House Republicans on Monday made their first counter offer to the White House in negotiations over the so-called fiscal cliff, proposing total savings of $2.2 trillion over the next decade, $800 billion of which would come from new revenue through tax reform.
House GOP leaders once again expressed disappointment at the offer presented by Treasury Secretary Timothy Geithner last week, calling it "neither balanced nor realistic" in a formal letter to President Barack Obama.
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House Speaker John Boehner (R., Ohio) and other senior Republicans, including House Budget Committee Chairman Paul Ryan (R., Wis.), proposed a "credible" savings framework based on one previously outlined by Erskine Bowles, the Democratic co-chair of the president’s deficit commission.
"We believe it warrants immediate consideration," they wrote.
The White House swiftly rejected the offer.
"The Republican letter released today does not meet the test of balance," White House spokesman Dan Pfeiffer said in a statement. "Until the Republicans in Congress are willing to get serious about asking the wealthiest to pay slightly higher tax rates, we won’t be able to achieve a significant, balanced approach to reduce our deficit our nation needs."
One House GOP aide said Pfeiffer’s statement proves the White House is "far more interested in raising tax rates than solving our economic problems."
Erskine Bowles, a former chief of staff to President Bill Clinton, also disavowed his own framework. He said, "Circumstances have changed."
The GOP proposal would reduce the deficit by $2.2 trillion and avert the fiscal cliff by doing away with the $1.2 trillion in automatic spending cuts scheduled to take effect early next year. The proposal would also extend current tax rates on all incomes, which are also set to expire absent Congressional action.
The GOP offer included $800 billion in new revenue through tax reforms that capped or eliminated deductions for high earners in addition to $1.2 trillion in spending cuts and entitlement savings. And it would save $200 billion by changing the way the federal government calculates inflation, as applied to various benefits programs such as Social Security.
The $800 billion revenue is in line with the amount Boehner had discussed in previous budget negotiations with the White House, and is roughly equivalent to the amount that would be raised by letting current income tax rates expire on top earners.
Bowles initially outlined this framework to Congress last November. It also included changes to entitlement programs such as gradually raising the age of eligibility for Medicare from 65 to 67.
GOP leaders wrote that the Bowles framework is "exactly the kind of imperfect, but fair middle ground that allows us to avert the fiscal cliff without hurting our economy and destroying jobs."
"If you are agreeable to this framework, we are ready and eager to begin discussions about how to structure these reforms so that the American people can be confident these targets will be reached," they wrote.
The president’s initial offer, unveiled last week, asked for $1.6 trillion in higher taxes, about $400 billion in new stimulus spending, and included vague promises on future spending cuts and entitlement reforms. It also called for eliminating the statutory requirement that Congress approve increases in the federal government’s borrowing authority.
Boehner on Monday called it a "La-la-land offer," and noted that it was largely based on Obama’s most recent budget proposal, which not a single Democrat in Congress voted for.
Senate Minority Leader Mitch McConnell (R., Ky.) said the House Republican framework was "a good-faith effort to find common ground and a realistic approach."
The two parties remain bitterly divided on the issue of tax rate increases.
Most Republicans are opposed on the grounds that higher tax rates will slow job growth and harm the fragile economic recovery.
However, the White House is insisting that any deal to avert the fiscal cliff allow current tax rates on top-earning families and small businesses to expire as planned.
"If Republicans are not willing to let rates go back up—and we think they should go back up to the Clinton levels, a time when the economy is doing exceptionally well—then there will not be an agreement," Geithner said Sunday.
Sen. Lindsey Graham (R., S.C.), who has expressed more flexibility than some of his colleagues on the issue of taxes, said he was pessimistic that a deal could be achieved.
"I think we’re going over the cliff," he said on CBS News’ Face the Nation.