CAPITOL HILL— U.S. Republican House Speaker John Boehner is proposing a backup plan in case he and Democratic President Barack Obama fail to reach agreement on a deal that would prevent massive tax increases and spending cuts from automatically taking effect on January 1 - a combination of measures economists are calling the "fiscal cliff."
As negotiations between the most powerful Republican in Washington, Boehner, and the president have intensified and appeared to be making progress, Boehner met Tuesday with his Republican caucus members. He told reporters afterwards that he is preparing to introduce a bill on the floor later this week in case the talks falter.
"So at the same time that we are going to continue to talk with the president, we are also going to move 'Plan B.' I think we all know that every income tax filer in America is going to pay higher rates come January 1st unless Congress acts," he said.
Boehner outlined the essence of his backup plan.
"Our Plan B would protect American taxpayers who make a million dollars or less, and have all of their current rates extended," he said.
Boehner stressed that he is still hopeful his talks with the president will lead to an agreement, but said the president is asking Republicans to agree to $1.3 trillion in tax increases, while only offering them $850 billion in spending cuts. During the negotiations, Democrats have insisted on raising taxes for the highest income earners, while Republicans are calling for substantial cuts in social spending programs.
The Senate, which is controlled by a Democratic majority, already has passed a bill that would extend Bush-era tax cuts for Americans earning less than $250,000 a year. Analysts say the Senate would probably not accept Boehner's bill, which puts the income level exempt from tax hikes at $1 million a year.
In a written statement, the White House responded quickly to Boehner's backup plan, saying the president has put a balanced, reasonable proposal on the table, and that the speaker's "Plan B" cannot pass the Senate. The statement said the plan does little to address the nation's fiscal challenges because it has zero spending cuts.
Asked about the threat of automatic spending cuts, known as the sequester, set to take effect January 1, Boehner conceded his bill does not address them. Economists have warned that the combination of spending cuts, tax hikes and other measures could send the U.S. economy spiraling back into a recession.
For now, both the president and the speaker say they are still hoping to reach an agreement in negotiations, but both are calling on each other to give up more ground.