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Obama offers new 'grand bargain' to GOP ahead of budget fights

President Barack Obama challenged Republicans on Tuesday to help him craft a “grand bargain” for the middle class, unveiling a corporate tax reform proposal intended to put the GOP on the spot ahead of the budget battles he faces with Congress this fall by trying to rally public opinion using the presidential bully pulpit.

In his latest push to frame those battles, Obama called for closing loopholes and certain deductions for big business in exchange for lowering rates. And he proposed using new revenue from the tax reforms for increased spending on infrastructure and transportation projects.

President Barack Obama shakes hands before giving a speech in Chattanooga, Tennessee, July 30, 2013. Larry Downing / Reuters

“Here’s the bottom line: I’m willing to work with Republicans on reforming our corporate tax code, as long as we use the money from transitioning to a simpler tax system for a significant investment in creating middle-class jobs,” he said Tuesday in Chattanooga, Tenn. “That’s the deal.”

The new gambit comes in advance of a showdown this fall with Republicans over extending government spending and raising the nation’s debt limit. Following three speeches last week stressing the importance of spending on projects to boost the middle class, Obama made his new offer Tuesday -- one met with skepticism by GOP leaders even before the address had been delivered.

Michael Steel, spokesman for House Speaker John Boehner, largely dismissed what Obama was offering. "The president has always supported corporate tax reform,” Steel said in a statement. “Republicans want to help families and small businesses, too. This 'grand bargain' allows President Obama to support President Obama's position on taxes and President Obama's position on spending, while leaving small businesses and American families behind."

Congress must come to an agreement to extend government spending past the end of September, or risk a government shutdown. Both Senate Democrats and House Republicans have proposed their own budgets, but they vary widely and neither party has made any attempt at reconciling the two.

Even more vexing is the fight over the debt ceiling. Congress must authorize the government to borrow more money to finance its existing debts. That approval had been largely cursory until recently, when Republicans, beginning in 2011, began using that vote to extract spending cuts in exchange for their vote to approve more borrowing. Boehner has demanded heading into this fall’s fight that every new dollar borrowed be matched by a dollar in spending cuts.

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The allure of corporate tax cuts was ostensibly intended as an inducement to win over the GOP to support some broader agreement, but Republican leaders quickly rejected Obama’s proposal out of hand. They said that they were given no heads-up about the offer, and that the president’s latest offer was little more than a negotiating ploy. Republican leaders further insisted that corporate tax reform be coupled with individual tax reform, since many small-business owners file taxes under that structure.

“The policy he intends to announce doesn't exactly qualify as new, it's just a further left version of a widely panned plan he proposed two years ago this time with extra goodies for tax-and-spend liberals,” said Senate Minority Leader Mitch McConnell, R-Ky., who said Obama’s latest offer represented a “serious blow to true bipartisan action.”

The swiftness with which Republicans rejected Obama’s proposal underscores just how wide of a gap separates Obama and GOP members of Congress. And as lawmakers prepare to head home for their August recess (during which Obama will take his annual family vacation), the prospects for any major breakthrough come September seem especially dim.

Obama’s series of speeches appear to have done little to sway Republicans; GOP lawmakers themselves are increasingly divided over their strategy heading into the debt ceiling fight. Conservatives have vowed not to raise the nation’s debt limit unless Obama’s health care law is defunded, a strategy which some other Republicans have derided as fanciful at best.

Still, Obama pressed forward with his proposal.

“I’m willing to simplify our tax code” in a way that closes loopholes, ends incentives to ship jobs overseas, and lowers rates for businesses that create jobs in America, he said.

“But if we’re going to give businesses a better deal, then we’re also going to have to give workers a better deal, too,” he added, explaining that the new money from corporate tax reform could be used for infrastructure spending, or boost high-tech manufacturing hubs, or help grow the community college system. “All of these things would benefit the middle class right now and in the years to come.”