U.S. Treasury Secretary Timothy F. Geithner and House Speaker John Boehner hardened their positions over the fiscal cliff, each blaming the other for a standoff that could lead to more than $600 billion in tax increases and spending cuts in January.
Geithner said Republicans in Congress will be responsible for hurting the economy if they refuse to raise tax rates on the highest-income earners as part of a deal.
“There’s not going to be an agreement without rates going up,” Geithner said in a taped interview that aired today on CNN’s “State of the Union.” Republicans will “own the responsibility for the damage” if they “force higher rates on virtually all Americans because they’re unwilling to let tax rates go up on 2 percent of Americans.”
Republican Boehner said the White House is wasting time.
“I would say we’re nowhere, period,” Boehner said on the “Fox News Sunday” program. “We’ve put a serious offer on the table by putting revenues up there to try to get this question resolved. But the White House has responded with virtually nothing.”
The comments followed a week of political jockeying signaling that post-election optimism over a compromise, expressed by Republicans and President Barack Obama, a Democrat, is fading. Both sides are resuming positions that have defined the debate over higher taxes on the top 2 percent of earners and cuts in government spending. If there’s no agreement by the end of this month, the tax increases and spending cuts will start taking effect.
There’s “clearly a chance” that there won’t be an agreement in time to avert the fiscal cliff, Boehner said on the Fox program.
Geithner appeared on five talk shows today. In the interviews, taped Nov. 30, he challenged Republicans to make a counteroffer to the Obama administration’s framework plan.
The Obama plan is to trade $600 billion in cuts for $1.6 trillion in tax increases, primarily targeting families with more than $250,000 in annual income. It also includes $800 billion in assumed savings from the winding down of the wars in Iraq and Afghanistan.
“The ball really is with them now,” said Geithner, the administration’s lead negotiator on the fiscal cliff, on CNN. “They’re having a tough time trying to figure out what they can do, what they can get support from their members for.”
Obama’s proposal included more new spending than cuts, Boehner told Fox News.
“They wanted to extend unemployment benefits,” he said. “They wanted a new stimulus program for infrastructure. They wanted to extend some other tax breaks. And all of this new stimulus spending would literally be more than the spending cuts that he was willing to put on the table.”
Republicans may be willing to consider caps to income-tax deductions for the wealthy, among other solutions, Boehner said.
“You could cap deductions at a percent of income,” the Ohio Republican said. “That would be one way to get there. You could eliminate certain deductions for the wealthiest in our country. You could do all of that.”
While the talks include “the normal political theater” of Washington, the Treasury secretary told NBC’s “Meet the Press” that he thinks a deal will be reached before Jan. 1. The president was playing golf today with a group including former President Bill Clinton, a Democrat who negotiated a deficit-reduction agreement with congressional Republicans.
Geithner defended the administration’s plan to cut spending, citing proposed savings in farm subsidies and a plan to “modestly increase premiums for high-income beneficiaries of Medicare.”
Warning of “prolonged negotiations,” Obama last week urged voters to pressure congressional Republicans to pass an extension of tax cuts for middle-income Americans. That would leave decisions on reworking the tax code and cutting spending - - two Republican priorities -- until next year.
House Democratic Leader Nancy Pelosi issued a statement today calling on Boehner to immediately schedule a vote on a Senate-passed bill to extend the middle-class tax cuts. Democrats will petition to bring the measure to the floor if he doesn’t act, she said.
Meanwhile, House Republicans this week will meet with small businesses and governors to discuss the fiscal cliff, said Boehner spokesman Kevin Smith. The discussion will center on “how the massive tax rate increases that the president is demanding instead of cutting spending will hurt small business and cost jobs,” Smith said in an e-mail.
In appearances on talk shows today, Republican Senator Bob Corker of Tennessee and Representative Tom Cole of Oklahoma called for Obama to propose spending cuts in entitlements including Social Security and Medicare.
“You can’t expect Republicans to lead in an area he’s dominant in politically,” Cole, who has called for an extension of middle-class breaks as the parties negotiate rates for the wealthiest Americans, said on ABC’s “This Week.”
Social Security shouldn’t be on the table during fiscal cliff negotiations, Geithner said on the ABC program.
“We think you have to do that in a separate process,” he said.
Geithner today reiterated the administration’s proposal to raise taxes on the highest-income earners to the levels of Clinton’s presidency. The top rate of 35 percent was 39.6 percent when Clinton left office.
“Those rates are gonna have to go up,” Geithner said on ABC. “That’s an essential part of any deal.” He also told ABC the administration is “prepared to, in a separate process, look at how to strengthen Social Security. But not as part of a process to reduce the other deficits the country faces.”
Geithner, who has said he plans to leave office in mid-January, said he’s “very confident” Obama will “have somebody in place in January to succeed me.”
Geithner also repeated his case for a long-term extension of the federal debt ceiling after partisan disputes dragged out negotiations over raising the limit last year.
“We are not prepared to let the threat of default on America’s credit, on the savings of Americans, the investments of Americans, be held hostage to the political agenda of a group of people in Congress over time,” he told CBS’s “Face the Nation” program.
Boehner dismissed the idea as “silliness.”
“Congress is never going to give up this power,” Boehner said on “Fox News Sunday.”
AT&T Inc. Chief Executive Officer Randall Stephenson, who met with Obama last week, said a budget deal must be found and will require both spending cuts and tax increases.
“Failure to address this will result in severe market disruptions, a return to negative economic growth and businesses pulling in investment,” Stephenson said in a statement last week.
The impasse has already caused damage, Boehner said. “Just the threat of the fiscal cliff is already hurting the economy,” he said.
Investors, in general, indicated their belief Obama and Republicans would make a deal. The Standard & Poor’s 500 Index rose a second week, the longest advance since September as investors watched developments in the budget negotiations amid better-than-anticipated economic reports.
The S&P 500 increased 0.5 percent to 1,416.18 for the week. The benchmark measure for American equities extended its rally since Nov. 16 to 4.1 percent. The Dow Jones Industrial Average advanced 15.90 points, or 0.1 percent, to 13,025.58.
Treasuries rose for the first month since July with the benchmark 10-year note yield falling for the fifth time in the past six weeks.
The U.S. 10-year yield fell seven basis points, or 0.07 percentage point, last week to 1.62 percent in New York, according to Bloomberg Bond Trader prices. The 1.625 percent note maturing in November 2022 added 22/32, or $6.88 per $1,000 face amount, to 100 3/32. The yield touched the lowest since Nov. 19 and fell 10 basis points last month.