To avoid the "fiscal cliff," Republicans have recently offered more compromises on tax rates and the debt limit. They are asking for entitlement reform in return, but Democrats seem unwilling to budge on the spending side of the Treasury's ledger.
Speaker of the House John Boehner met with President Barack Obama and offered to increase the tax rate on taxable income above $1 million and to increase the debt limit enough that it would not need another increase for one year. According to unnamed sources in the White House, the offer was rejected, but they acknowledged it was a significant step in their direction on behalf of the speaker.
The private meeting between Boehner and Obama was on Friday and news of what was discussed continued to leak over the weekend. They met again on Monday, beginning at 11:30 a.m.
During the presidential election, Obama and other Democrats frequently complained that Republicans want to protect tax cuts for "millionaires and billionaires." When Republicans offered to increase tax rates just on millionaires, though, the White House said it would not raise enough revenue. Instead, Obama wants tax rates to go up for the top two tax brackets, or those making more than $250,000 per year.
Both sides have moved closer on the revenue side. Boehner initially offered $800 billion in new revenue and is now up to $1 trillion in new revenue. Obama initially wanted $1.4 trillion in new revenue and will now accept $1.2 trillion in new revenue.
On the spending side, though, the two sides still appear far apart. In return for his concessions, Boehner wants entitlement reform. The two ideas being discussed are raising the retirement age and slowing the automatic increases in benefits.
Currently, Social Security and Medicare benefits are indexed to wages, not inflation. Money can be saved, therefore, by increasing benefits at a slower rate. Boehner offered to index benefits to a chained consumer price index, which would still rise faster than inflation, but lower than wages. The change would save about $200 billion over a decade. The White House reportedly rejected that idea as well.
Democrats have not shown a willingness, at least publicly, to go along with entitlement reform. While Democrats have often argued for a "balanced approach," meaning both spending cuts and revenue increases, they remain unbalanced by not agreeing to entitlement reform, complained the editors of The Washington Post, a left-leaning newspaper.
"Since the election last month, a few modest proposals have been floated to slow the growth in entitlement spending. None of these would fix the problem, but they would at least acknowledge that a problem exists. One by one, the ostensible advocates of balance have shot them down, portraying each in turn as a mortal threat to the poor or the aged," wrote The Washington Post editorial board Thursday.
The editors went on to acknowledge that the nation's "underlying fiscal problem," is entitlements, namely Medicare, Medicaid, Social Security, and the health-care exchanges established by the Affordable Care Act, or "Obamacare."
"But there's no way to fix America's problem without doing something on entitlements," they concluded. "If the Democrats -- and Mr. Obama, in particular -- don't get more seriously into that discussion, they have no standing to complain about the Republicans' lack of balance."