Obama Warns of Prolonged Talks as Republicans Rebuff Plan

Republicans Reject Obama Budget Plan as He Sells It to Public
Treasury Secretary Timothy Geithner shuttled among congressional leaders yesterday with a plan to trade $1.6 trillion in tax increases for $400 billion in unspecified entitlement program cuts, Republican congressional aides said. Photographer: Andrew Harrer/Bloomberg

President Barack Obama and U.S. House Speaker John Boehner each demanded the other compromise as they ended a week of public jockeying for advantage in fiscal cliff negotiations with a standoff over taxes.

Obama, warning of “prolonged negotiations,” used a campaign-style appearance yesterday in Pennsylvania to appeal for help from voters to put pressure on Republicans in Congress to pass an extension of tax cuts for middle-income Americans as a first step toward resolving the impasse. That would leave decisions on reworking the tax code and cutting spending until next year.

“It’s not going to be enough for me to just do this on my own,” Obama said on the floor of a toy factory in Hatfield.

Boehner, speaking less than a half-hour later in Washington, said the administration plan presented to congressional leaders by Treasury Secretary Timothy F. Geithner would risk growth by raising taxes on small businesses. He said it left talks no further along than they were before the election.

“There’s a stalemate, let’s not kid ourselves,” he said.

The deadlock over whether to continue Bush-era tax rates for the top 2 percent of wage earners extends a battle that has been waged for more than a year between Obama and Republicans in Congress. The issue has gained more urgency as the clock ticks down on more than $600 billion in tax increases and spending cuts scheduled to start taking effect in January.

Top Earners

Obama has proposed a framework that would raise taxes immediately on top earners and set an Aug. 1 deadline for rewriting the tax code and deciding on spending cuts, according to administration officials.

It calls for $1.6 trillion in tax increases, $350 billion in cuts in health programs, $250 billion in cuts in other programs and $800 billion in assumed savings from the wind-down of the wars in Iraq and Afghanistan, according to the officials, who asked for anonymity.

Obama, speaking at a facility of the Rodon Group that makes Tinkertoys and K’NEX building sets, said quick action by lawmakers to extend tax cuts for middle-income Americans -- while letting top rates rise -- would allow time for tougher negotiations on spending cuts to lower a budget deficit that has exceeded $1 trillion for each of the four years he has been in office.

Retail Sales

With the approach of Christmas, and the retail sales the season sparks, Obama said acting on rates would give consumers certainty even if the debate on spending and the tax code isn’t settled. Consumer spending accounts for about 70 percent of the economy.

“Where the clock is really ticking, right now, is on middle-class taxes,” he said. Settling that issue “would then give us in Washington more time to work together on that long-range plan to bring down deficits in a balanced way.”

Boehner refused to give in on raising tax rates on high earners, saying it would deal a “crippling blow” to small business and hurt economic growth.

“We’re willing to put revenues on the table, but revenues that come from closing loopholes, getting rid of special interest deductions and not raising rates,” Boehner said. “We think it is better for the economy clear and simple.”

Weekly Gain

The Standard & Poor’s 500 Index rose less than 0.1 percent to 1,416.18 at 4 p.m. in New York yesterday, erasing an earlier 0.3 percent drop and capping a second straight weekly gain. Yields on 10-year U.S. notes were little changed at 1.62 percent after losing seven basis points during the week amid concern about the budget standoff.

The dueling appearances by Obama and Boehner followed Geithner’s shuttling between congressional leaders on Nov. 29 with a plan to trade $1.6 trillion in tax increases on top earners for about $350 billion in unspecified entitlement-program cuts. It also seeks about $50 billion in stimulus spending in this fiscal year.

Republicans complained that the offer was little more than a rehash of old budget proposals, setting the stage for more contentious negotiations over the next several weeks.

It “was not a serious proposal,” Boehner said. “And so right now we’re almost nowhere.”

Entitlement Programs

Republicans also are seeking an overhaul of entitlement programs in exchange for raising tax revenue through other methods, such as limiting deductions. They want a higher Medicare eligibility age and an alternative yardstick for calculating inflation that would reduce Social Security cost-of-living adjustments, according to a Republican aide who wasn’t authorized to speak publicly

Gene Sperling, director of the White House National Economic Council and one of the administration’s principal negotiators, said the ball was now in the Republicans’ court.

“It’s for them now to come forward with their plan, with their details, so that we can start working quickly to getting an agreement,” Sperling said on “Political Capital with Al Hunt,” which airs this weekend.

That stance was echoed by Democrats in Congress, including Maryland Representative Steny Hoyer, the second-ranking House Democrat.

“I don’t think it’s a take it or leave it offer,” he told reporters. If Republicans “don’t like it, which apparently they do not, they need to counteroffer.”

Tax-Rate Increases

Sperling, while saying Obama insists on tax-rate increases for the wealthy, signaled flexibility on how much they might be raised and on the composition of the stimulus.

He said Obama has offered “very specific savings that have been detailed in our budget.” That proposal includes “$600 billion in entitlement savings, about $350 billion in health entitlement savings, such as in Medicare,” he said.

As part of the administration’s campaign for public support, Geithner also will appear tomorrow on the five main Sunday news interview shows, on NBC, ABC, CBS, Fox and CNN. Next week, Obama will meet with a group of governors on the fiscal cliff and address the Business Roundtable.

Senator Bob Corker, a Tennessee Republican, said the public posturing eventually will give way to serious negotiations.

“When it’s serious is when there will be negotiations that aren’t being leaked out for public consumption,” Corker said. “This is all theater that I don’t think anybody ought to pay any attention to.”

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