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Originally published December 3, 2012 at 8:52 PM | Page modified December 4, 2012 at 7:24 AM

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GOP makes counteroffer to Obama, but sides still far apart in fiscal talks

The counteroffer represented an acknowledgment by Republicans that they had to issue their own proposal to head off around $600 billion in automatic tax increases and spending cuts next year, a fiscal combination that could send the economy back into recession.

The New York Times

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WASHINGTON — Republican congressional leaders Monday countered President Obama's deficit-reduction proposal with a plan of their own that is far heavier on spending cuts, but that embraces $800 billion in new taxes over the next 10 years.

The counteroffer represented an acknowledgment by Republicans that they had to issue their own proposal to head off around $600 billion in automatic tax increases and spending cuts next year, a fiscal combination that could send the economy back into recession.

They said that their approach was a move toward the center rather than sticking to a position established last year with the passage of the House Republican budget, which included contentious changes to Medicare and Medicaid and deep domestic-spending reductions.

"Mindful of the status quo election and past exchanges on these questions, we recognize it would be counterproductive to publicly or privately propose entitlement reforms that you and the leaders of your party appear unwilling to support in the near term," Republican leaders wrote in a letter to Obama.

The president's offer, forwarded to congressional leaders by Treasury Secretary Timothy Geithner last week, stuck almost word for word with the budget proposal the Obama administration released nearly a year ago.

Monday's Republican offer on taxes was close to what Speaker John Boehner, R-Ohio, offered during private talks with Obama last year.

But Monday's offer did bring some Republican concessions.

Senior Republican leadership aides said the $800 billion in new revenue would come from increases in tax revenue, not from increased economic growth, as Republican leaders have often suggested since the number emerged from the Boehner-Obama talks. But the plan would extend the expiring Bush-era tax cuts for high-income Americans, something the president has said he would not agree to.

The offer itself — in a letter signed by the Republican House leadership, including Rep. Paul Ryan, the former vice-presidential nominee — means that both sides have now put their opening bids on the table.

Republican leaders last week loudly rejected the Obama administration's offer and said they would not counter until the president came back with a plan they considered more realistic, not the one that Boehner again dismissed Monday as a "La-La-Land offer." But facing increasing political pressure to produce an alternative, Republicans acted Monday. "What we are putting forth is a credible plan that deserves serious consideration from the White House," Boehner said.

But the White House was critical of the proposal.

"The Republican letter released today does not meet the test of balance," said Daniel Pfeiffer, the communications director. "In fact, it actually promises to lower rates for the wealthy and sticks the middle class with the bill. Their plan 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."

Republicans did produce proposals that could create a political backlash. Of the plan's savings, $200 billion over 10 years would come from changing the way the government calculates inflation, which would slow benefit increases in programs from Medicare to Social Security and raise taxes by slowing the annual rise in tax brackets.

Republican aides said that it will be unpopular, but that it is the right response to deficits still topping $1 trillion.

The Republican plan also called for $600 billion in cuts to federal health-care programs, including an increase in the eligibility age for Medicare and increased means testing to shrink health benefits for more affluent seniors.

In all, the Republican offer would reduce the deficit more than the president's, which predicted about $1.8 trillion in deficit reduction over the next 10 years.

The White House also counted $1 trillion in cuts agreed to last year, savings from ending the wars in Iraq and Afghanistan, and lower interest payments on a shrinking debt for a total savings of $4 trillion.

Republicans rejected that accounting, but using the same figures their plan would cut $4.6 trillion from future deficits over 10 years.

In an effort to give their proposal added credibility, Republicans said their counteroffer is close to numbers suggested last year by Erskine Bowles, the Democratic co-chairman of the president's deficit-reduction task force. Bowles said last week that his numbers, offered in testimony to a special bipartisan congressional committee on deficit reduction, were not so much a plan as a back-of-the-envelope suggestion to show that a deal could be struck that would be somewhere between Obama's position and the speaker's during their talks last year.

On Monday, Bowles sought to distance himself from the GOP plan, saying circumstances had overtaken his numbers. He said to get a deal "it will be necessary for both sides to move beyond their opening positions."

With just weeks left to find a solution, the parties remain far apart on substance. The White House is insisting that tax increases include higher tax rates on affluent households, a formula that Republicans continue to reject.

"The new revenue in the Bowles plan would not be achieved through higher tax rates, which we continue to oppose and will not agree to in order to protect small businesses and our economy," the Republican letter said. "Instead, new revenue would be generated through pro-growth tax reform that closes special-interest loopholes and deductions while lowering rates."

Republicans offered no specifics on which loopholes or deductions they would close, saying that would be determined next year by the congressional tax-writing committees.

Cuts to other programs that are not under the purview of annual congressional spending bills — so-called mandatory programs — would total $300 billion over 10 years, according to the Republican plan. And discretionary programs, already cut by nearly $1 trillion through last year's Budget Control Act, would be cut another $300 billion.

GOP leaders called the offer "the kind of imperfect but fair middle ground that allows us to avert the fiscal cliff without hurting our economy and destroying jobs."

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