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Fiscal Cliff Talks: Behind Obama’s Opening Bid

By Lyn Leahz on November 30, 2012 • ( 1 )

Ryan Grim

Posted: 11/29/2012 9:40 pm EST Updated: 11/30/2012 11:34 am EST

WASHINGTON — Republicans in Congress reacted angrily to an Obama administration proposal delivered Thursday by Treasury Secretary Timothy Geithner that offered to avert the fiscal cliff by raising $1.6 trillion in new taxes, in exchange for some $400 billion in cuts to entitlement programs to be negotiated next year.

But the proposal wasn’t new. The offer that has Republicans furious was presented to them earlier this month by President Barack Obama at the White House, according to a well-placed Democratic source, and confirmed by two GOP sources involved in the talks.

What surprised Republicans wasn’t the newest offer, but who delivered it. The original offer, delivered by Obama, simply wasn’t taken seriously. Republicans assumed that Obama’s initial offer floated to congressional leaders would go like many others he’s made in the past, and quickly soften amid staff talks. That seemed to be happening, which left them taken by surpise by Geithner. Acknowledging that Thursday’s offer was essentially the same as the one presented by the president, a GOP aide said that White House “staff has been back-channeling flexibility up until now. This was the first time their staff echoed his fantasyland numbers.” A second senior GOP aide called Thursday’s offer “a more detailed version” of Obama’s. “The day after the White House meeting, we gave them our framework. It took them 10 days for them to give us theirs and it didn’t reflect any of the conversations we have had since then,” he said.

A source involved in the talks provided HuffPost with a GOP summary of the White House offer as presented Thursday. A Democratic source involved in the talks confirmed that it accurately reflects the offer, adding that it’s “no different than what was discussed last Friday.”

“My question is do the Republicans actually think they are going to get anywhere in moving public opinion with press conferences in the Capitol compared to POTUS, who will be flying across the country to deliver his message,” he said. House Speaker John Boehner (R-Ohio) and Senate Minority Leader Mitch McConnell (R-Ky.) “are relegated to dealing with Geithner while POTUS delivers his message far and wide.”

Having Geithner make the offer accomplishes several things. It blocks Republicans from claiming that Democrats have not put an offer on the table — because they’ve now been publicly complaining about the offer on the table. And it pushes the process closer to the fiscal cliff, ramping up pressure on Republicans.

Geithner’s offer would delay the sequester — automatic spending cuts to the Pentagon and social programs — for a year, and effectively eliminates the congressional requirement to lift the debt ceiling in perpetuity. The offer included an extension of unemployment insurance, the payroll tax and even money to help homeowners modify mortgages and invest in infrastructure. “I think there was a leprechaun in there somewhere, too,” quipped one GOP aide.

The proposal is based on a two-step plan that would decouple the high-end tax and capital gains rates from the middle-class rates, extending only those for the middle class. It would revert estate taxes to their higher 2009 level, and raise an additional $600 billion in taxes elsewhere, according to the GOP summary. It then proposes tax reform required to raise at least as much as the tax hikes, and entitlement reform that would trim $400 billion from the programs.

The president made the same two-step offer to Republicans, said the sources in both parties involved in the talks. Republicans contend they’ve made a sufficient counter-offer that is essentially being ignored. Democrats say that Republicans refuse to get specific on entitlements. The president “asked them to give us what they want as a down payment on entitlements. They still haven’t given us a proposal. All they have done is said, extend all rates,” said a congressional Democratic source.