Progress on resolving ‘fiscal cliff’ remains elusive

Olivier Knox

Republican House Speaker John Boehner on Friday dashed any hope that the lack of public evidence of progress in talks to avoid the "fiscal cliff" might mask some movement behind the scenes.

"This isn't a progress report, because there's no progress to report," Boehner told reporters Friday at a hastily announced public appearance at the Capitol. "When it comes to the fiscal cliff that's threatening our economy and threatening jobs, the White House has wasted another week."

Boehner's comments poured cold water on speculation from Washington observers that he and President Barack Obama—the two main players in this postelection drama—may quietly be making the incremental progress needed to set up an 11th-hour compromise to avoid the fiscal cliff.

The fiscal cliff refers to a package of across-the-board automatic tax hikes and painful government spending cuts that goes into effect Jan. 1 if a budget deal between the White House and Congresss isn't reached. Experts have said the combination could plunge the economy into a new recession.

Treasury Secretary Timothy Geithner laid out the administration's opening bid. Republicans rejected it. The GOP made a counteroffer. The White House scoffed—and prepared for the talks to fail.

Some Republicans have urged a compromise on the president's top priority: extending Bush-era tax cuts for most earners while allowing them to expire for the richest 2 percent of American earners.

Meanwhile, organized labor—a major Democratic constituency—openly fears that any large-scale deal to reduce the deficit could include cuts to popular government programs like Medicare.

Public signs of progress have been so elusive that the mere fact that Obama and Boehner spoke by telephone this week seemed to herald a new, more promising phase. Right? Not so much, Boehner said on Friday."The phone call was pleasant, but was just more of the same, the conversations that the staff had yesterday—just more of the same," the speaker complained. "It's time for the president, if he's serious, to come back to us with a counteroffer."

Boehner faces the political challenge of selling any final deal to House Republicans. That's not an easy task: While the president won a convincing re-election, many House Republicans routed their Democratic foes in increasingly conservative districts where the only serious political danger to the incumbent is a primary challenge from the right.

But national polling shows the public largely siding with Obama in the standoff, and the president has focused on a PR offensive aimed at maintaining that advantage. On Monday he will continue that effort with a visit to a plant outside Detroit that manufactures engines.

If the president's re-election depressed Washington Republicans, his emphasis on campaign-style events rather than negotiation has left them steaming.

"We're ready and eager to talk to the president," Boehner said at his press conference, which more than once took on a plaintive tone. "When is he going to take a step toward us?"

The administration has sent mixed messages about how close to the cliff the president is willing to go.

The White House has sounded the alarm about middle-class families potentially paying Uncle Sam $2,200 more in taxes if a deal isn't reached. But Geithner said Obama was "absolutely" prepared to go over the cliff if the tax rates on the wealthiest Americans aren't hiked.

Boehner has rejected Obama's call to let tax rates rise on income above $200,000 for individuals and $250,000 for families, but he has said he would be open to raising tax revenue by closing loopholes and taking other steps.

Obama, who once argued for a similar approach, campaigned in 2012 on a vow to raise tax rates on the wealthiest Americans—and now says he will veto any legislation that does not do so.

The administration argues that closing loopholes won't raise enough revenue and the alternative would be to cut government programs—like college loans—that chiefly benefit the middle class.

There appears to be room for both sides to save face.

White House press secretary Jay Carney has stopped short of saying Obama would insist that the top income tax rate on the wealthy must rise back to Clinton-era levels of 39.6 percent, from 35 percent now. Republicans could meet the president in the middle at, say, 37 percent and say they succeeded in holding off a higher increase.

"The top brackets have to go up—this is not a negotiable issue," Vice President Joe Biden told reporters on Friday. "Theoretically we can negotiate how far up. But we think ... the top rate should go to 39.6%."

The president, for his part, has signaled an openness to reduce spending on Medicare and other popular entitlements. Republicans say such cuts must be part of any deal.

The White House had no immediate plans to respond to Boehner. But House Democratic Minority Leader Nancy Pelosi blasted her GOP counterpart for adjourning the House with no solution in sight.

"Speaker Boehner says Democrats are slow-walking the economy to the fiscal cliff," Pelosi said on Friday. "Yet this is the same Republican leadership that had the House and Senate in session barely a day—barely a day this week."

The two sides have girded for a drawn-out political battle—or a compromise, depending on one's outlook. One admittedly minor but potentially significant sign: Some Congressional Democrats now refer to the fiscal "slope," rather than the more apocalyptic "cliff." Sounds almost pleasant by comparison.

The White House is working hard to keep Democrats on board with its strategy, holding daily conference calls with communications aides to Pelosi and Democratic Senate Majority Leader Harry Reid. Obama's communications director, Dan Pfeiffer, met with Senate Democrats last week. And top Obama economic adviser Gene Sperling spoke to House Democrats in late November.

Boehner meets most mornings when the House is in session with Republican House Majority Leader Eric Cantor, Republican House Majority Whip Kevin McCarthy and the chair of the House Republican Conference, Rep. Cathy McMorris-Rodgers. He also meets with Budget Committee Chairman Paul Ryan, Ways and Means Committee Chairman Dave Camp, and Energy and Commerce Committee Chairman Fred Upton.

The New York Times reported these arrangements on Friday. Yahoo News confirmed them with aides on both sides.

Both sides have actively courted private-sector leaders. Obama hosted top CEOs at the White House last week, while leaders of the Business Roundtable met on Wednesday with McCarthy, Democratic Senate Finance Committee Chairman Max Baucus and Republican Sen. John Thune, who sits on the Finance and Budget committees.

After the disastrous summer 2011 fight over raising the debt limit, which led to the U.S. credit rating being downgraded, business leaders are taking an active role in trying to prevent another Washington feud from stifling promising signs of economic recovery.

On Thursday, Carney played down reports that the talks were in a deep freeze.

"The fact is, conversations continue. Lines of communication remain open between the White House and Congress. Multiple other conversations and communications continue to occur as we press for an agreement," he said.

But "it is our view that simply having conversations with congressional leaders will not produce a deal," he warned. "Rates on the top 2 percent—the wealthiest Americans—have to rise."

Chris Moody and Rachel Hartman contributed reporting.