The administration’s call for stimulus measures would help offset any drag from tax increases and spending cuts that do take effect, Senator Kent Conrad, a North Dakota Democrat, said.
“From an economic standpoint, it’s about as clear as a bell that you need some additional lift for this economy, especially in light of what’s happening in Europe,” Conrad, chairman of the Senate Budget Committee, said.
Obama and congressional Democrats have insisted that the George W. Bush-era tax cuts should be allowed to expire at the end of this year for the top 2 percent of taxpayers. The tax cuts should be extended for middle-class taxpayers, they contend.
Republicans reject higher tax rates for all income levels. They are seeking an overhaul of entitlement programs in exchange for raising tax revenue through other methods, such as limiting deductions. They want a higher Medicare eligibility age and an alternative yardstick for calculating inflation that would reduce Social Security cost-of-living adjustments, according to a Republican aide who wasn’t authorized to speak publicly.
Geithner’s offer, as described by two Republican aides, is based on Obama’s fiscal 2013 budget and his 2011 proposal to the deficit-cutting supercommittee, which last year didn’t come up with a plan all sides could accept.
It would raise taxes for top earners by $1.6 trillion over the next decade with higher rates on income, capital gains, dividends and estates, along with limits on tax breaks. It would call for about $400 billion in cuts to entitlement programs, which Republicans have deemed insufficient.
The plan would either extend or replace a payroll tax cut that is set to expire at the end of the year, according to the Republican aides. It would protect millions more people from having to pay the alternative minimum tax and defer by a year the federal spending cuts set to start taking effect in January.