US party leaders test fiscal cliff plans

White House officials and Republican leaders in the House of Representatives  huddled with members of their parties in Congress, testing their willingness to  make the final compromises needed for a fiscal cliff deal in the coming days.

John Boehner, Republican speaker, held two meetings with rank-and-file  conservatives on Tuesday in an attempt to shore up internal support for his  recent proposal to allow tax rates to increase on those earning more than $1m.  This concession has drawn scepticism from many House Republicans, though not  enough outright opposition to scuttle any deal.

But Mr Boehner is likely to have to accept even more revenue, with tax rises  hitting households earning substantially less than $1m per year, in any deal  with Barack Obama.

At the same time, Rob Nabors, the top congressional liaison representing Mr  Obama, was meeting with Democrats on Capitol Hill to explain the president’s  latest offer, which includes some spending cuts that have dispirited members of  his own party.

Among the most significant of Democratic concerns is Mr Obama’s offer this  week to allow a less generous measure of inflation in the calculation of Social  Security pension benefits.

With both sides hunkering down to gauge the level of support for a deal, the  mood of the talks was slightly less bright than it had been on Monday when a  flurry of concessions from both sides led to greater momentum in the  negotiations.

Still, Mr Boehner and the White House continued to express confidence that a  deal was within reach, as the differences narrowed between the sides. “In a  perfect world, we are one meeting away from leaders coming out saying ‘we’ve got  it’,” says Gabe Horwitz, director of the economic programme at Third Way, a  centrist Democratic think-tank. “There’s always a chance a deal can go south but  we’re just getting close,” he says.

Nevertheless, John Boehner, the Republican Speaker of the House of  Representatives, said he was preparing a back-up plan to extend current tax  rates for all Americans except millionaires, in case talks to avert the fiscal cliff  collapsed.

“I believe it’s important that we protect as many American taxpayers as we  can,” he added, dismissing the latest  offer from Mr Obama as insufficient, arguing that the president’s planned  tax rises on the wealthy remained excessive and the spending cuts too modest.

But Mr Boehner also suggested that a deal involving $1tn in new taxes  combined with $1tn in fresh spending reductions would be acceptable to House  Republicans, a goal that appears within reach.

The White House rejected Mr Boehner’s back-up plan, urging the Republican  leader to remain focused on the main negotiations.

“The Speaker’s ‘plan B’ ... can’t pass the Senate and therefore will not  protect middle-class families and does little to address our fiscal challenges  with zero spending cuts,” said Jay Carney, the White House press secretary.

“The president is hopeful that both sides can work out remaining differences  and reach a solution so High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article.

The concessions began at the start of the week when Mr Boehner agreed to  raise tax rates on households with incomes above $1m, dropping his party’s  steadfast opposition to any tax rate increases.

Mr Obama then responded by saying that his threshold for tax rises was no  longer $250,000 in earnings, a position on which he campaigned in both the 2008  and 2012 presidential elections, but somewhat higher at $400,000.

Sources close to the talks made it clear the White House offer was not final,  leaving room for a final compromise. But both Mr Boehner and White House  officials first needed to test the temperature of their allies in Congress ahead  of the last push.

“Obviously leadership is doing whatever it can to see where members are on  various thing, saying ‘how would you feel about this?’, that kind of thing,” said one Republican aide in the House. “You have to make sure people are OK with  what the package is.”

However, Republicans believe there are no good options on the table.

Rob Woodall, a Republican congressman from Georgia, seemed to capture the  views of many in his party when he said in a speech on the House floor last week  that he would oppose any tax increases, but wanted Mr Obama to make it “difficult” for him to vote “no” against a deal by including “substantive  reform” in the final compromise.

“Make those spending reductions so large, and so helpful to the American  economy, that I would have no choice but to agree to your tax increases so that  we can save the country from the real problem, which is spending,” Mr Woodall  said.

But as well as making progress on the issue of taxes, Mr Obama and Mr Boehner  have also found increasing common ground on the spending side and the terms for  a rise in the debt ceiling.

Mr Obama dropped his main demand for short-term stimulus, in the extension of  a payroll tax cut for all American workers, though he is still pressing for  emergency jobless benefits and infrastructure spending to be approved.

we don’t miss the opportunity in front of us today,” Mr  Carney said.

Source:http://www.ft.com.December 19, 2012 By James Politi and Stephanie Kirchgaessner in Washington