President Obama presented his first proposal to avert the so-called "fiscal cliff" this week when Treasury Secretary Timothy Geithner met with Republican leaders. The President's proposal would raise taxes by $1.6 trillion and set a target of $400 billion in cuts/savings from federal healthcare programs. No specific cuts were identified in the package.
According to news reports, the President's plan would raise taxes by $1.6 trillion on filers reporting more than $200,000 in income ($250,000 for couples) while maintaining existing income tax rates for everyone else. The President would add $50 billion in new stimulus spending on infrastructure and other programs. The President would promise to cut $400 billion from federal healthcare programs like Medicare although no specifics were given, and would delay for one year automatic spending cuts set to impact defense and federal agency budgets in January. The President would also gain authority to raise the debt limit, which is a law meant to cap borrowing by the Treasury Department, without congressional approval.
Without Presidential and congressional action, a "fiscal cliff" of looming tax hikes and automatic spending cuts amounting to more than $500 billion are scheduled to take effect on January 1, 2013. This could leave the typical middle-income family making $40,000 to $64,000 a year with a tax increase of $2,000 next year. Another component of the "fiscal cliff" is an automatic across-the-board cut to the military and domestic programs of $110 billion. At this point, congressional leaders have not filed this plan as a legislative package to be voted on in either chamber.