Lawmakers optimistic after ‘fiscal cliff’ talks

House Speaker John Boehner (left) looks on as President Barack Obama speaks to reporters Friday at the White House before a meeting with congressional leaders on a framework for averting the “fiscal cliff.”
House Speaker John Boehner (left) looks on as President Barack Obama speaks to reporters Friday at the White House before a meeting with congressional leaders on a framework for averting the “fiscal cliff.”

— Democratic and Republican leaders of Congress emerged from their first budget meeting with President Barack Obama at the White House at midday Friday and jointly expressed confidence that the two parties will reach an agreement before the end of the year to avert economy rattling tax increases and across-the-board spending cuts.

The four leaders - two Republicans, House Speaker John Boehner of Ohio and Sen. Mitch McConnell of Kentucky, the Senate minority leader; and two Democrats, Sen. Harry Reid of Nevada, the Senate majority leader, and Rep. Nancy Pelosi of California, the House minority leader - politely took turns at a microphone outside the West Wing, addressing each other by first names and describing the roughly 90-minute session as constructive.

“We feel very comfortable with each other, and this isn’t something we’re going to wait until the last day of December to get it done,” Reid said.

“This isn’t the first time that we’ve dealt with these issues,” he added. “We feel we understand what the problem is. And we felt very - I feel very good about what we were able to talk about in there. We have the cornerstones of being able to work something out. We’re both going to have to give up some of the things that we know are a problem.”

Boehner said he outlined a framework for overhauling the tax code and spending programs that is “consistent with the president’s call for a fair and balanced approach.”

“To show our seriousness,” he added, “we put revenue on the table as long as it’s accompanied by significant spending cuts.”

An aide said Boehner’s approach calls for agreement on long-term revenue and spending targets to be set into law, presumably this year, leaving details to 2013 on an overhaul of the tax code and remaking benefit programs.

McConnell made plain that Republicans were talking about spending for the entitlement programs, chiefly Medicare and Medicaid, which are growing fast as the population ages and, along with military spending, are squeezing everything else in the federal budget. Republican senators, McConnell said, “fully understand that you can’t save the country until you have entitlement programs that fit the demographics of the changing America in the coming years.”

“We’re prepared to put revenues on the table,” he added, “provided we fix the real problem, even though most of my members, I think without exception, believe that we’re in the dilemma we’re in not because we tax too little but because we spend too much.”

Pelosi, whose House Democratic colleagues include many liberals who resist significant changes to entitlement spending, said: “We understand our responsibility here. We understand that it has to be about cuts, it has to be about revenue, it has to be about growth, it has to be about the future.”

She added, “I feel confident that a solution may be in sight.”

With Obama in the Roosevelt Room, the leaders made up the same cast who bitterly fought in 2011, then eventually agreed to nearly $1 trillion in spending cuts over 10 years but deadlocked on the roughly $4 trillion “grand bargain” both sides say the country needs.

Obama demands that it include up to $1.6 trillion in tax increases for top income earners, while Republicans favor less in revenue but big cost-saving changes to Medicare and Medicaid.

The two sides met after a week of post election, pre-bargaining positioning. Obama, after making an issue of it in his re-election campaign, believes he has a mandate to insist on extending the George W. Bush-era tax cuts, which otherwise expire Dec. 31, but not for income of $250,000 and above for couples and $200,000 for individuals.

More broadly, the outcome of the budget talks will go a long way to defining his leverage for a second term, both in regards to his influence and the resources available to him to press his agenda.

The president “will not sign, under any circumstances, an extension of tax cuts for the top 2 percent of American earners,” his spokesman, Jay Carney, told reporters Thursday.

“We have to make sure that taxes don’t go up on the middle class, that the economy remains strong,” Obama said as the meeting began.

“That’s an agenda that Democrats and Republicans and independents, people all across the country share,” he said. “So our challenge is to make sure that we are able to cooperate together, work together, find some common ground, make some tough compromises, build some consensus to do the people’s business.”

“My hope is, is that this is going to be the beginning of a fruitful process where we’re able to come to an agreement that will reduce our deficit in a balanced way, that we will deal with some of these long-term impediments to growth,” he added.

Republican leaders, for their part, have signaled since their losses for the White House and in Congress that they would agree to additional tax revenue, but they oppose raising the top marginal rate, which is now 35 percent and scheduled to return to 39.6 percent, the Bill Clinton era level, on Jan. 1.

And Republicans are holding out for significant future savings from Medicare and Medicaid, which Obama and his party also support as necessary to controlling the mounting federal debt in an aging population - to a limit. Still, many liberal Democrats are mobilizing against entitlement program cuts, especially after a campaign in which Republicans and their standard-bearer, Mitt Romney, accused Obama and the Democrats of having enacted Medicare reductions as part of the 2010 health-care law.

All four lawmakers were reelected to their leadership posts this week after Congress began its lame-duck session. It could last through the holidays unless the parties can reach an agreement on a budget deal to avoid a so-called “fiscal cliff” after Jan. 1, when the country would be hit by more than $500 billion in tax increases - mainly from the expiration of the Bush-era tax rates - and across-the-board cuts in military and domestic spending absent a bipartisan compromise on an alternative package of deficit-reduction.

Such large and sudden action could cause a short recession, the Congressional Budget Office has warned; any negotiated alternative would spread the budget cuts over a longer period to avoid harming the still-weak economy.

Reid said the parties would work over the Thanksgiving holiday and meet again the following week. Obama leaves today for a four-day diplomatic trip to Asia.

Treasury Secretary Timothy Geithner said he is optimistic a deal on averting the fiscal cliff can be reached within weeks after Friday’s talks.

“It was a good meeting, and the tone was very good,” Geithner said in an interview Friday in Washington on Bloomberg Television’s Political Capital With Al Hunt airing this weekend. “I think this is do-able within several weeks.”

Geithner said a deal must be reached soon to prevent further damaging consumer confidence. The lack of agreement is “this huge cloud of uncertainty hanging over the economy,” he said. As the peak of holiday shopping season approaches, “You’d want to do it as soon as you can.”

If nothing else, the mood seemed good around the table in the Roosevelt Room of the White House on Friday. Obama noted that it would soon be Boehner’s birthday and said he wasn’t “going to embarrass him with a cake because we didn’t know how many candles were needed.”

“Yeah, right,” said Boehner, who’s turning 63 today, chuckling as he playfully poked the president in the elbow.

Information for this article was contributed by David Espo, Ben Feller and Andrew Taylor of The Associated Press and by Ian Katz, Richard Rubin, Heidi Przybyla and Kathleen Hunter of Bloomberg News.

Front Section, Pages 1 on 11/17/2012

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