Obama’s offer included elements that hadn’t previously been publicly under consideration. His proposal would end three recurring debates in Congress over expiring provisions.
The president’s plan would permanently extend an annual “patch” that prevents expansion of the alternative minimum tax. He would end a payment cut to doctors under Medicare. Also, he would permanently extend dozens of tax breaks that routinely expire, such as a research-and-development tax credit and a deduction for state and local sales taxes.
His plan would achieve $400 billion in savings from health programs, $200 billion from other so-called mandatory spending and another $200 billion from other programs, half in defense.
About $130 billion of the savings would come from switching the way annual inflation increases for Social Security benefits are calculated. Obama’s offer would include protections for the most vulnerable recipients, said the person familiar with the talks.
“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,” Brendan Buck, a Boehner spokesman, said in a statement.
“We hope to continue discussions with the president so we can reach an agreement that is truly balanced,” Buck said.
The Republican calculation doesn’t count $290 billion in lower interest payments as part of the spending cuts, as the White House totaled them. Interest savings are a byproduct of both tax and spending decisions.
Obama and Boehner met yesterday at the White House for the third time in nine days, and they were joined by Treasury Secretary Timothy F. Geithner.
“They are way aways from a deal yet, but they are talking,” Senator Saxby Chambliss, a Georgia Republican, told reporters after leaving a meeting with Boehner yesterday. “That’s the good news.”
If Obama and Boehner reach a deal, it will take days to draft legislation, sell it to lawmakers and pass it. Senate Majority Leader Harry Reid, a Nevada Democrat, said senators would probably convene Dec. 26 to consider budget measures.
The Standard & Poor’s 500 Index increased 1.2 percent to 1,430.36 at 4 p.m. in New York yesterday, marking the measure’s biggest gain since Nov. 23. Treasuries slid, and the yield on the 10-year benchmark note climbed seven basis points, or 0.07 percent, to 1.77 percent at 5 p.m. in New York, according to Bloomberg Bond Trader prices.
Boehner and Obama each have political challenges as they try to wrap up a deal.
Boehner must secure enough savings from entitlement programs to placate Republicans, who are demanding a high price for reversing their opposition to increased tax revenue.
Boehner last week offered to tax annual incomes exceeding $1 million at 39.6 percent, the top rate Obama is seeking.
The Heritage Foundation, a Republican-leaning Washington policy group, called Boehner’s latest plan “infuriatingly frustrating to conservatives, again.”
Some House Republicans, including Representative Tom Rooney of Florida, say they could support higher tax rates on income above $1 million in exchange for an overhaul of entitlement programs.
“If we can get some kind of compromise and some kind of deal and get our approval rating above 9 percent,” Rooney said in an interview yesterday, “then you are going to have to compromise against what you believe might be right or might be wrong.”
Conversely, Obama must get enough tax concessions from Boehner to satisfy Democrats who say that the president would get the tax rate increases he wants by waiting until Jan. 1. That’s when the tax cuts expire and Obama could pressure Congress to cut rates on income of individuals below $200,000 and married couples below $250,000.
The proposed inflation gauge, known as chained CPI, would reduce scheduled benefit increases and annual adjustments in tax brackets, subjecting more income to higher rates.