House Speaker John Boehner says he’s “optimistic” one day, only to be “disappointed” the next by the lack of progress. President Obama talks about the need to act immediately, yet the federal government is still lurching toward a disastrous mishmash of tax hikes and slashed spending next year.
The fiscal cliff totals more than $600 billion and threatens to plunge the country into recession, according to the Congressional Budget Office. As of the last week of November, much of what we know about the talks comes from government officials speaking to reporters anonymously, past budget proposals, and press briefings. To help you sort out the difference between what politicians say and what they mean on this issue, The Fiscal Times has put together this simple guide.
Fiscal Cliff Guide | ||
| President Obama | House Republicans |
Income Taxes | 1) Before the Bush-era tax rates expire next year, extend them for those earning less than $250,000. 2) Increase taxes by $1.6 trillion over 10 years. Additional revenue comes from the higher rates and capping deductions for the wealthy. | 1)Approve all Bush-era rates for another year. 2) Overhaul tax code to close deductions and lower rates. Simpler tax code increases economic growth, creating new revenues. |
| Sticking Point: | Sticking Point: |
Budget Sequester | Avoid the $109 billion in automatic cuts for 2013 with a new agreement. Make the cuts targeted, rather than based on across-the-board percentages for defense and domestic programs. | In September, passed a bill that required Obama to find an alternative to the sequester's $55 billion in defense cuts. The Democratic-majority Senate blocked it. |
| Sticking Point: | Sticking Point: |
Medicare & Medicaid | Reduce entitlement spending by $400 billion over 10 years, according to POLITICO. White House budget proposal contained $364 billion in Medicare savings, 42 percent would come from paying less for drugs for low-income recipients. The Simpson-Bowles plan listed $330 billion in potential cuts, a third of which comes from greater out-of-pocket costs for beneficiaries. | White House claims the GOP has yet to offer specifics, while Speaker Boehner says the Democrats should present their ideas first. The 2013 House budget would turn Medicare into a voucher-style program for Americans younger than 55 and eventually raise the eligibility age to 67. But CBO estimates show the real savings wouldn't start until after 2023. |
| Sticking Point: | Sticking Point: |
Social Security | White House insists that's off the table in fiscal cliff discussions. | Reportedly want reforms to the retiree entitlement that's on its way to being insolvent by 2033. |
| Sticking Point: | Sticking Point: |
Debt Ceiling | Top Dems don't want to frantically negotiate on the fiscal cliff, only to then have to start bargaining again with the GOP over raising the $16.4 trillion debt ceiling. The White House wants Congress to relinquish its control over the borrowing limit as part of a package deal. | Boehner will extend the borrowing limit by a sum equal to long-term spending reductions. It's possible to keep Obama on a leash by raising the limit in monthly increments. |
| Sticking Point: | Sticking Point: |
"Doc" Fix | No dispute! Both sides want to suspend the cuts in Medicare physician payments. | No dispute! Both sides want to suspend the cuts in Medicare physician payments. |
| Sticking Point: | Sticking Point: |
AMT & Other Tax Credits | No dispute! Both sides want to patch the Alternative Minimum Tax for inflation so it doesn't hit families making $74,450. | No dispute! Both sides want to patch the Alternative Minimum Tax for inflation so it doesn't hit families making $74,450. |
| Sticking Point: | Sticking Point: |
Defense | The military is about 20 percent of the $3.7 trillion budget. Obama wants to trim Pentagon spending by $487 billion during the next 10 years. | Hawkish about defense spending, the GOP budget by Rep. Paul Ryan, R-Wisc., would add about $300 billion to the military during that same period. |
| Sticking Point: | Sticking Point: |
