GWEN IFILL: House Republicans today offered their counteroffer to the president's plan for a deal both sides say is needed to avoid year-end tax increases.
The move was the latest volley in an increasingly tense face-off between the two branches of government.
With 28 days left to come to a deal on the nation's fiscal cliff, the White House is holding firm on its proposal to raise taxes on the wealthy.
Spokesman Jay Carney:
JAY CARNEY, White House: The obstacle remains at this point the refusal to acknowledge by Republican leaders that there is no deal that achieves the kind of balance that is necessary without raising rates on the top 2 percent wealthiest Americans. The math simply doesn't add up.
GWEN IFILL: The White House proposes raising $1.6 trillion in taxes over 10 years, imposing higher rates on those making more than $250,000 a year.
In a letter sent to the White House today, speaker of the House John Boehner rejected the president's approach, writing that Republicans "cannot in good conscience agree to this approach, which is neither balanced nor realistic."
His counteroffer, save $2.2 trillion by among other things raising $800 billion in new revenues. The plan would also raise the future eligibility age for Medicare and alter Medicaid to save another $600 billion. The Republican plan wouldn't increase tax rates for the wealthy.
The president is campaigning for his plan, taking questions on Twitter today and releasing this new Web video.
PRESIDENT BARACK OBAMA: Under my plan, first of all, 98 percent of folks who make less than $250,000, you wouldn't see your income taxes go up a single dime. All right?
(CHEERING AND APPLAUSE)
BARACK OBAMA: Because you're the ones who need relief.
GWEN IFILL: Treasury Secretary Timothy Geithner met with congressional leaders last week and pressed the administration's case in a series of talk show appearances this weekend.
TREASURY SECRETARY TIMOTHY GEITHNER: Rates are going to go up, have to go up on the wealthiest Americans. Those rates are going to have to go up. That's an essential part.
There's no possibility that we're going to find a way to get our fiscal house in order without those tax rates going back up. There's no path to an agreement that doesn't involve Republicans acknowledging that rates have to go up for the wealthiest Americans.
GWEN IFILL: But Boehner, also on a Sunday talk show appearance, pushed back.
REP. JOHN BOEHNER R-Ohio: I was just flabbergasted. I looked at him and said, you can't be serious.
CHRIS WALLACE, "FOX News Sunday": Where are we now?
JOHN BOEHNER: Right now, I would say we're nowhere, period. We're nowhere. We have put a serious offer on the table by putting revenues up there to try to get this question resolved, but the White House has responded with virtually nothing. They have actually asked for more revenue than they have been asking for the whole entire time.
GWEN IFILL: The White House also proposed ending congressional control over the nation's debt limit. Boehner called that silliness.
Mr. Boehner and other congressional leaders will head to the White House tonight for a holiday party, but there are no formal negotiations scheduled for the rest of this week. The president makes his case to state leaders tomorrow when several governors visit the White House.
Late this afternoon, the White House rejected today's Republican counteroffer, saying it doesn't meet the test of balance.
One man who has been searching for that balance is Erskine Bowles, who, with Alan Simpson, is co-author of a deficit reduction plan that neither side has previously embraced. I spoke with him a short time ago.
Erskine Bowles, thank you so much for joining us.
Late this afternoon, John Boehner, the House speaker, sent a letter to the White House in which he said he needed to find different middle ground on this fiscal cliff issue.
And he particularly cited your report, which he described as providing imperfect, but fair middle ground as a way of breaking this political stalemate.
He's saying, if only the president would adopt your approach, that maybe this stalemate could be broken. What do you think about that?
ERSKINE BOWLES, National Commission on Fiscal Responsibility And Reform: Well, I haven't seen the letter, as I think you know.
But it's nice that the speaker would give me some credit for trying to do that. But what he is referring to is, when I testified before the super committee, I tried to show these guys that if they truly wanted to get together, that they could get together at that time.
And, basically, as an example, on discretionary spending, they were talking about cuts between $200 billion and $400 billion. I said, well, look, you could get together on $300 billion. On health care, we're supposedly between $500 billion and $700 billion. There was $600 billion.
Another mandatory that got that -- the number that came out is $300 billion. Both were talking about changing to superlative CPI, so you could get $200 billion there.
And you would have about $400 billion that would come out of interest. That would be $1.8 trillion of new cuts that you would have. That, on top of the $1.3 trillion, would give you $3.1 trillion.
And at that time, the speaker and the president were supposedly talking about having $800 billion in cuts. That would give you $3.9 trillion. And I said, that would be a good start.
GWEN IFILL: But let me ask you...
ERSKINE BOWLES: And you still need to reform the tax code. You still need to do something to make Social Security sustainably solvent.
GWEN IFILL: Right. But one of the things -- there were several sticking points to your approach. And one of them was raising the retirement age to 69. If that was back on the table, can you imagine that breaking through the current political stasis we're watching?
ERSKINE BOWLES: I think basically now, Gwen, there are three sticking points. One is the amount of revenue and the sources of revenue.
