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.
Many Republicans had argued that party leaders should use the threat of default to demand additional spending cuts from Obama. But Boehner’s offer would head off that potentially nasty fight — at least until the end of next year.
Boehner’s 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 Boehner’s 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.
“The evaluation of any deal should depend on how much total revenue is raised, whether adequate demand is maintained to sustain the recovery and whether we are restoring confidence or just marking time until another debt-limit crisis,” Summers said.
Boehner and Obama have not spoken directly since the Friday afternoon phone call when Boehner extended his latest offer. With Obama in Newtown, Conn., to attend a Sunday-night service for victims of Friday’s elementary school massacre, aides were uncertain when their next meeting would take place.
All told, Boehner’s 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.
That would boost the top rate from the current level of 35 percent to 39.6 percent for about 400,000 families in the 2013 tax year. The rest of the tax revenue would come through a rewrite of the tax code next year aimed at limiting deductions and other tax breaks. More >>