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Frustration sets in as U.S. 'fiscal cliff' talks stall

Source: Thomson Reuters Foundation - Thu, 13 Dec 2012 20:26 GMT
Author: Reuters
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* White House says Republicans refusing to budge on tax rates

* Frustrated Boehner heads home for weekend

* Polls show public backs Obama in showdown with Republicans

By Thomas Ferraro and Richard Cowan

WASHINGTON, Dec 13 (Reuters) - Negotiations between congressional Republicans and the White House hit a wall on Thursday, with both sides voicing frustration at the lack of progress on averting the "fiscal cliff" of steep tax hikes and spending cuts.

With an end-of-year deadline looming, U.S. House of Representatives Speaker John Boehner planned to head home for the weekend on Friday after criticizing President Barack Obama for putting jobs and the economic recovery at risk by insisting on raising tax rates for the wealthiest 2 percent of Americans.

White House spokesman Jay Carney, meanwhile, reaffirmed Obama's commitment to raising the top rates and complained there had been no movement from Republicans on that crucial topic.

"What we have not seen from the Republicans is any movement at all on the fundamental issue," Carney told reporters. "Republicans need to accept the fact that rates will go up on the top 2 percent."

Economists say failure to reach an agreement before Jan. 1 could tip the country back into recession. The main hurdle is the expiring tax cuts, which Obama wants extended for all but the rich and Boehner wants extended for everyone.

But with positions seeming to harden, both sides also emphasized their differences on Obama's request for permanent authority to increase U.S. borrowing as part of a "fiscal-cliff" agreement and on Republican calls for an increase in the eligibility age for recipients of the Medicare healthcare program.

At a news conference, Boehner occasionally raised his voice in criticism of Obama's bottom-line insistence on raising tax rates on the rich.

"Raising tax rates will hurt small businesses at a time when we're expecting small businesses to be the engine of job creation in America," said Boehner, who used a chart to illustrate his point that curbing spending increases was the key to deficit reduction.

If Obama persisted on a path of higher spending and higher taxes, he said, "this chart is going to look a lot worse," he said.

Afterward, his spokesman said Boehner would return to his home state of Ohio on Friday for the weekend, but was available if talks resumed.

"Ohio has both cell phone service and airports," spokesman Michael Steel said. "It won't be a problem."

A seven-day rally in world shares came to a halt and commodity prices slipped on Thursday after negotiations over the fiscal cliff appeared to stall.

"Today's there's a certain sense that both sides are still apart," said Gordon Charlop, managing director at Rosenblatt Securities in New York, describing trading as "tweaking" while investors watch Washington's back-and-forth drama.

While Republicans fumed, Obama planned to continue his public-relations offensive with a round of interviews with anchors from local television stations, following his interview with ABC's Barbara Walters two days ago.

A flurry of new polls showed strong support for Obama's position. According to a Wall Street Journal/NBC survey, three-quarters of Americans say they would accept raising taxes on the wealthy to avoid the cliff. Even among Republicans, some 61 percent say they would accept tax increases on high earners.

'REALITY SET IN'

A Pew Research Center poll showed Obama's approval rating rising and 55 percent saying he was making a serious effort to engage in the fiscal talks, while just 32 percent said Republicans were serious about a deal.

Senate Democratic leader Harry Reid, citing the polls, said Boehner "can't ignore the people forever" on the tax issue. "At some point, reality should set in," he told reporters.

The polls have put Republicans in a difficult negotiating position, and pressure has grown on Boehner in recent weeks from the right and left. Some Republicans have expressed a willingness to give in on higher tax rates in exchange for deeper spending cuts, while conservatives have demanded that Boehner stand firm.

"I'm not concerned about my job as speaker," Boehner, who faces re-election to the leadership post in January, told reporters.

Boehner also dismissed any notion that Republicans would agree to giving Obama more authority on the debt ceiling.

"Congress is never going to give up our ability to control the purse," Boehner said. "The debt limit ought to be used to bring fiscal sanity to Washington."

A group of 72 House Democrats, meanwhile, urged Obama to reject Republican calls to raise the Medicare eligibility age.

Senator Dick Durbin of Illinois, the second-ranking Democrat in the Senate, told reporters that he was told by the White House that raising the eligibility age for qualifying for Medicare benefits is not in the mix anymore.

"My understanding is that is no longer one of the items being considered by the White House," Durbin told reporters.

Durbin said doing so "creates some serious issues for a lot of people who may be caught in the gap between retirement and eligibility. Where are they going to get health insurance? Many of them are sick people," Durbin said.

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