US Republicans make 'fiscal cliff' counter-offer

Republicans laid out a plan Monday for closing the huge US deficit that raises half the income proposed by President Barack Obama and opposes a tax rate increase for the rich.

Calling Obama's plan "neither balanced nor realistic," Republicans instead proposed $1.2 trillion in government spending cuts over 10 years that took sharp aim at benefits in the huge Medicare health insurance program for seniors.

Their reply left the two sides far apart in negotiations just four weeks before the onset of the so-called fiscal cliff, a poison-pill plan of automatic tax increases and spending reductions that economists say will send the economy into recession.

While Republicans agreed to the permanent extension of tax cuts -- a move that would mitigate much of the impact of the cliff -- they insisted that the country's wealthiest also benefit, which Obama has rejected.

They also did not immediately address Obama's call to modify or delay the cliff's drastic "sequester" spending cuts slated to begin on January 1 that could sharply slow growth.

The White House quickly blasted the new plan, saying it "includes nothing new and provides no details on which deductions they would eliminate, which loopholes they will close or which Medicare savings they would achieve."

"While the president is willing to compromise to get a significant, balanced deal and believes that compromise is readily available to Congress, he is not willing to compromise on the principles of fairness and balance that include asking the wealthiest to pay higher rates," said spokesman Dan Pfeiffer.

In a letter to the president, House Speaker John Boehner and fellow House Republican leaders dismissed Obama's plan submitted last week to attack the deficit via $1.6 trillion in increased government income and just $600 billion in spending cuts.

Obama's plan also calls for an increase in the tax rate for households earning over $250,000 a year.

The White House proposal "contains very little in the way of common ground," the Republicans said.

"We cannot in good conscience agree to this approach, which is neither balanced nor realistic."

In their own broad-brush plan, the Republicans proposed a $2.2 trillion package, including $1.2 trillion sliced from federal spending, with half of those savings coming directly from Medicare.

They offered $800 billion in tax increases through "pro-growth tax reform" that lowers tax rates but boosts income by closing loopholes and special deductions for companies and households.

And they said another $200 billion in savings could come from revising the way the consumer price index inflation measure is applied to adjust benefits like Medicare.

"This is by no means an adequate long-term solution, as resolving our long-term fiscal crisis will require fundamental entitlement reform," the letter said.

But the Republicans called their proposal "fair middle ground that allows us to avert the fiscal cliff without hurting our economy and destroying jobs."

The offer from Republicans, who control the House of Representatives, closed little of the gap between the two sides as they race to beat the deadline for the fiscal cliff, originally designed as an extreme solution to force the two sides to achieve a more moderate compromise.

They did appear to accept the Democrats' insistence that long-term reforms to Social Security not be part of the talks.

Given the result of the November 6 election, which saw Obama secure a second term, "it would be counterproductive to publicly or privately propose entitlement reforms," the letter said.

But they turned back Obama's request to end Congress' absolute control of the country's borrowing ceiling, a point of leverage Republicans invoked toughly last year to force budget compromises on the White House.

The current borrowing limit, $16.4 trillion, will be reached at the end of December, again giving Obama's opponents leverage in the negotiations.

--

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