Flashpoints in "fiscal cliff" negotiations

Associated Press Published: November 16, 2012
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WASHINGTON (AP) — There are numerous hurdles, big and small, in front of President Barack Obama and lawmakers on Capitol Hill as they seek a budget and tax agreement to avoid economy-rattling tax increases and automatic spending cuts known as the "fiscal cliff." They include:

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—Taxes. Obama insists on increasing taxes on upper-income earners and he's proposed raising the rates paid on family income over $250,000, with a boost in the top rate from 35 percent to 39.6 percent. GOP leaders vow to block any increase in tax rates but say they could support revenue increases as part of a tax reform plan that curbs tax breaks and uses the resulting revenue to both lower rates and defray the deficit. That approach, however, is opposed by many tea party GOP conservatives who have signed a pledge to oppose any tax increase.

—Entitlements. Big benefit programs like Medicare, Social Security and the Medicaid health program for the poor — called entitlements because participation is based on eligibility criteria — are a major flash point. As a condition of voting for higher revenues, Republicans are demanding fundamental entitlement reforms such as increasing the Medicare eligibility age from 65 to 67, making wealthier seniors pay more for Medicare, and a less generous inflation adjustment for Social Security. Those ideas were discussed in negotiations in the summer of 2011 but Democrats seem to be signaling a harder line now.

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