US 'fiscal cliff' offer rejected

Barack ObamaThe White House has rejected a Republican counter-offer aimed at averting the "fiscal cliff", saying it does not meet "the test of balance".

White House communications director Dan Pfeiffer said the Republican proposal would lower tax rates for the wealthy and land the middle classes with the bill. He said the plan includes nothing new and provides no details on how it would achieve higher revenues.

The House Republican plan calls for 800 billion US dollars in higher tax revenue over 10 years. But it would keep Bush-era tax cuts in place for all income earners.

President Barack Obama has insisted there can be no deal unless Republicans agree to end the tax cuts for families making more than 250,000 dollars a year when they expire in January.

The plan, sent to the White House by House Speaker John Boehner, did go partway toward the president's demand that Republicans lay out spending cuts they would demand as negotiations on the budget crisis begin in earnest.

Mr Obama and congressional Republicans have until December 31 to reach an agreement on how to increase US government revenue and cut spending to avoid big automatic tax increases on all Americans and massive cuts in government programmes ranging from education to the military.

Economists predict that a failure to avoid both the rise in taxes and the mandated spending cuts would send the fragile economy back into recession and cause a spike in already stubbornly high unemployment.

The Republican plan calls for increasing the eligibility age for Medicare, the federal government's health insurance programme for older Americans, and lowering cost-of-living increases for social security pension benefits that go to Americans of retirement age. But it does not meet Mr Obama's demand that tax rates be raised for American couples earning more than 250,000 dollars a year and runs counter to his campaign promise to save Medicare from the chopping block.

Adding to the negative consequences of a negotiated outcome is the coincidence of the end to two other programmes at the same time - a reduction in the payroll tax that Americans pay into the federal social security pension programme and extended government benefits to the long-term unemployed.

The Boehner offer is in response to Mr Obama's offer last week to hike taxes by 1.6 trillion dollars over the coming decade but largely exempt Medicare and social security from budget cuts. The Republican plan also proposes to raise 800 billion dollars in higher tax revenue over the decade but it would keep the former president George Bush-era tax cuts, including those for wealthier earners targeted by Mr Obama, in place for now.
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