WASHINGTON -- President Barack Obama has softened his demand for higher taxes at upper income levels and agreed to curtail future inflation adjustments for recipients of Social Security pensions as part of accelerating talks with Republicans to avoid a "fiscal cliff," people familiar with the talks said Monday.
The manoeuvring is aimed at reaching an agreement to rein in deficit spending before an automatic year-end hike in taxes for nearly all wage-earners hits, as well as deep spending cuts in defence and in domestic programs across the government. Economists have warned that the combination of the two, set to begin at year's end, could send the economy into recession.
Speaking a few hours after Obama and House of Representatives Speaker John Boehner met at the White House, these people said the president was now seeking higher tax rates beginning at incomes over $400,000 for couples, down from the $250,000 level that was a cornerstone of his successful campaign for re-election.
Obama's willingness to reduce future cost-of-living increases in Social Security pensions and numerous other government programs marked a clear a concession to Boehner, although it came with an asterisk. The president wants lower-income recipients to be exempt from any loss from scaling back future pension cost of living increases, these officials said.
Nor did Obama's offer include raising the age of Medicare eligibility from 65 to 67, a Republican goal that has drawn particularly strong objections from Democratic liberals who cherish the federal health care program for the elderly.
Several officials also said during the day that Boehner's offer late last week to accept higher tax rates -- a first in the talks -- included provisions that would mean higher taxes on investment income and dividends earned by wealthy Americans.
The people who described the talks did so on condition of anonymity, citing the secretive nature of the discussions.
Other major issues are part of the negotiations. Without action by Congress, for example, long-term unemployment benefits will expire for millions at the end of the year, and doctors will face a cut in the payments they receive for treating Medicare patients.
Obama has also called for assistance for hard-pressed homeowners as well as fresh economic stimulus measures, and some Democrats want to include a sizeable amount of disaster aid in any legislation to offset the cost of Superstorm Sandy.
Obama's latest offer included another concession, dropping his earlier proposal to extend a payroll tax cut due to expire at year's end.
Brendan Buck, a Boehner spokesman, said that the president's proposal does not include enough spending cuts and "cannot be considered balanced. We hope to continue discussions with the president so we can reach an agreement that is truly balanced and begins to solve out spending problems."
Earlier at the White House, spokesman Jay Carney sidestepped when asked about curbing cost-of-living increases for benefit programs. The president "is prepared to make tough choices. He also understands that his bill will not, as written, likely be what the final compromise, if there is one, looks like," he said.
"But he insists and will insist before he signed anything that there is the balance that he seeks that is fair and that seniors aren't bearing the burden so that the healthy bear less -- those who can afford it most bear less."
A spokesman for Boehner declined comment on the tax proposals.
Obama and Treasury Secretary Tim Geithner met with Boehner and his top aides at the White House for less than an hour during the day. While neither side provided significant details, Republicans have made it clear in recent days that it is the president's turn to propose savings from Medicare and other benefit programs following Boehner's agreement last week to let tax rates rise at incomes higher than $1 million.
As the talks progress, Republicans across the party's spectrum are eager to turn public attention toward spending cuts, rather than remain bogged down in a politically debilitating debate about tax increases for the wealthy.
"Our problem isn't that we tax too little. It's that we spend too much! We must have serious spending cuts for a debt ceiling increase," tweeted Republican Congressman Tom Price.
That was a reference to the third ingredient under negotiation as part of deal to prevent the economy from reaching the fiscal cliff -- an increase in the government's borrowing authority.
After a brush with the first-ever default by the Treasury in 2011 -- the compromise reached then is what created the fiscal cliff scenario looming now -- Obama is demanding that any compromise give him authority to raise the current $16.4 trillion cap without a prior vote by Congress. Officials say that Boehner's most recent proposal would grant an increase equal to the size of any spending cuts, roughly $1 trillion under his own recommendations.
The speaker made his offer to Obama late last week, dropping his blanket opposition to the president's call for an increase in the tax rate paid on upper incomes. Obama's agreement to reduce his demand so it would affect incomes over $400,000 left the two sides closer, but short of agreement.
