Despite fiscal cliff talks fizzling last week, Timothy Geithner is optimistic of a deal. Republicans have to give, though.
By Kevin Hewston
The fiscal cliff threatens virtually all Americans with tax increases of about $600 billion. But that’s only if the nation goes over the cliff come January 1st. Treasury Secretary Timothy Geithner remains hopeful for a solution to stave off what some critics fear could be a recession.
“I actually think that we’re gonna get there,” Geithner said on ABC’s This Week. “I think we’re actually making a little bit of progress, but we’re still some distance apart.”
What the Obama administration is trying to do is two-fold. They are preventing tax increases on 98 percent of Americans. But they are also trying to create a long-term, stable economy.
To do this, Geithner said the government has a “very good mix” of tax increases and spending cuts. Geithner mentioned tax increases on the wealthiest 2 percent of Americans and what he called “very comprehensive…savings.” Those savings would help stabilize the debt and even invest in the economy like rebuilding infrastructure.
Mr. Obama’s plan includes $1.6 trillion in tax increases over the next ten years. It also includes $50 billion in immediate stimulus spending and $400 billion in unspecified Medicare and other entitlement program cuts over the next ten years. Geithner also spoke of $600 billion in “reforms and savings” to healthcare and other programs. The president also would have permanent authority to increase the debt ceiling.
Republicans, embittered over tax cuts for the wealthy, say the proposal isn’t serious. It asks for twice the amount Mr. Obama would get from the wealthy. Moreover, it would have trouble passing the Democratically-controlled Senate, which narrowly passed a bill creating $800 billion months ago.
Nonetheless, Mr. Geithner predicted broad support of the plan from the business community and the American people.
The plan even incorporates Republican proposals. Senate Minority Leader Mitch McConnell (R-KY) proposed to give the President authority to raise the debt ceiling previously without cutting government spending. He did this, although he never intended for it to be permanent. On the campaign trail, Mitt Romney also spoke of limiting deductions that would affect the wealthy.
Although Mr. Geithner wasn’t clear on what deductions that would include, he indicated deduction limits would affect the middle class. Specifically, that’s 17 million middle class Americans and a large revenue source. Likewise, limiting charitable contributions would equal lost revenue.
Mr. Geithner remains clear on the proposal to impose a “percentage limit” on all deductions and exclusions for the top 2 percent. A tax increase on the wealthy would be reminiscent of Clinton-era rates “at one of the best, most prosperous times in recent American economic history.” The Bush-era tax cuts, says Geithner, would cost $1 trillion over the next 10 years if allowed to continue.
President Obama favors extending cuts for families making less than $250,000—98 percent of Americans—and individuals making less than $200,000.