WASHINGTON (AP) — President Barack Obama upped the pressure on Republican leaders to reach a fiscal deal, as the Senate tried to work out a compromise agreement as early as Sunday that would avoid middle-class tax increases and possibly prevent deep spending cuts that could threaten the nation’s economic recovery.
Republican and Democratic negotiators in the Senate were trying to work out a deal on what threshold to set for increased tax rates, whether to keep current inheritance tax rates and exemptions and how to pay for jobless benefits and avoid cuts in Medicare payments to doctors. Medicare is the government program that provides health care coverage to the elderly.
Senate leaders were hoping to be able to present their members with a plan when the parties meet separately on Capitol Hill Sunday afternoon. Any agreement passed by the Senate would still need to be approved by the Republican-controlled House before it be sent to Obama to sign.
The U.S. faces the so-called “fiscal cliff” in January because tax rate cuts dating back to President George W. Bush’s tenure expire on Dec. 31. The pending across-the-board reductions in government spending, which will slice money out of everything from social programs to the military, were put in place last year as an incentive to both parties to find ways to cut spending. That solution grew out of the two parties’ inability in 2011 to agree to a grand bargain that would have taken a big bite out of the deficit.
Unless Obama and Congress act to stop them, about $536 billion in tax increases, touching nearly all Americans, will begin to take effect in January. That will be coupled with about $110 billion in spending cuts, about 8 percent of the annual budgets for most federal departments. Economists predict that if allowed to unfold over 2013 this double whammy would result in a big jump in unemployment, financial market turmoil and a slide back into recession.
Obama pressed lawmakers to start where both sides say they agree — sparing middle-class families from looming tax hikes.
“If we can get that done, that takes a big bite out of the fiscal cliff. It avoids the worst outcomes. And we’re then going to have some tough negotiations in terms of how we continue to reduce the deficit, grow the economy, create jobs,” Obama said in an interview on NBC’s “Meet the Press” that aired Sunday.
Obama argued that Republican leaders have rejected his past attempts to strike a bigger and more comprehensive bargain.
“The offers that I’ve made to them have been so fair that a lot of Democrats get mad at me,” Obama said.
Boehner disagreed, saying Sunday that the president had been unwilling to agree to anything “that would require him to stand up to his own party.”
Don Stewart, a spokesman for Republican Senate leader Mitch McConnell, said Sunday: “While the president was taping those discordant remarks yesterday, Sen. McConnell was in the office working to bring Republicans and Democrats together on a solution.”
Attention Sunday focused on the Senate, where McConnell and Senate Majority Leader Harry Reid engaged in negotiations in the Capitol in hopes of having something to present senators.
“I was modestly optimistic yesterday, but we don’t yet see an agreement,” Obama said, referring to his mood Friday after he met with congressional leaders from both parties. “And now the pressure’s on Congress to produce.” The interview was taped Saturday.
Whether negotiated in a rush before the new year or left for early January, the fiscal deal Obama and Congress cobble together will be far smaller than what they initially envisioned as an alternative to purposefully distasteful tax increases and spending cuts.
Instead, their deal, if a deal is indeed cut, will put off some big decisions about tax and entitlement changes and leave other deadlines in place that will likely lead to similar moments of brinkmanship, some in just a matter of weeks.
An agreement would halt automatic across-the-board tax increases for virtually every American and perhaps temporarily put off some steep spending cuts in defense and domestic programs.
Gone, however, is the talk of a grand deal that would tackle broad spending and revenue demands and set the nation on a course to lower deficits. Obama and Boehner were once a couple of hundred billion dollars apart on a deal that would have reduced the deficit by more than $2 trillion over ten years.
Republicans have complained that Obama has demanded too much in tax revenue and hasn’t proposed sufficient cuts or savings in the nation’s massive health care programs.
The trimmed ambitions of today are a far cry from the upbeat bipartisan rhetoric of just six weeks ago, when the leadership of Congress went to the White House on Nov. 16 to set the stage for negotiations to come.
“I outlined a framework that deals with reforming our tax code and reforming our spending,” Boehner said as the leaders gathered on the White House driveway on Nov. 16.
“We understand that it has to be about cuts, it has to be about revenue, it has to be about growth, it has to be about the future,” House Democratic leader Nancy Pelosi said at the time. “I feel confident that a solution may be in sight.”
That big talk is over for now.
Senate negotiators were haggling over what threshold of income to set as the demarcation between current tax rates and higher tax rates. They were negotiating over the estate tax, how to extend unemployment benefits, how to prevent cuts in Medicare payments to doctors and how to keep a minimum income tax payment designed for the rich from hitting about 28 million middle-class taxpayers.
South Carolina Republican Sen. Lindsey Graham is predicting that without at least 28 of the 47 Republicans senators on board with any given proposal, Boehner wouldn’t be able to get the votes to pass it in the House of Representatives.
If McConnell “can’t get 60 percent of us to vote for this deal, it will be hard for Boehner to get it through the House. And I want to vote for it even though I won’t like it because the country’s got a lot at stake here,” Graham said on “Fox News Sunday”.
Democratic Sen. Dianne Feinstein of California said the 2.1 million Americans whose extended unemployment benefits ran out on Saturday are already feeling the pain of Congress’ inaction.
“From this point on, it’s lose-lose. My big worry is a contraction of the economy, the loss of jobs, which could be well over 2 million in addition to the people already on unemployment. I think contraction of the economy would be just terrible for this nation. I think we need a deal, we should do a deal,” Feinstein said on “Fox News Sunday.”
But the deal was not meant to settle other outstanding issues, including more than $1 trillion in cuts over 10 years, divided equally between the Pentagon and other government spending. The deal also would not address an extension of the nation’s borrowing limit, which the government is on track to reach any day but which the Treasury can put off through accounting measures for about two months.
That means Obama and the Congress are already on a new collision path. Republicans say they intend to use the debt ceiling as leverage to extract more spending cuts from the president. Obama has been adamant that unlike 2011, when the country came close to defaulting on its debts, he will not yield to those Republican demands.
As the day ended Saturday, there were few signs of success on a scaled-back deal. But no one was declaring a stalemate either.
Lawmakers have until the new Congress convenes to pass any compromise, and even the calendar mattered. Democrats said they had been told House Republicans might reject a deal until after Jan. 1, to avoid a vote to raise taxes before they had technically gone up, and then vote to cut taxes after they had risen.
Associated Press writers Jim Kuhnhenn, David Espo, Julie Pace and Michele Salcedo contributed to this article.
Copyright 2012 The Associated Press.