US fiscal cliff talks seem at standstill as each side demands specifics; Jan. 1 deadline looms

WASHINGTON – House Speaker John Boehner on Tuesday accused President Barack Obama of delaying negotiations on a deal that would pull the U.S. economy back from the Jan. 1 “fiscal cliff” that would trigger a combination of tax increases and spending cuts that could push the country back into economic recession.

He said Obama, contrary to assertions from Democrats, had not been willing to outline spending cuts to go with the White House demand for an increase in tax rates for wealthy Americans.

Both sides have laid out positions unacceptable to the other, a common bargaining tactic, but they are showing no real signs of giving ground with less than three weeks remaining before the deadline. Obama campaigned on raising income tax rates on the wealthiest Americans, to which Republicans object, and insists on that as a path to reducing the country’s spiraling budget deficit. Boehner instead wants changes to the tax code, eliminating loopholes and deductions. There is agreement that the government also needs to reduce spending but proposals in this round of talks have been vague.

Opening the House session Tuesday, Boehner said Obama was engaged in delaying tactics by refusing to outline spending cuts he’s willing to support as part of a compromise.

In a downbeat assessment of negotiations to date, the speaker said the longer the president drags the talks, the closer the economy gets to the fiscal cliff and the threat of a new recession.

But the Democratic leader in the House, Rep. Nancy Pelosi, countered that Obama and Democrats have in fact identified spending cuts they can support as part of a balanced plan. She also said Boehner should call for a vote on a Democratic measure that would allow the Bush-era tax cuts to expire for upper income Americans, while extending the reductions for Americans who earn less than $200,000 as individuals or $250,000 for a couple.

In the Senate, top Republican Mitch McConnell bitterly complained that Obama has been unwilling to lay out a specific plan for cutting government spending.

“The president seems to think that if all he talks about are taxes, and that’s all reporters write about, somehow the rest of us will magically forget that government spending is completely out of control, and that he himself has been insisting on balance,” McConnell said in remarks on the Senate floor.

The U.S. faces the fiscal cliff because tax rate cuts that were put in place during the administration of former President George W. Bush expire at the end of the year. The pending across-the-board reductions in government spending, which will slice money out of everything from social programs to the military, were put in place last year as an incentive to both parties to find ways to cut spending. That legislation grew out of the two parties’ inability in 2011 to agree to a tax and spending program that would have taken a big bite out of the deficit.

Compounding the pressure to avoid the fiscal cliff is the coincidental expiration of extended government benefits for the long-term unemployed and the expiration of temporary cuts in the payroll tax that funds the government’s Social Security pension program.

On Monday, Obama made another campaign-style trip, this one to the heartland of the U.S. auto industry, to build grassroots support for his promise to raise taxes on wealthy Americans as part of his plan for reducing the government deficit.

Obama warned workers at a diesel engine factory that their taxes will rise on Jan. 1 without action by the Congress. “That’s a hit you can’t afford to take,” he declared.

He spoke one day after meeting privately at the White House with Boehner. The White House did not dispute that the president was prepared to modestly scale back his initial demand for $1.6 trillion in new tax revenue over a decade, twice as much as Boehner has offered.

Expressing frustration with the talks, Boehner’s office said, “We continue to wait for the president to identify the spending cuts he’s willing to make as part of the ‘balanced’ approach he promised the American people.”

Many Republicans agree that Obama and the Democrats hold most of the political leverage, given the president’s re-election last month after a campaign in which he said the wealthy should pay more in taxes. Obama wants to boost the tax rate on individuals earning more than $200,000 a year and for couples with annual income above $250,000.

If anything, the president has toughened his demands in recent days, insisting not only that tax rates must rise, but also that Congress give him and future presidents the authority to raise the government’s borrowing limit without prior approval by lawmakers.

Boehner, while claiming his own election mandate for the Republican majority in the House, has said he was prepared to buck many in his party and support additional tax revenue as part of a fiscal cliff agreement. He has not yet ruled out giving the president his way, and some Republicans have said they are prepared to do so — encouraging Democrats to say they anticipate the speaker will eventually yield.

The White House meeting Sunday was the first private negotiation session between Obama and Boehner since the Nov. 6 election. Obama and Boehner agreed not to release details of their conversation, but aides said it proved lines of communication remain open.

Obama’s plan would raise $1.6 trillion in revenue over 10 years, partly by letting decade-old tax cuts on the country’s highest earners expire at the end of the year. The highest rates on top-paid Americans would rise from 33 per cent and 35 per cent to 36 per cent and 39.6 per cent, respectively.

The Republican plan also would cut spending by $1.4 trillion, including by trimming annual increases in Social Security pension payments and raising the eligibility age for the Medicare health care program from 65 to 67.