Republicans in Congress hardened their resistance to President Barack Obama’s proposed higher taxes for top earners and demanded a spending-cut plan, as lawmakers in both parties said it’s becoming less likely an agreement can be enacted before the Christmas holiday.
Obama’s budget plan is “mainly tax hikes,” House Speaker John Boehner told reporters today in Washington. “We’ve got some serious differences.” During a phone call yesterday, Boehner said, he and the president were “frank” about “how far apart we are.”
Separately, Federal Reserve Chairman Ben S. Bernanke said the prospect of more than $600 billion in spending cuts and tax increases “clearly” is having an effect on the economy “even though we’ve not yet even reached the point of the fiscal cliff kicking in.”
“It’s already affecting business and hiring decisions by creating uncertainty” or “pessimism,” he said at a news conference in Washington. “Clearly this is a major risk factor.”
“I actually believe that Congress will come up with a solution and I certainly hope they will,” Bernanke said.
If Congress doesn’t act, the tax increases and spending cuts will start taking effect in January. Tax rates for income at all levels will rise, along with taxes on estates, capital gains and dividends.
The gloomy outlook shared by Republicans and Democrats about passing a deal by Dec. 25 comes amid a campaign by outside groups, in particular chief executives of major companies, urging Obama and Boehner to find a compromise.
“You might have a booming economy in a couple of months,” with economic growth accelerating to 4 percent rather than 2 percent, Dimon said today at a conference in New York hosted by the New York Times’s DealBook.
Republicans say Obama’s unwillingness to specify entitlement spending reductions is hampering a deal, while Democrats say talks are stalled over Boehner’s refusal to allow income tax cuts to expire for the top 2 percent of earners.
“The reports I have from people at the White House are that Boehner and his staff really are unhelpful this week,” Senator Dick Durbin of Illinois, the second-ranking Democrat, said today. “There just has been very little progress made.”
Senate Majority Leader Harry Reid said on the Senate floor today he was “very, very disappointed” with the lack of progress. He said Republicans will either agree to raise tax rates for top earners, “or we are going to go over the cliff” of tax increases and spending cuts.
House leaders are telling members that votes are possible after Christmas, said Representative Doc Hastings, a Washington Republican. “It’s going to be a long December,” he said.
Senate Minority Leader Mitch McConnell, a Kentucky Republican, said Obama’s focus on higher tax rates for top earners has made a deal tough to reach.
“The president and his allies have taken so many things off the table the only thing left is varnish,” McConnell said.
“There’s not much progress,” said Representative Charles Boustany, a Louisiana Republican, after leaving a party meeting. “We’re going to hold the line” on tax rates.
White House press secretary Jay Carney said today the president will hold firm on his insistence that the rates for top earners go up. He wouldn’t give a timeline for the talks or for reaching a deal.
“The parameters of what a deal would look like are clear,” Carney said. While Obama is “willing to make tough choices on the spending side,” Republicans must accept letting rates rise for top earners, he said. Republican offers to raise revenue by curbing tax breaks are vague, he said.
Separately, Democrats are stepping up their campaign to extend tax cuts for all except the top earners. House Minority Leader Nancy Pelosi of California called on House Republicans to advance a Senate-passed bill to maintain tax cuts for married couples earning less than $250,000 a year.
Sixty-five percent of Americans say Obama’s Nov. 6 election victory gave him a mandate on his proposal to raise tax rates for top earners, according to a Bloomberg National Poll of 1,000 adults conducted Dec. 7-10. Majorities of about 2-to-1 also see the election results as an endorsement of Obama’s pledge to protect Social Security and Medicare benefits.
“The Republicans have isolated themselves,” Pelosi told reporters at the Capitol today. She compared the situation to the debate over the payroll tax cut extension in 2011, when days before its scheduled expiration, Republicans dropped their opposition. “Republicans are just delaying, delaying and delaying, and that’s not responsible.”
The Standard & Poor’s 500 Index rose 0.1 percent to 1,428.61 at 4 p.m. in New York, erasing an earlier rally of as much as 0.8 percent. Treasuries fell. The benchmark 10-year yield increased five basis points to 1.7 percent, the highest since Nov. 23.
Obama held a meeting and conference call with a bipartisan group of mayors and community leaders to seek support for his talks with congressional Republicans on the budget.
Obama yesterday reduced his demand for new tax revenue to $1.4 trillion from $1.6 trillion. Republicans still have an $800 billion revenue target, party aides said.
Boehner said Obama’s demand for $1.4 trillion in more tax revenue “can’t pass the House and Senate.” Durbin said the offer demonstrates that “the president’s trying to show some flexibility and move the negotiations forward.”
Representative Chris Van Hollen, the top Democrat on the House Budget Committee, said he’s concerned Boehner may think he’s unable to make a deal perceived as “reasonable to the vast majority of the country” because it may put his speakership at risk when the next Congress convenes in January.
It’s becoming increasingly doubtful a plan can be enacted by Christmas, Van Hollen of Maryland said at a breakfast in Washington sponsored by the Christian Science Monitor. The two sides would have to strike a deal on a framework by the end of this week to pass legislation in both chambers by Dec. 25, he said.
Until Christmas Eve
“We are going to stay here right up until Christmas Eve, throughout the time period before the New Year,” said House Majority Leader Eric Cantor, a Virginia Republican.
The president’s plan also would include a corporate tax overhaul, according to an official familiar with the negotiations who wasn’t authorized to describe them publicly and asked to not be identified.
The two sides remain hundreds of billions of dollars apart on taxes and spending, and they continue to disagree on whether a year-end deal should include an increase in the debt limit and fresh programs to boost the economy.
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