WASHINGTON - President Barack Obama is ready to cut federal spending to reduce the nation's spiraling debt but won't make any deal with Republicans until they first agree to raise taxes on wealthy Americans and specify their own demands for reducing government outlays for a vast array of programs, Treasury Secretary Timothy Geithner said Sunday, explicitly outlining a tough administration negotiating position for avoiding the looming "fiscal cliff."
If the White House and Congress can't reach agreement by Jan. 1, the income tax rate for all Americans will rise significantly and deep cuts in government spending will be triggered, events that economists say would drive the U.S. economy back into recession and cause a spike in already stubbornly high unemployment.
Past legislation has set the Jan. 1 deadline for the expiration of George W. Bush-era tax cuts and the implementation of steep across-the-board federal spending cuts, amounting to hundreds of billions of dollars sliced out of federal programs for everything from education to the military.
"The ball really is with them now," Geithner, one of the White House's chief negotiators with congressional Republicans, said during appearances on five Sunday television talk shows.
On Thursday, Geithner presented congressional leaders with Obama's postelection blueprint, but House Speaker John Boehner, leader of the Republican-controlled lower chamber of Congress, dismissed the plan as "not serious," merely a Democratic wish list.
As outlined by administration officials, the plan calls for nearly $1.6 trillion in new tax revenue over the next decade, while making $600 billion in spending cuts, including $350 billion from the Medicare system that provides health care coverage to the elderly and other health programs. But it also contains $200 billion in new spending on jobless benefits, public works and aid for struggling homeowners — and would make it virtually impossible for Congress to block Obama's ability to raise the debt ceiling.
"I was just flabbergasted," Boehner said, describing his meeting with Geithner. "I looked at him and I said, 'You can't be serious?" The speaker, noting the short time between the Nov. 6 election and the new year, said time has been lost so far "with this nonsense."
But Geithner, in interviews that were taped Friday, offered a somewhat rosier view. "I think we're far apart still, but I think we're moving closer together," he said.
He called the back-and-forth "normal political theatre," voicing confidence a bargain can be struck in time, and said all that's blocking it is Republican acceptance of higher tax rates on the wealthy.
"It's welcome that they're recognizing that revenues are going to have to go up. But they haven't told us anything about how far rates should go up ... (and) who should pay higher taxes?" Geithner said.
He said so far, Republican proposals demonstrate "political math, not real math."
Republican leaders have said they will accept higher tax revenue overall, but only through what they call tax reform — closing loopholes and limiting deductions — and only coupled with tough measures to curb the explosive growth of Medicare, Medicaid and Social Security. Medicaid is the government health insurance program for the poor. Social Security is the federal pension available to retirees.
But Geithner insisted that there's "no path to an agreement (without) Republicans acknowledging that rates have to go up for the wealthiest Americans." He also said the administration would only discuss changes to Social Security "in a separate process," not in talks on the fiscal cliff.
As to spending, Geithner said if Republicans don't think Obama's cutting enough spending, they should make a counter-proposal. "They might want to do some different things. But they have to tell us what those things are," he said.
Republicans have also rejected Obama's debt ceiling proposal. Geithner noted it was Senate Minority Leader Mitch McConnell who first suggested it, as a temporary measure in the summer 2011 deficit deal. The administration would make it permanent. "It was a very smart way by a senator with impeccable Republican credentials to ... lift this ... periodic threat of default," Geithner said. "And that's an essential thing for us."
Under current laws, Congress must approve raising the government's ability to borrow. Until last year's standoff, which resulted in a lowering of the country's credit rating, the debt ceiling had been raised as a matter of course regardless of which party controlled the White House or Congress.
Geithner voiced sympathy for Republicans leaders, saying they're caught between the voters' endorsement of higher taxes on the rich and a House Republican caucus that thinks all tax increases are job-killers.
"They really are in a difficult position," he said. "And they're going to have to figure out their politics of what they do next."
In the past week, Obama has held a series of campaign-style appearances — including one in a swing district in Pennsylvania — urging lawmakers to accept a measure passed by the Democratic-controlled Senate extending the tax cuts enacted during the administration of President George W. Bush for all but the top 2 per cent of wage-earners. He'll continue the effort when he meets with state governors on Tuesday and speaks to the Business Roundtable on Wednesday.