7 Min Read
WASHINGTON (Reuters) - Republicans in Congress and President Barack Obama consumed much of Wednesday talking up their positions on the "fiscal cliff" and though Obama and Republican House Speaker John Boehner spoke by phone, neither side offered any new compromises in public.
Nor was the phone call, a rarity, followed by any immediate announcement of a face-to-face meeting that has been widely anticipated all week and was explicitly requested early in the day by House of Representatives Republican leader Eric Cantor.
Asked in an interview with CNBC if the administration was ready to go over the so-called fiscal cliff if Republicans don't come around on taxes, Obama's chief negotiator, Treasury Secretary Timothy Geithner, responded: "Oh, absolutely."
Facing spending cuts and tax increases that start to take effect in January unless Congress acts, Republicans on Capitol Hill were privately acknowledging that they were taking a public relations thrashing at the hands of the White House, which has marshaled a campaign-style offensive that involves some of the very "job-creators" Republicans say they are protecting.
Obama met with another such corporate group on Wednesday, The Business Roundtable, renewing his call to include tax hikes on the wealthiest 2 percent of Americans as part of the final resolution and for including an increase in the nation's borrowing limit.
U.S. stocks rose on Wednesday after Obama also said a deal to avert the fiscal cliff was possible within a week, though he expressed it as a hope not a prediction.
The confrontation has become an endless loop of familiar talking points and well-worn positions. Republican leaders have balked at raising any tax rates, and Democrats have resisted Republican calls for cuts in entitlements like the Medicare and Medicaid healthcare programs.
Obama said there could be a quick deal if Republican leaders dropped their opposition to raising tax rates for those making more than $250,000 a year in exchange for spending cuts and entitlement reforms.
"If we can get the leadership on the Republican side to take that framework, to acknowledge that reality, then the numbers actually aren't that far apart," Obama told The Business Roundtable.
"Another way of putting this is we can probably solve this in about a week. It's not that tough, but we need that conceptual breakthrough," he said.
Geithner reiterated that there would be no deal without higher tax rates on the wealthy and without a change in congressional rules making it harder to block an increase in the U.S. debt ceiling.
"There is no prospect (for) an agreement that doesn't involve rates going up on the top 2 percent of the wealthiest Americans," he told CNBC.
The two sides have submitted proposals to cut deficits by more than $4 trillion over the next 10 years, but differ on how to get there. Republicans propose $1 trillion more in spending cuts than Obama, while the president wants $800 billion more in tax increases and $200 billion to boost the sluggish economy.
Republicans have shown cracks in their solidarity on taxes, however, with some saying they would be willing to let rates rise on the wealthiest 2 percent in exchange for extending low rates for the other 98 percent of taxpayers.
Republican Senator Tom Coburn of Oklahoma said he could accept some higher tax rates as part of a long-term solution to the threat posed by spiraling U.S. debt. He said the path to prosperity would require at least a $9 trillion package of spending cuts and tax increases over 10 years, rather than the $4 trillion being discussed now.
"Personally I know we have to raise revenue. I don't really care which way we do it. Actually, I would rather see the rates go up than do it the other way because it gives us a greater chance to reform the tax code and broaden the base in the future," Coburn said on MSNBC.
With no resolution in sight and the fiscal cliff looming, the White House budget office has told all federal agencies to begin planning for possible automatic spending cuts that will start taking effect in January without a deal, the White House said.
White House spokesman Jay Carney said the Office of Management and Budget needed to take certain steps to be ready if an agreement is not reached and asked federal agencies for information so it could complete calculations on the required cuts.
Economists have predicted that failure to reach an accord could trigger another recession, and business executives and investors in the financial markets have watched the back and forth anxiously.
Jim McNerney, chairman of the Business Roundtable and chairman and chief executive officer of Boeing Co., called for non-stop negotiations to break the stalemate.
"We encourage both sides to work around the clock, if necessary, to avoid the severe repercussions that inaction would have on U.S. economic growth and job creation," McNerney said in a statement after Obama's appearance before the executives.
Obama's call for including an increase in the debt ceiling in a final package seemed likely to complicate the negotiations.
In his speech to executives, Obama said it was a "bad strategy" for Republicans to believe they would have more leverage next year to extract concessions from the White House by threatening to let the United States default.
A debt ceiling standoff between the White House and House Republicans in 2011 brought the country perilously close to default and resulted in an embarrassing debt rating downgrade.
"I want to send a very clear message to people here: We are not going to play that game next year," Obama told the executives.
The focus on the debt ceiling is already raising concerns among market watchers.
"The more the Republicans talk about raising or not raising the debt limit, that really makes the market nervous, and makes the White House more nervous than Congress," said John Brady, managing director at R.J. O'Brien & Associates in Chicago. "The cliff can be punted into the future, but the debt ceiling can't be." (Additional reporting by Kim Dixon, Alina Selyukh, David Alexander, Richard Cowan, Steve Holland and Rodrigo Campos; Writing by John Whitesides; Editing by Eric Beech)