WASHINGTON: Lead White House negotiator Timothy Geithner insisted yesterday that there would be no deal to avert the “fiscal cliff” unless Republicans allowed tax rates on the wealthiest Americans to rise.
Talks to avoid the dreaded “fiscal cliff” are at a dangerous impasse after President Barack Obama’s opening gambit in the high-stakes negotiations was shot down by leading Republicans on Thursday as “ridiculous”.
Markets are jittery as, without a deal by the year-end, a poison pill of tax hikes and massive spending cuts, including slashes to the military, comes into effect with potentially catastrophic effects for the fragile US economy.
Budget negotiations go right to the heart of ideological differences between Democrats and Republicans on the size and scope of government, but the biggest sticking point has clearly been on tax rates for high-earners.
Obama campaigned on a platform of raising taxes on individuals who make more than $200,000 per year and on families that rake in more than $250,000, as a way of raising extra revenue to tame the deficit.
Republicans insist that raising taxes on the wealthy would be counter-productive, hurt small business owners, slow economic growth and dampen job creation.
“There’s not going to be an agreement without rates going up. There’s not,” Geithner told CNN’s “State of the Union” program, saying the ball was in the Republicans’ court to propose a counter-offer to the Obama plan.
Republicans say they are ready to raise more revenue from wealthy Americans, but want to do so by closing tax loopholes and limiting deductions rather than by raising income tax rates.
“Increasing tax rates draws money away from our economy that needs to be invested in our economy to put the American people back to work,” Republican House Speaker John Boehner said. “It’s the wrong approach.”