Under the administration's plan, the new tax revenue would include $950 billion generated by raising taxes on families with incomes over $250,000 and by closing certain tax loopholes. The remainder would be achieved through an overhaul of the tax system next year and would not become effective until 2014.
The proposal, which the administration has also described to business and labor leaders, would require Congress and the White House to identify a "down payment" of cuts and tax loophole closings by the end of this year that would buy Congress and the president time to negotiate a tax overhaul and changes in entitlement programs between now and Aug. 1.
One new feature in the Geithner plan is a call for increasing the nation's debt limit without the need for congressional approval. Under last year's debt ceiling deal, Obama simply had to notify Congress that he was raising the debt ceiling, a move that could be blocked only if both houses of Congress passed resolutions of disapproval that Obama could veto. The administration wants a permanent extension of the debt ceiling with a similar legislative arrangement and with no offsetting spending cuts, as demanded by Republicans.
One administration official said Obama's must-have positions are expirations of the Bush era tax cuts for high earners and the inclusion of the debt limit in the deal. The officials spoke on the condition of anonymity because he was not authorized to describe publicly the state of negotiations.
By counting $1 trillion in spending cuts agreed to last year, claiming $800 billion saved this year and over the next decade because of troop drawdowns in Iraq and Afghanistan and estimating $600 billion in lower interest payments on the national debt, the administration places its total deficit reduction over 10 years nearly $4.4 trillion.
Associated Press writers David Espo, Andrew Taylor, Ben Feller, and Ken Thomas contributed to this report.