Obama administration threatens to veto Boehner Budget Bill

US President Barack Obama would veto a tax and spending proposal presented by House Speaker John Boehner because it would put “too big a burden on the middle class,” White House Communications Director Dan Pfeiffer said.

“Millionaires would see a tax break of $50,000, while eliminating tax cuts that 25 million students and families struggling to make ends meet depend on,” Pfeiffer said in a statement on Wednesday. It also would “deeply” cut Medicare, he said.

The House may vote tomorrow on Boehner’s “Plan B,” which would raise tax rates on income over $1 million, rather than the $400,000 threshold the president proposed in his latest offer.

 

With his push for a vote on his proposal, Boehner is looking to pressure Obama to accept deeper spending cuts and a higher threshold for rate increases by showing how hard it will be to win Republican support for any tax increase. Unless Congress acts, more than $600 billion in tax increases and spending cuts will begin next month.

“Right now we need to do something to get the president’s attention,” Representative Frank Lucas, an Oklahoma Republican, said in an interview. Boehner’s approach “might just help,” he said.

Putting Republicans on record in support of a higher rate for some top earners might insulate Boehner and his party from blame if no deal is reached with Obama and taxes rise starting January 1 as part of the so-called fiscal cliff.

Senate Minority Leader Mitch McConnell, a Kentucky Republican, said today that Obama has squandered the chance to craft a broader solution with Republicans.

“Speaker Boehner, like me, would like to prevent a tax hike on everyone,” McConnell said on the Senate floor. “But given the president’s failure to act, the House will soon vote on legislation to prevent a tax hike on anyone making less than a million dollars a year, rather than letting taxes go up on every American taxpayer.”

“A lot of things right now are for the dynamics of the negotiation,” said Missouri Senator Roy Blunt, who previously served as House Republican whip. “We’re down to a fairly narrow question here. I would hope that the president and the speaker could negotiate the end of that difference.”

Boehner first signalled openness on December 14 to tax rate increases on income over $1 million, marking progress in what had been a primary stumbling block in his talks with Obama.

Meanwhile in London, ratings firm Fitch said it is more likely to strip the US of its triple-A status if a political deal is not reached to halt $600 billion of spending cuts and tax hikes set for early next year.

“Failure to avoid the fiscal cliff ... would exacerbate rather than diminish the uncertainty over fiscal policy, and tip the US into an avoidable and unnecessary recession,” Fitch said in its 2013 global outlook, published on Wednesday.

“That could erode medium-term growth potential and financial stability. In such a scenario, there would be an increased likelihood that the US would lose its Aaa status.”

Fitch currently assigns the United States its highest rating but with a negative outlook. Peer Standard & Poor's has already downgraded the world's biggest economy, lowering the United States to Aa+ in August 2011 — a move which appears to have done little to dull the attraction of US bonds for investors. Fitch added that an agreement on a multi-year deficit reduction plan to stabilise US debt and public finances was likely to see the country keep its Aaa rating.

However, it went on to say that: “failure to put in place a credible fiscal consolidation strategy during 2013 would be likely to result in the US losing its Aaa status.”