WASHINGTON – House Speaker John Boehner has offered to push any fight over the federal debt limit off for a year, a major concession that would deprive Republicans of leverage in the budget battle but is breathing new life into stalled talks over the year-end fiscal cliff.
The offer came Friday, according to people in both parties familiar with the talks, as part of the latest effort by Boehner, R-Ohio, to strike a deal with President Obama to replace more than $500 billion in painful deficit-reduction measures set to take effect in January.
With the national debt already bumping up against the $16.4 trillion cap set last year, Congress risks a government default unless it acts to raise the debt ceiling in the next few months.
Many Republicans had argued that party leaders should use the threat of default to demand additional spending cuts from Obama. But Boehners offer would head off that potentially nasty fight – at least until the end of next year. Boehners offer also includes a proposal to raise tax rates for millionaires, generating $460 billion over the next decade – about half what Obama has demanded from the wealthy, according to official estimates.
The White House rejected the offer, saying it would raise too little cash to significantly dent record budget deficits and do nothing to extend emergency unemployments benefits into the new year, according to a Democrat familiar with the talks.
But the tax offer was viewed as a breakthrough, the Democrat said. Senior White House officials remained in contact with Boehners staff throughout the weekend in a sign that serious negotiations had finally begun after weeks of stalemate and partisan posturing.
Recognizing the importance of raising tax rates is a big, positive and important step, said former White House economic adviser Lawrence Summers, who emphasized that he was not speaking for the Obama administration.
All told, Boehners proposal would generate about $2 trillion in savings over the next decade, split equally between new taxes and spending cuts, according to a Republican familiar with the talks.
On the tax side, about $460 billion would be locked in by letting the George W. Bush-era tax cuts expire on income over $1 million a year.
In exchange for the higher tax rates for millionaires, Boehner is demanding changes to federal health and retirement programs. Boehner wants $1 trillion in total savings.