Obama, Boehner to meet on fiscal cliff

Posted at 3:06 PM, Dec 13, 2012
and last updated 2012-12-13 17:06:26-05

By Tom Cohen

WASHINGTON (CNN) — Facing a looming deadline to avoid the fiscal cliff, President Barack Obama and House Speaker John Boehner will meet Thursday afternoon at the White House, a Republican aide told CNN.

The face-to-face 5 p.m. ET meeting will be the first since Sunday between the president and Boehner, the lead Republican negotiator, in a bid to reach a deal to prevent the automatic tax hikes and spending cuts of the fiscal cliff set to take effect in less than three weeks. The two spoke by phone Tuesday.

News of the meeting followed a day of heated rhetoric between the two sides that reflected their underlying ideological division over the size and role of government.

In the talks to reduce the nation’s chronic federal deficit and debt, Obama demands more revenue from taxes, including higher rates on the top two income brackets.

Republicans reluctantly agree to more revenue from unspecified reforms such as eliminating some deductions and loopholes, but so far refuse to accept higher rates on anyone.

No deal is possible until a break occurs in the stalemate that has dominated deficit talks for two years and reflects the widening ideological divide in a country increasingly defined by partisan politics.

Before news of the Obama-Boehner meeting, the White House and the speaker continued their posturing Thursday, with both sides accusing the other of stalling the process by failing to offer realistic proposals.

“More than five weeks ago, Republicans signaled our willingness to avert the fiscal cliff with a bipartisan agreement that is truly balanced and begins to solve our spending problem,” Boehner told reporters. “The president still has not made an offer that meets those two standards.”

In particular, Boehner said Obama’s proposal failed to offer the significant spending cuts needed to address the mounting deficits and debt.

“It’s clear the president is just not serious about cutting spending, but spending is the problem,” the Ohio Republican said.

Minutes earlier, House Democratic leader Nancy Pelosi of California argued that Obama and Congress already cut spending in budget battles of the past two years. Now, she said, Republicans want further spending cuts to address most or all of needed deficit reduction.

“At some point you are cutting the seed corn of our future,” Pelosi told reporters, adding, “You’re not going to reduce the deficit by … only cutting your way to it because you will cut the prospects for job creation, which produce revenue.”

At the White House, spokesman Jay Carney complained Republicans have yet to offer details on which deductions or loopholes they would eliminate to raise revenue.

Obama “has made abundantly clear that Republicans need to accept the fact that rates will go up on the top 2% (of Americans) and that we should extend tax cuts for the remaining 98%,” Carney told reporters. “Thus far, we have not seen an acceptance of that by Republican leaders.”

In the latest developments this week, the two sides exchanged counteroffers that included two shifts by the White House. Democratic sources said Obama lowered his revenue demand from $1.6 trillion to $1.4 trillion but also added changes to the corporate rate to his proposal involving income taxes.

The Obama proposal contains his push to extend the Bush-era tax cuts for income up to $250,000 for families, or 98% of Americans. Rates would increase on income over that threshold, an outcome rejected by Boehner.

Obama and Democrats want Boehner to hold a vote on the president’s tax plan, which already has passed the Senate. Some House Republicans have indicated they would vote for the measure, and Boehner avoided a direct answer when asked Thursday about a possible vote.

Later, Democrats touted a report by the non-partisan Congressional Research Service that indicated no apparent correlation in the past 65 years between economic growth and tax rates on top-level personal income and capital gains.

Rep. Chris Van Hollen, D-Maryland, called the report “the final nail in the coffin of a fictional theory, and they’ve got nothing else really to hide behind.”

Along with pressure from the White House and Democrats, Boehner also must contend with growing cracks in his party’s anti-tax facade.

Obama “holds all the cards,” Sen. Ron Johnson, R-Wisconsin, conceded Wednesday on Fox Business Network. “He’s the only man that can sign a bill from preventing tax increases. So we may have to do a fallback position where we’re just trying to minimize the damage.”

