What compromise?

5 December 2012 By Daniel Indiviglio

The president’s approach to solving the budget crisis could take America over the edge. His first offer was dead on arrival and he quickly rejected Republicans’ compromise response. The politics of not reaching a deal might appeal to Obama, but it’s not good for the economy.

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U.S. President Barack Obama has rejected a Republican plan to cut the deficit and avoid a series of tax hikes and spending cuts. In an interview on Dec. 4 with Bloomberg he said that the plan was still out of balance as it would not raise taxes enough and was too aggressive on entitlement reform and spending cuts.
The GOP’s latest offer sought to raise taxes by $800 billion over a decade by reducing deductions and loopholes, despite many having taken a pledge not to increase taxes. This contrasts with the president’s initial offer, which would have raised taxes by $1.6 trillion, most of which would come from raising marginal tax rates on wealthier Americans.
The two sides are also at odds on entitlement reform. Republicans have demanded some structural changes in return for tax hikes. Their plan would re-index cost of living increases for Social Security benefits as well as raise the age for Medicare eligibility. It would save $800 billion over a decade. The president’s plan would cut Medicare costs by around $300 billion, mainly by reducing payments to healthcare providers.

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