By Alexander Bolton - 12/12/12 01:05 AM EST
Congressional Republicans and the White House on Tuesday appeared to edge closer to a deficit-reduction deal that would raise new taxes on the wealthy but also reform entitlement programs.
The two sides exchanged offers following a face-to-face meeting Sunday between President Obama and Speaker John Boehner (R-Ohio), who are negotiating a deal to prevent tax hikes and spending cuts that could trigger a recession early next year.
Sources said the White House lowered its $1.6 trillion request for new tax revenues to $1.4 trillion over 10 years in an offer on Monday. Republicans made a counteroffer Tuesday that remained at $800 billion in new tax revenues.
Boehner and Obama also spoke to one another Tuesday night.
Separately, members of both parties offered predictions that their leaders were willing to compromise in the talks.
Republican senators are coalescing around the position that they will allow tax rates on wealthy families to rise to prevent tax rates from increasing for middle-class families with annual income under $250,000.
All of the tax rates are set to expire at the end of the year, and many Republicans fear they’ll be blamed by the public if the tax rates rise.
“All the president has to do if he wants to raise the top rates is nothing,” said a senior Senate Republican aide.
It’s a position that has also advanced in the House, where Rep. Tom Cole (R-Okla.) last month said Republicans would have more leverage on spending cuts and entitlement reforms if they gave in on hiking the upper-income tax rates.
Members of both parties also predicted Tuesday that the president would move further on the entitlement reforms demanded by Republicans.
Obama embraced significant entitlement reforms in private talks with Boehner in 2011, including raising the Medicare eligibility age, cutting Medicaid spending and changing the formula for calculating Social Security benefits.
In this year’s talks, Obama has taken a harder line on entitlements so far, and some Senate Republicans think the president might wait until closer to Dec. 31 to embrace structural changes to minimize the backlash from the party’s liberal base and labor unions.
Democrats in Congress were infuriated when they learned of the tentative concessions Obama had offered in 2011, and the emerging deal soon fell apart.
“He knows he can’t solve this with revenues alone,” said Senate Republican Conference Chairman John Thune (S.D.). “Maybe he’s waiting until he’s dragged to the table kicking and screaming so it looks like he resisted.”
In an interview with ABC’s Barbara Walters that aired Tuesday night, Obama acknowledged that raising the Medicare eligibility age from 65 to 67 is “something that’s been floated,” and did not dismiss the idea outright.
“When you look at the evidence, it’s not clear that it actually saves a lot of money,” he said. “But what I’ve said is let’s look at every avenue, because what is true is we need to strengthen Social Security, we need to strengthen Medicare for future generations. The current path is not sustainable because we’ve got an aging population, and healthcare costs are shooting up so quickly.”
Centrist Democrats in the Senate also believe Obama wants to enact major reforms.
Retiring Sen. Ben Nelson (D-Neb.) said Obama must orchestrate his moves carefully in order not to provoke a backlash from his own party.
“The question is not whether, it’s how, because it’s not sustainable in its present form,” Nelson said of entitlement reform.
Sen. Mark Pryor (Ark.), another centrist Democrat, thinks Obama will come around to entitlement reform but it’s a matter of timing that needs to be meticulously planned in the midst of high-stakes talks.
“It’s a negotiation; you don’t want to lay all your cards on the table until they’ve laid their cards on the table,” he said.
If Obama is as serious about reforming entitlement programs as many Democrats think he is, then linking those reforms to tax hikes for the wealthy would give him political cover. It would let him claim he had to make those concessions to ensure the nation’s highest income earners pay more in taxes.
The president could be waiting until the last moment to give Democratic allies less time to revolt over concessions on entitlement spending when they think Republicans will be forced to accept higher income tax rates for families above the $250,000 earning threshold.
The danger for Obama from the left was made clear in an op-ed published Tuesday in USA Today by House Minority Leader Nancy Pelosi (D-Calif.). She objected to changing the eligibility age for Medicare, though she said Democrats would be willing to find savings “that extend the life of Medicare without hurting beneficiaries.”
And on Sunday, Sen. Bob Corker (Tenn.) became the latest Republican to argue that the GOP should give in on higher tax rates on the wealthy.
“There is a growing group of folks that are looking at this and realizing that we don’t have a lot of cards on the tax issue before year-end,” Corker said on “Fox News Sunday.” “A lot of people are putting forth a theory, and I actually think it has merit, where you go ahead, give the president the 2 percent increase that he is talking about — the rate increase on the top 2 percent — and all of a sudden the shift goes back to entitlements.”
Sen. Susan Collins (R-Maine) told the Portland Press Herald, “wealthy individuals — millionaires and billionaires — should pay a greater percentage of their income in taxes to help us reduce the soaring deficit.”
Some conservatives disagree vehemently.
Sen. Jim DeMint (R-S.C.) argues decoupling tax breaks for the wealthy and the middle class would be a disaster.
“I don’t think any decoupling of the rates is a concession we should make. I think that’s capitulation. It doesn’t help the country. For the Republicans to agree to that is bad policy and I think it’s bad politics,” he said last month.
House GOP leaders have also said they will not accept higher tax rates, with Ways and Means Committee Chairman Dave Camp (R-Mich.) lashing out Tuesday at the Business Roundtable for endorsing rate hikes.
Senate Republican Leader Mitch McConnell (Ky.) on Tuesday bemoaned the media’s focus on tax cuts instead of entitlement reforms.
“The president seems to think if all he talks about are taxes and that’s all reporters write about, somehow the rest of us will magically forget that government spending is completely out of control,” he said.
Amie Parnes and Erik Wasson contributed.