The second is the amount of spending cuts and how much of that will come from the entitlement programs, particularly health.
And the last sticking point is going to be, what are we going to do about this debt limit that we come up against all the time that puts our sovereign credit in danger?
GWEN IFILL: The president has said the debt limit should be, at least in his opening gambit, that the debt limit debate should be set aside and that nothing can be done unless the taxes are cut -- are raised for the wealthy.
Is that part of a solution that you can see working for what it is everybody is trying to get to here?
ERSKINE BOWLES: Look, Gwen, I'm not a bit worried that it appears on the surface that Secretary Geithner and the speaker didn't make any progress last week. That's just a Kabuki theater you go through at each one of these.
Geithner made his first offer. The Republicans rejected it. No surprise. I'm sure that this offer that the speaker has made today, the Democrats will reject. They're going to have to get together at some point in time when the time is right in a conference room and go through these three big items.
I am positive that to get a deal done, you're going to have to have higher tax rates on the top 2 percent. I'm equally sure that $350 billion worth of cuts that the president put on the table for health care entitlements is not going to be sufficient to get the deal done. There's going to have to be some compromise.
But you can rest assured that there are going to be tax increases, tax rate increases for the top 2 percent. And you're probably going to see more in the form of health care entitlement cuts.
GWEN IFILL: Let me get this right. You're thinking, however, that whatever compromise they come up with will be some distance from what you proposed more than a year ago?
ERSKINE BOWLES: Actually, it was more than a year ago. It was like more than two years ago. And times change. And elections happen. And there are consequences to those elections.
So, yes, I think you will see a different product come out. But I think the key is you're going to see a balanced approach with both revenue and spending cuts. You're going to see at least $4 trillion because that is the minimum amount you have to reduce the deficits in order to stabilize the debt and get it on a downward path as a percent of GDP.
GWEN IFILL: You said a moment ago that this is Kabuki theater, that these are both like opening bids that either side is going to reject. How do we get past that? Or how do they get past that if, in fact, the catastrophe everyone keeps warning us about is going to be avoided?
ERSKINE BOWLES: You know, Gwen, if they got to agreement the way Washington is, too quickly, their own side would just kill them because they wouldn't think they had negotiated hard enough.
You know, they have got to go through this exchange. This is no different than when, you know, you list your house, you know, you put up one price, somebody comes in with a lower price, you kind of reach a middle ground.
The thing I'm sure of is that we got to end up with at least $4 trillion of deficit reduction. Some of that's got to come from revenue.
I can guarantee you the White House isn't going to do a deal unless it has an increase in tax rates for part of that revenue. And I'm assuming that the Republicans are going to insist that there be more cuts on the health care entitlements than what's been put on the table to date.
GWEN IFILL: Here's the difference between what we're seeing now and what happens when I put my house on the market. At the end of this year, there will be consequences. And it's unclear -- in the past, when these consequences or these deadlines have arisen, they have just put them off. And that's how we got to where we are today.
Are you confident that -- as confident that they will actually come up with a permanent solution before this deadline or that they will just kick it down the road?
ERSKINE BOWLES: Yes, Gwen. No, we can't kick it down the road. That would be disaster.
Look, this is the magic moment. We have a second-term Democrat president who has put entitlements on the table with specificity. We have a Republican speaker who gets it, who understands the need for us to do something, to do it now, who has put revenue on the table.
We have at least half of the members of the Senate in both parties who are for a balanced approach. And we have this fiscal cliff which says we have to go ahead and do something or the economic consequences on America will be disastrous. So, I think something will happen.
GWEN IFILL: I do want to ask you about this fiscal cliff idea. I have heard people on the left and right say that that is kind of hyperbole, that it's more of a fiscal slope or it's a gradual -- there will be a gradual effect. There's not a steep cliff right after Dec. 31.
ERSKINE BOWLES: Gwen, what I can tell you is, there are over $7 trillion worth of economic events that are going to hit America in the gut on Dec. 31; $500 billion of those take place in 2013.
Most economists will tell you that the negative impact of this will be as much as slowing the rate of growth by 4 percent. If you're only growing at less than 2 percent, by definition, you're back into recession.
Over two million people are going to lose their jobs. Unemployment is going to go to 9 percent. Businesses will tell you that through attrition, they're already downsizing their work forces because they're so concerned about this. They're going to start laying people off after the 1st of the year if we go over the cliff.
They're already slowing down their investments and their capital expenditures. You will see the credit agencies reduce the credit rating of our sovereign debt. You will see the market absolutely surprised because they don't believe -- the markets don't believe we could be stupid enough to reach this cliff.
So, I think the impact could be really strong. And anybody who thinks this is going to be a slope better wake up.
GWEN IFILL: Erskine Bowles, co-chair of the president's debt commission with Alan Simpson, thank you so much.
ERSKINE BOWLES: Thanks so much.
GWEN IFILL: We will continue our series of conversations on this subject tomorrow with economist Paul Krugman.