At the same time, Johnson made clear his belief that the problem resulted from Democrats refusing to corral rising government spending that has fueled the growing deficits.

Neither Obama nor Senate Democrats intend “to limit the rate of growth in government, and as a result, they have no plan for doing so,” Johnson said.

He and other Republicans note that 71% of every tax dollar now goes to support Social Security, Medicare and Medicaid as well as paying off interest on the national debt. By 2026, the cost of those items would equal all federal tax revenue unless changes are made.

“The president wants to pretend spending isn’t the problem,” Boehner said. “That’s why we don’t have an agreement.”

Democrats consider the entitlement programs to be the foundation of the social contract with Americans and therefore question any push for benefit cuts. Instead, they insist the programs can be strengthened through improved efficiency and other reforms, such as the $700 billion in Medicare savings under Obama’s health care reform law of 2010 that Pelosi cited Thursday.

After his re-election last month, Obama wants to secure increased revenue from higher taxes on the wealthy to minimize the amount of spending cuts in an overall deficit reduction package.

Polls consistently show the public favors Obama’s stance in the negotiations.

Nearly half of Americans — 49% — say they approve of the president’s handling of the talks, compared with 25% who say Boehner is doing a good job, according to an ABC News/Washington Post poll released Wednesday.

Meanwhile, a Bloomberg National Poll indicated that nearly two-thirds of respondents, including nearly 50% of Republicans, believe Obama’s re-election gave him a mandate to seek higher taxes on the wealthy.

Also Wednesday, an administration official said the Business Roundtable — an association of CEOs of major corporations — has dropped its opposition to raising tax rates on the top two income brackets after lobbying by the White House.

However, Boehner and other Republicans complain that Obama’s tax stance will harm small business owners who declare their profits as personal income and therefore will get hit by the rate increase above $200,000 for individuals and $250,000 for families.

“Raising tax rates will hurt small businesses at a time when we’re expecting small businesses to be an engine of job growth in America,” Boehner said Thursday.

Some small business owners interviewed by CNNMoney said they would continue with plans to expand even if the Obama proposal gets passed and raises their taxes.

“If your business is good, you’ll grow it. We’ll figure out a way,” said Chelsea Sloan, who started the Uptown Cheapskate retail franchise. “Business owners who say they’ll stop hiring if tax rates go higher are blowing smoke.”

Both sides said they want a comprehensive agreement that reduces deficits and reforms the tax system.

Democrats call for a two-step approach that would include Obama’s tax plan and some spending cuts now, with broader tax and entitlement reform in the new Congress that convenes in January.

Boehner made clear Thursday that the first step must include significant spending cuts.

Meanwhile, two former Senate majority leaders told CNN on Thursday that both sides must be ready to compromise instead of sticking to party ideology.

“The simplest way to put it is that we’re at 24% spending, we’re at 16% revenue,” said Tom Daschle, the former Democratic senator from South Dakota. “We’ve got to bring those two closer together and that’s how you get a balanced budget and ultimately that’s how you get fiscal responsibility. You’ve got to bring those two together. You’ve got to raise revenue, you’ve got to cut spending and it can be done.”

To Trent Lott, the former Republican senator from Mississippi, it comes down to the principal negotiators.

“There’ll come a moment when the speaker is going to have to, you know, make a decision on that and the president will have to make a decision on what he’s going to do in return on spending, but they need to do it in concert,” Lott said. “It’s like directing the orchestra. You’ve got to have the winds and the brass come together and they’re not quite there.”

The House of Representatives is supposed to end its current session Friday and go home for the year, but Majority Leader Eric Cantor, R-Virginia, made clear the chamber would stay later than planned.

CNN’s Dana Bash, Paul Steinhauser, Caitlin Stark, Deirdre Walsh, Jessica Yellin, Ashley Killough and CNNMoney’s Jose Pagliery contributed to this report.

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