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| President Barack Obama pauses while he speaks to reporters in the Brady Press Briefing Room at the White House in Washington after meeting with Congressional leaders regarding the fiscal cliff, Friday, Dec. 28, 2012. |
WASHINGTON (AP) -- The end game at hand, the White House and Senate leaders took a final stab at compromise Friday night to prevent middle-class tax increases from taking effect at the turn of the new year and possibly prevent sweeping spending cuts as well.
"I'm
optimistic we may still be able to reach an agreement that can pass both
houses in time," President Barack Obama said at the White House after
meeting for more than an hour with congressional leaders.
Surprisingly, after weeks of postelection gridlock, Senate leaders sounded even more bullish.
The
Republican leader, Sen. Mitch McConnell of Kentucky, said he was
"hopeful and optimistic" of a deal, adding he hoped a compromise could
be presented to rank-and-file lawmakers as early as Sunday, a little
more than 24 hours before the year-end deadline.
Said
Majority Leader Harry Reid: "I'm going to do everything I can" to
prevent the tax increases and spending cuts that threaten to send the
economy into recession. He cautioned, "Whatever we come up with is going
to be imperfect."
Officials said there was a
general understanding that any agreement would block scheduled income
tax increases for middle class earners while letting rates rise at upper
income levels.
Democrats said Obama was
sticking to his campaign call for increases above $250,000 in annual
income, even though in recent negotiations he said he could accept
$400,000.
The two sides also confronted a divide over estate taxes.
Obama
favors a higher tax than is currently in effect, but one senior
Republican, Sen. Jon Kyl of Arizona, said he's "totally dead set"
against it. Speaking of fellow GOP lawmakers, he said they harbor more
opposition to an increase in the estate tax than to letting taxes on
income and investments rise at upper levels.
Also
likely to be included in the negotiations are taxes on dividends and
capital gains, both of which are scheduled to rise with the new year.
Also the alternative minimum tax, which, if left unchanged, could hit
millions of middle- and upper-income taxpayers for the first time.
In
addition, Obama and Democrats want to prevent the expiration of
unemployment benefits for the long-term jobless, and there is widespread
sentiment in both parties to shelter doctors from a cut in Medicare
fees.
The White House has shown increased
concern about a possible spike in milk prices if a farm bill is not
passed in the next few days, although it is not clear whether that
issue, too, might be included in the talks.
One
Republican who was briefed on the White House meeting said Boehner made
it clear he would leave in place spending cuts scheduled to take effect
unless alternative savings were found to offset them. If he prevails,
that would defer politically difficult decisions on government benefit
programs like Medicare until
2013.
Success was
far from guaranteed in an atmosphere of political mistrust - even on a
slimmed-down deal that postponed hard decisions about spending cuts into
2013 - in a Capitol where lawmakers grumbled about the likelihood of
spending the new year holiday working.
In a
brief appearance in the White House briefing room, Obama referred to
"dysfunction in Washington," and said the American public is "not going
to have any patience for a politically self-inflicted wound to our
economy. Not right now."
If there is no
compromise, he said he expects Reid to put legislation on the floor to
prevent tax increases on the middle class and extend unemployment
benefits - an implicit challenge to Republicans to dare to vote against
what polls show is popular.
The guest list for the White House meeting included Reid, McConnell, Boehner and House Democratic leader Nancy Pelosi, D-Calif.
The
same group last met more than a month ago and emerged expressing
optimism they could strike a deal that avoided the fiscal cliff. At that
point, Boehner had already said he was willing to let tax revenues rise
as part of an agreement, and the president and his Democratic allies
said they were ready to accept spending cuts.
Since
then, though, talks between Obama and Boehner faltered, the speaker
struggled to control his rebellious rank and file, and Reid and
McConnell sparred almost daily in speeches on the Senate floor. Through
it all, Wall Street has paid close attention, and in the moments before
the meeting, stocks were trading lower for the fifth day in a row.
The
core issue is the same as it has been for more than a year, Obama's
demand for tax rates to rise on upper incomes while remaining at current
levels for most Americans. He made the proposal central to his
successful campaign for re-election, when he said incomes above $200,000
for individuals and $250,000 for couples should rise to 39.6 percent
from the current 35 percent.
Boehner refused
for weeks to accept any rate increases, and simultaneously accused Obama
of skimping on the spending cuts he would support as part of a balanced
deal to reduce deficits, remove the threat of spending cuts and prevent
the across-the-board tax cuts.
Last week, the
Ohio Republican pivoted and presented a Plan B measure that would have
let rates rise on million-dollar earners. That was well above Obama's
latest offer, which called for a $400,000 threshold, but more than the
speaker's rank and file were willing to accept.
Facing
defeat, Boehner scrapped plans for a vote, leaving the economy on track
for the cliff that political leaders in both parties had said they
could avoid. In the aftermath, Democrats said they doubted any
compromise was possible until Boehner has been elected to a second term
as speaker when the new Congress convenes on Jan. 3.
Further
compounding the year-end maneuvering, there are warnings that the price
of milk could virtually double beginning next year.
Congressional
officials said that under current law, the federal government is
obligated to maintain prices so that fluid milk sells for about $20 per
hundredweight. If the law lapses, the Department of Agriculture would
be required to maintain a price closer to $36 of $38 per hundredweight,
they said. It is unclear when price increases might be felt by
consumers.
