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Obama, Boehner Inch Closer as 'Fiscal Cliff' Nears
December 18, 2012

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Within hours after a face-to-face meeting at the White House, President Barack Obama reported a new offer in the ongoing discussions with House Speaker John Boehner to avoid the "fiscal cliff."

The "cliff" is a $600 billion combination of tax increases and spending cuts that is due to take effect on January 1 unless superseded by new legislation that Congress passes and the President signs.

Boehner had earlier proposed that the Bush-era tax cuts expire for incomes higher than $1 million a year. That in itself was a significant shift for Boehner and other Republicans who have long insisted that they would not approve of any tax increases.

Obama then countered by raising the level of tax increases he was proposing from $250,000 a year to $400,000 a year. That was a significant shift for Obama in that he had campaigned during the presidential election on the $250,000 threshold.

Boehner insisted that his proposal be offset by $1 trillion in spending cuts during the next decade and that such an agreement would include a pledge to raise the debt ceiling for another year. The "fiscal cliff" came about in part as a result of a stalemate in 2011 over raising the debt ceiling. Obama's counter-offer was a proposal for a two-year extension of the debt ceiling.

The debt ceiling, created in 1917, is the legal limit on how much money the U.S. Government can borrow to pay its bills. The Government needs this limit because it is usually in the position of needing to spend more money than it takes in.

Congress has voted to increase the debt ceiling nearly 100 times since it was established, with the majority of those increases coming since 1962. The debt ceiling has progressed rapidly from less than $1 trillion in the 1980s to $6 trillion just a decade later and to more than $16 trillion in 2012.

The movement on taxes is a sign of progress, observers say, but many Democrats worry about the GOP's proposed cuts in spending, just as many in the GOP worry about the continuation of a largely unbalanced budget.

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