Nov. 27 (Bloomberg) -- Senate Majority Leader Harry Reid said Democrats and Republicans have made little headway in negotiations over how to avoid a year-end fiscal cliff.
“There’s been little progress with the Republicans, which is a disappointment to me,” Reid, a Nevada Democrat, told reporters today in Washington.
Reid said that following a Nov. 16 White House meeting, Republicans backed away from earlier openness to considering new tax revenue as part of a year-end deal to avert the so-called cliff, $607 billion in tax increases and spending reductions set to begin in January.
“They talked some happy talk about doing revenues, but we only have a couple weeks to get something done,” Reid said. “So we have to get away from the happy talk and start talking about specific things.”
Still, Reid also said he was “extremely hopeful, and I do not believe that the Republicans are going to allow us to go over the cliff.”
U.S. stocks extended losses as Reid spoke. The Standard & Poor’s 500 Index slipped 0.3 percent to 1,402.03 as of 3:17 p.m. in New York. The Dow Jones Industrial Average fell 0.5 percent to 12,908.08.
Senate Minority Leader Mitch McConnell, a Kentucky Republican, said Democrats are politicizing the talks.
Turning Off Campaign
“My advice to the president would be it seems like our friends on the other side are having some difficulty, kind of, turning off the campaign,” McConnell told reporters today.
The depth of potential Republican support for tax increases and the conditions attached to it will be tested over the next few weeks as lawmakers negotiate with President Barack Obama.
As their price for considering more taxes, Republicans are demanding structural changes to entitlement programs and an overhaul of the tax code. They say they are waiting for Obama and congressional Democrats to make an offer on spending cuts.
“There’s a point where panic will set in, but not yet, apparently,” Senator Ben Nelson, a Nebraska Democrat, said today in an interview when asked about the progress of talks. “I’m concerned.”
Obama met with small-business owners at the White House today and plans to travel to a toy factory in Pennsylvania on Nov. 30 to build public support for his approach to averting the so-called fiscal cliff at year’s end.
Time Running Short
“There’s still a great deal of ground that has to be covered before they get anywhere near a budget deal, and time is running” short, said Phil English, a former Republican congressman from Pennsylvania and now a lobbyist at Arent Fox LLP in Washington.
Some Republicans who long dismissed any tax increase as unacceptable said after the Nov. 6 election they were willing to consider higher revenue so long as Democrats accepted cuts in entitlement programs as part of a deficit-reduction deal.
In the Senate, Saxby Chambliss of Georgia and Bob Corker of Tennessee have expressed willingness to renounce their past anti-tax pledges. While the verbal openness to taxes questions the hold of anti-tax advocate Grover Norquist on lawmakers who signed his pledge against tax increases, Norquist calls the requisite deal for spending cuts “a pink unicorn.”
The president spoke by telephone over the weekend with Reid and with House Speaker John Boehner, an Ohio Republican, White House press secretary Jay Carney said yesterday.
“We remain confident that we can achieve an agreement,” and more “work has to be done” to come up with a plan that both sides can live with, Carney said.
The efforts have made such little headway that Obama is delaying inviting leaders to the White House this week as he had originally planned, a Democratic congressional aide who wasn’t authorized to discuss the talks publicly said yesterday.
The negotiations are occurring amid advertising and lobbying campaigns by advocates for keeping retirement savings tax breaks, current dividend tax rates and social safety-net programs.
House Republican leaders will meet tomorrow with business executives including Lloyd Blankfein, chief executive officer of Goldman Sachs Group Inc., according to a House aide who asked for anonymity because the meeting hasn’t been announced. Blankfein also is among business leaders invited to meet tomorrow with Obama, two people familiar with the matter said.
Thomas Donohue, president of the U.S. Chamber of Commerce, met with White House aides yesterday, said Sally-Shannon Birkel, a spokeswoman for the chamber.
Significant questions remain about what Republicans would accept. Boehner has drawn a line at increases in marginal tax rates, suggesting that he could support limits on deductions or other ways of increasing taxes on high earners that wouldn’t raise their rates.
At the same time, Boehner has said he wants to take in any additional revenue through economic growth and an overhaul of the tax code. His statements haven’t specified whether he is suggesting a tax increase as measured by congressional scorekeepers, who don’t allow revenue generated by economic growth from a tax overhaul to count in their estimates.
The tax overhaul Republicans are contemplating for 2013 could put long-lived features of the tax code such as the mortgage-interest deduction on the table for limits or elimination. Repealing the deduction would raise taxes on 20.2 percent of households, the nonpartisan Tax Policy Center estimated in 2011.
Democrats also will be faced with internal dissent over how much they are willing to give on entitlement spending.
“There’s a huge, huge opposition both within the Democratic Party and the administration and also the American people against doing radical changes to entitlements that would effectively cut a lot of benefits for middle-income families,” said Ethan Pollack, a senior policy analyst at the Economic Policy Institute in Washington, which favors policies that benefit low-income workers.
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