Congressional leaders from both parties voiced fresh optimism after meeting with newly re-elected US President Barack Obama about avoiding year-end “fiscal cliff” tax increases and spending cuts that would hammer the US’ middle class and risk plunging the economy into recession.
Obama’s Democrats and opposition Republicans have until the end of the year to work out a deal each side could live with, and that would have a softer impact on the economy, which is still recovering very slowly from the last recession.
Speaker of the US House of Representatives John Boehner said on Friday his Republicans are willing to consider increased revenue “as long as it is accompanied by spending cuts” as leaders in a divided government get to work on a possible deal after a fierce election campaign.
Republicans are opposed to increasing tax rates and want to cut spending, while Democrats do not want to cut into social programs from healthcare to education, and are proposing raising taxes on richer Americans.
Boehner presented a framework that one official said called for a deficit down-payment of unspecified size by year’s end, to be followed by comprehensive tax reform and an overhaul of healthcare for the elderly and other benefit programs next year.
Democrats indicated some spending cuts would be fine with them.
“I feel confident that a solution may be in sight,” US House Minority Leader Nancy Pelosi said.
The goal of the high-pressure talks to come is to produce a multitrillion-dollar deficit-reduction plan that can take the place of the across-the-board tax increases and spending cuts that are slated to take effect on Jan. 1.
In remarks while reporters were present, Obama stressed that time was short as he welcomed the leaders to the White House on Friday for the first time since winning re-election this month.
“We have urgent business to do,” he said.
There was no indication that the meeting touched on Obama’s campaign-long call to raise tax rates at upper incomes.
After the meeting, White House press secretary Jay Carney said: “Both sides agreed that while there may be differences in our preferred approaches, we will continue a constructive process to find a solution and come to a conclusion as soon as possible.”
For all the expressions of optimism, it was unclear whether the Nov. 6 elections and the prospect of the so-called fiscal cliff would serve as a strong enough catalyst for these talks to succeed where other recent attempts have failed.
Obama ran for a new term calling for a “balanced approach” to deficit reduction that includes raising taxes on income over US$200,000 a year for individuals and US$250,000 for couples. And while the president has stated a willingness to pull federal savings out of benefit programs, including government health insurance for the elderly and the poor, Democratic leaders have been reluctant to go along.
Raising taxes has long been anathema to Republicans, who say government’s spending must be cut to reduce deficits and taxes reduced to stimulate job creation in an economy where unemployment is 7.9 percent.
Boehner told reporters after Friday’s meeting that he had outlined a framework for negotiations that “is consistent with the president’s call for a fair and balanced approach.”
He did not provide details, except to say it “deals with reforming our tax code and reforming our spending.”