Obama rejects Republican fiscal plan

US House Speaker John Boehner proposed $2.2 trillion (€1.6 trillion) of spending cuts and new revenue that lack what president Barack Obama calls essential for a fiscal agreement: higher tax rates for top-earning Americans.

Mr Boehner, an Ohio Republican, yesterday called it a "credible plan that deserves consideration by the White House."

The Obama administration promptly rejected the proposal, which would raise the Medicare eligibility age and slow Social Security cost-of-living increases.

The two sides remain far apart with about four weeks left before more than $600 billion in tax increases and federal spending cuts start taking effect, possibly triggering a recession.

As political pressure mounts, Democrats continue to insist on higher tax rates for top earners while the Republican party (also called the GOP) press for reductions in entitlement programmes.

With the Republican blueprint, both parties now have their opening offers on the table.

Nebraska senator Ben Nelson, a Democrat, said the Republican plan signals "act two" in negotiations over the so-called fiscal cliff.

"There will be an act three undoubtedly, and hopefully the distance between the bid and ask is closed," he said.

Even so, the Republican offer signifies a step forward in negotiations that four days ago Mr Boehner had pronounced at a stalemate, said Jim Manley, a former aide to Democratic Senate majority leader Harry Reid.

Republicans argued their plan is similar to one offered in 2011 by president Bill Clinton's former chief of staff, Erskine Bowles, and it signals they're willing to consider new federal revenue from a net increase in taxes.

Congressional Republican leaders said their proposal puts the onus back on the White House to make the next offer to keep negotiations on track.

Previously, Republicans had insisted on revenue achieved only through economic growth, and last week they rejected Mr Obama's proposal to raise $1.6 trillion in taxes, by increasing tax rates on the top 2 per cent of earners.

"This may be a hopeful first step," Mr Manley said.

"Both sides are trying to show they've done their bit and it's on the other one to act," he said.

"Nothing's going to happen until the deadline is looking everyone in the face."

The $2.2 trillion Republican plan is the first offer from either party that pitches major changes to US entitlement programs, with $900 billion in cuts.

It would collect $800 billion in new tax revenue from revisions that would eliminate unspecified deductions and credits.

Bloomberg