House Speaker John Boehner, R-Ohio, speaks at a news conference on Capitol Hill in Washington. President Obama and Speaker Boehner met at the White House today in search of a compromise to avert the economy-threatening "fiscal cliff."
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WASHINGTON — President Obama has agreed to curtail future cost-of-living increases for Social Security and softened his demand for higher taxes at upper income levels as part of talks with House Speaker John Boehner to avoid a “fiscal cliff,” people familiar with the talks said Monday.
The President is now seeking higher tax rates beginning at incomes over $400,000 for couples. The $250,000 level had been a cornerstone of his campaign for re-election.
Mr. Obama’s willingness to reduce future cost-of-living increases in Social Security and other government programs marked a clear a concession to Mr. Boehner (R., Ohio).
But Mr. Obama wants lower-income recipients to receive protection against any loss from scaling back future cost-of-living increases, officials said.
The President’s offer did not include raising the age of Medicare eligibility from 65 to 67, a Republican goal that has drawn strong objections from Democrats.
Several officials also said uring the day that Mr. Boehner’s offer late last week to accept higher tax rates included provisions that would mean higher taxes on investment income and dividends earned by wealthy Americans.
Mr. Obama and Treasury Secretary Tim Geithner met with Mr. Boehner and his top aides at the White House for less than an hour during the day.
The sources described the developments on condition of anonymity.
The maneuvering is aimed at reaching an agreement that would include cancellation of a scheduled year-end hike in taxes for nearly all wage-earners as well as spending cuts at the Pentagon and in domestic programs across the government.
Economists the government have warned that the combination of the two, scheduled to begin at the end of the year, could send the economy into recession.
Senate Majority Leader Harry Reid (D., Nev.) said his chamber will wrap up work on the issue after Christmas.
“It appears that we’re going to be coming back the day after Christmas to complete work on the fiscal cliff,” he said on the Senate floor.
Mr. Boehner faces a crucial test on Tuesday morning when he is expected to brief House Republicans. He is not expected to bring any deal up for a vote unless a majority of the House’s 241 Republicans support it.
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.
Mr. Obama also has called for assistance for hard-pressed homeowners as well as fresh economic stimulus measures. Some Democrats want to include a sizeable amount of disaster aid in any legislation to offset the cost of Superstorm Sandy.
On another point, Mr. Obama’s latest offer dropped his earlier proposal to extend a payroll tax cut scheduled to expire at year’s end.
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,” Mr. Carney 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.”
Officials familiar with the talks said that under Mr. Boehner’s proposal, the top tax rate on capital gains would go to 20 percent, up from the current 15 percent.
The top rate on dividends also would climb, although it was not known what the new level would be, and the estate tax would also be adjusted to produce more government revenue.
Under current law, the top capital gains tax rate would rise to 20 percent automatically at the end of the year if the cuts enacted during George W. Bush’s White House tenure were allowed to expire.
The tax on dividends also would rise. The estate tax would be 55 percent on estates after allowance for a $1 million exemption.
Mr. Obama also is demanding that any fiscal cliff compromise give him authority to raise the current $16.4 trillion cap without a prior vote by Congress.
Mr. Obama’s agreement to reduce his demand so it would affect incomes over $400,000 left the two sides closer, but short of agreement.
As part of the change, Mr. Obama is now seeking $1.2 trillion in additional revenue, down from $1.4 that was in an offer he made several days ago.
Officials have said Mr. Boehner offered a total of $1 trillion in higher revenue, less than half of which would come this year, and the balance in 2013 as part of a bill to overhaul the tax code.
The new inflation adjustment would create government savings of an estimated $168 billion over a decade, according to a recent estimate by the Congressional Budget Office.
It also would raise tax revenue by $54 billion by affecting the adjustment in income tax brackets that occurs annually to take inflation into account, the budget office said.