Overview of the White House’s counter-offer to avert the fiscal cliff
President Barack Obama spoke to Republican House Speaker John Boehner again last night and presented a counter-offer to avert the fiscal cliff.
The fiscal cliff refers to the combination of tax increases and steep spending cuts that are scheduled to go into effect on Jan. 1st unless Congress and the President reach a deal by the end of the year.
The White House’s latest proposal doubled the amount of spending cuts – including cuts entitlement programs such as Social Security and Medicare – that Republicans have insisted on. It also significantly raised the income threshold for the expiration of the Bush-era tax cuts.
Overview of Obama’s counter-offer:
- $1.2 trillion in additional revenue over 10 years, which will be generated primarily by allowing the Bush tax cuts to expire for income exceeding $400,000 a year. The President’s previous proposal would have allowed the Bush tax cuts to expire for income exceeding $250,000 a year.
- More than $800 billion in cuts to entitlements and discretionary spending programs.
- $400 billion in cuts to health care programs such as Medicare and Medicaid.
- $200 billion in cuts to non-health care entitlement programs.
- $200 billion in cuts to discretionary spending, split evenly between defense and non-defense programs.
- Cuts to Social Security benefits by calculating the Cost-of-Living Adjustments (“COLA”) using an alternative Consumer Price Index (“chained CPI”). The chained CPI factors in “the ability of consumers to substitute goods or change purchasing outlets in response to relative price changes” from inflation. So under the chained-CPI calculation, seniors receive get lower cost-of-living adjustments as they get older. According to the Social Security Administration, using chained CPI will reduce annual benefits by 2.9% for men and by 3.9% for women (who tend to live long than men). Seniors who live past 90 years old will see about a 10% benefit cut under the chained CPI calculations.
- WhatTheFolly.com: Fiscal Cliff: Boehner rejects Obama’s counter-offer, presents “Plan B”
- WhatTheFolly.com: Transcript: House Speaker John Boehner proposes Plan B to avert fiscal cliff
- WhatTheFolly.com: Bernanke: Federal Reserve can’t “offset” fiscal cliff damage
- WhatTheFolly.com: Pelosi challenges House Republicans to bring middle-class tax cut bill to a vote
- WhatTheFolly.com: Fiscal Cliff: Boehner sends counter proposal to White House
- WhatTheFolly.com: Overview of the White House’s initial proposal to avert the fiscal cliff
- WhatTheFolly.com: Overview of the GOP’s initial proposal to avert the fiscal cliff
- WhatTheFolly.com: Social Security cost-of-living increase won’t keep up with Medicare premium hike
- WhatTheFolly.com: Older Americans hit hard by the Great Recession
- WhatTheFolly.com: Transcript: Dr. Eric Kingson on cost of living adjustments for Social Security recipients
- WhatTheFolly.com: Transcript: Dr. Heidi Hartmann on growing reliance on Social Security by American seniors
- WhatTheFolly.com: CBO director Doug Elmendorf: U.S. debt to reach 85% to 190% total GDP by 2035
- WhatTheFolly.com: National coalition calls on Congress to improve Social Security benefits for women
- WhatTheFolly.com: Analysis: Impact of sequestration on non-defense discretionary spending
- WhatTheFolly.com: 5 key facts about sequestration
- WhatTheFolly.com: Sequestration will result in a ‘hollowed out’ military, armed forces chiefs warned
- WhatTheFolly.com: Discretionary spending will face another round of cuts if the Super Committee’s plan fails
- Social Security Administration: Distributional Effects of Reducing the Cost-of-Living Adjustments – 2008
- Social Security Administration: Social Security Cost-of-Living Adjustments and the Consumer Price Index – 2007
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