Republicans reject tax hike, push cuts in 'fiscal cliff' offer

Fiscal cliff

Republicans proposed steep spending cuts on Monday but gave no ground on President Barack Obama's call to raise taxes on the wealthiest in their first formal proposal to avert a "fiscal cliff" that could push the U.S. economy into recession.

After days of stalemate, the Republican offer shows deep differences with President Barack Obama as the two sides work to head off across-the-board spending cuts and tax increases due to take effect in January.

The White House dismissed the proposal and said it contained no new ideas. But it could allow negotiators to begin work in earnest as both sides now have outlined their visions in concrete terms. Analysts say the talks will have to show progress this week to ensure that a deal can be signed into law before the end of the year.

"The American people expect their leaders to find fair middle ground to address the nation's most pressing challenges," House of Representatives Speaker John Boehner of Ohio and several other top House Republicans wrote in a letter to Obama. Both the Republican and White House plans would rely on spending cuts and increased tax revenue to trim budget deficits by more than $4 trillion over the coming 10 years. According to the Republicans, their plan would save $240 billion more than Obama's proposal.

Beyond the headline numbers, the two plans reveal deep philosophical divisions about how the country should balance tax increases and spending cuts to put the country's finances on a sustainable course.

Republicans envision $1 trillion more in spending cuts than Obama has proposed, while Obama wants $800 billion more in tax increases and $200 billion in measures to boost the sluggish

economy. The Republican proposal would overhaul the complicated U.S. tax code to raise $800 billion in new revenue. Boehner tentatively agreed to that much in new tax revenue, presumably from closing loopholes in deductions, in failed talks with Obama in the summer of 2011.

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