revenue is raised, whether adequate demand is maintained to sustain the recovery and whether we are restoring confidence or just marking time until another debt-limit crisis," Summers said.

Boehner and Obama have not spoken directly since the Friday afternoon phone call when Boehner extended his latest offer. With Obama in Newtown, Conn., to attend a Sunday-night service for victims of Friday's elementary school massacre, aides were uncertain when their next meeting would take place.

All told, Boehner's proposal would generate about $2 trillion in savings over the next decade, split equally between new taxes and spending cuts, according to a Republican familiar with the talks. On the tax side, as much as $460 billion would be locked in by letting the George W. Bush-era tax cuts expire on income over $1 million a year.

That would boost the top rate from the current level of 35 percent to 39.6 percent for about 400,000 families in the 2013 tax year. The rest of the tax revenue would come through a rewrite of the tax code next year aimed at limiting deductions and other tax breaks.

The Bush tax cuts would be extended for everyone else under the proposal, averting the biggest of several automatic tax hikes set to rattle the economy in January.

In exchange for the higher rates for millionaires, Boehner is demanding changes to federal health and retirement programs, which are projected to be the biggest drivers of future federal borrowing. Boehner wants $1 trillion in total savings, starting with adoption of a less generous way of calculating inflation that would save $200 billion over the next decade — about two-thirds of it by reducing Social Security cost-of-living adjustments.

Obama has offered $600 billion in spending cuts, with $350 billion coming from health programs and none from Social Security. Many congressional Democrats adamantly oppose dragging the program into the year-end talks.

Still, if Republicans make an offer on higher tax revenue that Democrats consider big enough, senior Democrats have signaled that they are open to the change in how inflation is calculated for entitlement programs, known as chained CPI.

The tax issue also remains problematic. Obama has called for the Bush tax cuts to expire for income over $250,000 a year, a move that would raise about $830 billion over the next decade, according to the Joint Committee on Taxation. He also wants higher taxes on inherited estates and new limits on tax breaks for the wealthy, to bring total new taxes to $1.6 trillion.

White House officials last week dropped their tax demand to $1.4 trillion and may be willing to go lower, Democrats said. But setting the income threshold for tax rate hikes at $1 million, as Boehner proposed, would sacrifice too much money, they said. Democrats argue that a threshold of $375,000 or even $500,000 would be more appropriate.

If a pact were reached, people in both parties say it likely would include a postponement of $100 billion in automatic spending cuts from the Pentagon and other agency budgets next year.

With many lawmakers still hoping for a resolution by Christmas, people close to the talks cautioned that much work remains to be done before Obama and Boehner could seal a deal.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Project Management Support Assistant

£20000 per annum: Recruitment Genius: This Railway Museum, the largest of its ...

Sauce Recruitment: FP&A Analyst -Home Entertainment

£250 - £300 per day: Sauce Recruitment: (Rolling) 3 month contractA global en...

Recruitment Genius: Sales and Account Manager - OTE £80,000+

£40000 - £80000 per annum: Recruitment Genius: This is a fantastic opportunity...

Ashdown Group: Junior Web Developer - Kent - £40,000

£30000 - £40000 per annum + benefits: Ashdown Group: Junior Web Developer - ne...

Day In a Page

Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore
'I'm gay, and plan to fight military homophobia'

'I'm gay, and plan to fight military homophobia'

Army general planning to come out
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
America: Land of the free, home of the political dynasty

America: Land of the free, home of the political dynasty

These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
A graphic history of US civil rights – in comic book form

A graphic history of US civil rights – in comic book form

A veteran of the Fifties campaigns is inspiring a new generation of activists
Winston Churchill: the enigma of a British hero

Winston Churchill: the enigma of a British hero

A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
Growing mussels: Precious freshwater shellfish are thriving in a unique green project

Growing mussels

Precious freshwater shellfish are thriving in a unique green project