At fiscal cliff’s edge, budget talks resume

 

McClatchy Newspapers

Just days from a fiscal meltdown, President Barack Obama and congressional leaders resumed stalled talks Friday and head into the weekend with a final attempt to negotiate a last-minute budget compromise that would avert looming tax increases for most Americans that could plunge the country back into recession.

After meeting for slightly more than an hour at the White House with Obama, the leaders of the nation’s two major parties said they were optimistic they could forge a scaled-down pact, with the Senate taking the lead.

The Democratic and Republican leaders of the Senate said they would spend the next two days working to find a possible solution in time for votes Sunday night by both the Senate and the House of Representatives. The Senate has been in session since Thursday; the House postponed its return to Sunday after talks broke down last week between Obama and House Speaker John Boehner, R-Ohio, and failed to produce any kind of grand bargain to avert painful austerity moves scheduled to kick in over the next several days, while adopting alternative measures to rein in runaway deficits over time.

“I just had a good and constructive discussion here at the White House with Senate and House leadership about how to prevent this tax hike on the middle class, and I’m optimistic we may still be able to reach an agreement that can pass both houses in time,” Obama said at the White House after the Oval Office meeting.

He said Senate Majority Leader Harry Reid, D-Nev., and Minority Leader Mitch McConnell, R-Ky., were “working on such an agreement as we speak.”

Visibly frustrated, Obama said that if Reid and McConnell fail, he will ask Congress to vote on his original proposal to raise taxes on individual income above $200,000 and family income above $250,000, and also to extend jobless benefits for 2 million unemployed workers. It was unclear how he could get a vote, however, if the two parties do not agree on a proposal, given congressional rules.

“The American people are not going to have any patience for a politically self-inflicted wound to our economy,” Obama said in a six-minute statement in the White House Briefing Room. “We’ve got to get this done.”

A scaled-back proposal could also avert defense cuts slated to take place next week, stop the alternative minimum tax from hitting more taxpayers, and prevent a cut in doctors’ Medicare reimbursements.

“Whatever we come up with is going to be imperfect,” Reid said. “Some people aren’t going to like it. Some people will like it less. But that’s where we are. And I feel confident that we have an obligation to do the best we can. That was made very clear in the White House. We’re going to do the best we can for the caucuses that we have and the country that’s waiting for us to make a decision.”

As a fallback, Reid said he also was preparing a proposal to vote Monday on just Obama's original proposal, a vote that likely could not happen over Republican objections and would serve only as a final political statement of Democratic goals even if it did.

“At President Obama's request,” Reid said in a statement Friday evening, “I am readying a bill for a vote by Monday that will prevent a tax hike on middle-class families making up to $250,000, and that will include the additional, critical provisions outlined by President Obama. In the next 24 hours, I look forward to hearing any good-faith proposals Senator McConnell has for altering this bill.”

McConnell said “conversations are underway” and “hopefully we can come up with something” to present to Republican and Democratic congressional caucuses.

“We are engaged in discussions, the majority leader and myself and the White House, in hopes that we can come forward as early as Sunday and have a recommendation that I can make to my conference and the majority leader can make to his conference,” McConnell said. “And so we’ll be working hard to try to see if we can get there in the next 24 hours. So I’m hopeful and optimistic."

Boehner reminded those in the meeting that that the House had already “acted to avert the entire fiscal cliff and is awaiting Senate action” and reiterated his position that the Senate must act first, according to spokesman Brendan Buck.

Before Obama and Boehner’s talks broke down, Obama had proposed a plan to raise taxes on annual incomes above $400,000. Boehner countered with a proposal to raise taxes on incomes above $1 million, but could not get his fellow Republicans to support it, let alone Obama.

The House previously had passed legislation to extend all the George W. Bush-era tax cuts that expire Tuesday and prevent $109 billion in automatic spending cuts that will take effect Wednesday. The Senate this summer passed a measure to extend only tax cuts for individuals earning less than $200,000 and families making less than $250,000.

Failure to reach a deadline by the end of the year would mean that $500 billion in tax increases take effect early next year, coupled with $109 billion in spending reductions, the first installment toward $1.2 trillion in cuts over two years. Compounding the problem, Congress learned this week that the government will reach the $16.4 trillion debt limit Monday.

Obama chastised lawmakers for waiting until the last minute to work out a deal, with neither side willing to compromise too early. The stock markets have been falling for a week in apparent anxiety about the fiscal crisis.

“The American people are watching what we do here,” Obama said.

“Obviously, their patience is already thin,” he said. “This is deja vu all over again. America wonders why it is that in this town, for some reason, you can’t get stuff done in an organized timetable; why everything always has to wait until the last minute. Well, we’re now at the last minute.”

Sen. Charles Schumer, D-N.Y., said Friday that he was “getting a little more optimistic.”

“Sometimes it’s darkest before the dawn,” he said on NBC. “I am hopeful that there will be a deal that avoids the worst parts of the fiscal cliff; namely, taxes going up on middle-class people. I think there can be. And I think the odds are better than people think that they could be.”

Sen. Bob Corker, R-Tenn., said the current situation is a “total dereliction of duty at every level.”

“I’ve been very surprised that the president has not laid out a very specific plan to deal with this, but candidly, Congress could have done the same, and I think the American people should be disgusted,” he said on CBS. “Again, a total lack of courage, lack of leadership.”

Email: akumar@mcclatchydc.com, wdouglas@mcclatchydc.com; Twitter: @anitakumar01, @williamgdouglas

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