* Plenty of cuts in plan, administration argues
* Trying to avoid year-end crisis
* Plan includes $200 billion in stimulus spending
By Matt Spetalnick and Steve Holland
WASHINGTON, Nov 30 The Obama administration
sought to counter Republican charges on Friday that President
Barack Obama's plan to avoid a year-end "fiscal cliff" is light
on spending cuts and too reliant on tax increases.
Administration officials said the overall plan, offered to
Republicans on Thursday and quickly rejected by them, would
achieve $4.5 trillion in savings to the government. This
includes around $1 trillion in cuts already enacted into law and
would set up an "expedited process" to spirit through Congress
some of the most comprehensive legislation in decades.
The plan, which Treasury Secretary Timothy Geithner outlined
to Republican congressional leaders, is aimed at taking a big
step toward comprehensive reform of the U.S. tax code and
overhauling federal programs like Medicare by next Aug. 1,
according to a summary provided by administration officials.
The fate of the administration proposals is uncertain, as
they are now part of a mix of offerings to be hashed out over
the next few weeks and beyond, aimed at heading off a package of
automatic tax increases and spending cuts that would tip the
U.S. economy over the fiscal cliff and back into recession.
Senate Minority Leader Mitch McConnell outlined his ideas
for cutting entitlement programs in a Wall Street Journal
interview Friday, while House Republicans said talks had
basically arrived at a stalemate at this juncture.
The administration's proposals for next year, when combined
with some immediate savings such as taxing the rich at a higher
rate, would raise approximately $1.5 trillion in new revenues.
Those would be coupled with about $2.4 trillion in spending
cuts, according to the officials who asked not to be identified.
Some of those proposed spending cuts are controversial. For
example, they count $800 billion in savings from the wars in
Iraq and Afghanistan that are winding down. Many Republicans in
Congress argue that sound budgeting should not allow for
counting savings on money that was not going to be spent.
The war savings were part of previous deficit-reduction
negotiations that failed in 2011.
Administration officials disclosed details of the White
House proposal in an effort to push back against Republicans'
characterization of it as not serious.
Without a deal, around $600 billion in steep tax increases
and spending cuts would begin in January, forcing the economy
into a recession, according to the Congressional Budget Office.
As expected, the White House proposal called for a two-step
approach to deficit reduction.
The first step would mainly consist of letting income tax
rates rise on families with net incomes above $250,000. The
revenues generated would help replace the steep, automatic
spending cuts to domestic programs due to kick in on Jan. 2 if
Congress and the president cannot reach a compromise.
Also included are the extension of expiring major tax
breaks, such as the research and development credit.
A second deficit-reduction step, which both Republicans and
Democrats have talked about at length, would give Congress time
to revamp the complicated U.S. tax code and figure out how to
slow the rapid growth of federal healthcare programs for the
elderly and poor.
Under the scenario laid out by Geithner, the new tax
provisions would become effective on Jan. 1, 2014, according to
administration officials, and are anticipated to bring in an
additional $600 billion in revenues over 10 years, beyond the
$950 billion from raising taxes on the rich.
Meanwhile, federal spending would be cut by $350 billion
over 10 years by reforming Medicare and other unspecified health
programs, the officials said. Savings of another $250 billion
would be achieved by cutting subsidies to farmers and other
Also tucked into the proposal, the officials said, were $200
billion in "economic growth initiatives" designed to help
stimulate the sluggish economy.
This would include $50 billion in infrastructure spending,
an extension of payroll tax cuts, extending unemployment
benefits and funding for a mortgage refinancing program.