White House threatens to veto backup fiscal plan

The White House has threatened to veto House Speaker John Boehner’s surprise backup plan for averting the “fiscal cliff” that looms two weeks away, saying it was time to stop political posturing and pursue recent progress in talks to avoid hundreds of billions worth of broad tax increases and budget-wide spending cuts due to be triggered without a deal.

Boehner, the most powerful Republican in Congress and his party’s leader in the negotiations, had yesterday proposed extending tax cuts for people making up to $1 million.

President Barack Obama has proposed extending those cuts only for households earning $400,000 and below.

Boehner plans a House vote on his proposal on Thursday, hoping that it would raise pressure on Obama to make concessions. The White House said his package would not raise enough revenue from the country’s top earners and would leave too big a deficit reduction burden on the middle class.

Boehner’s plan also contains none of the spending reductions that both sides have proposed in their efforts to strike a compromise.

Economists generally agree that unless a deal is reached by the end of the year, the steep, abrupt tax increases and budget cuts probably would shove the economy back into recession.

The talks in recent days had produced movement on tax rate hikes that have proven deeply unsettling to conservatives and on cuts to federal Social Security pensions that have incensed liberal Democrats.

On Monday, Obama had offered concessions, including a plan to raise top tax rates on households earning more than $400,000 instead of the $250,000 threshold he had campaigned on before winning re-election.

And the two sides had inched closer on the total amount of tax revenue required to seal the agreement to rein in deficit spending. Obama now would settle for $1.2 trillion, lowering his 10-year tax revenue goals from the $1.6 trillion he originally sought, while Boehner is now offering $1 trillion.

Obama’s latest offer focusing tax increases on income above $400,000 would affect nearly 1.1 million taxpayers. Limiting the tax increases to income exceeding $1 million would target just 2,37,000 households, according to the latest Internal Revenue Service figures for 2009.

The outlines of a possible Obama-Boehner agreement appeared to have shaky support at best from Boehner’s leadership team and outright opposition from key Republicans like Vice-Presidential nominee Paul Ryan, a House Republican aide said. That aide spoke only on condition of anonymity because the aide was not authorised to discuss the situation publicly.

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