Dec. 14 (Bloomberg) -- President Barack Obama and House Speaker John Boehner met for a third time at the White House to discuss averting spending cuts and tax increases before a year-end deadline.
Boehner and Obama met for almost an hour late yesterday, with no public announcement of progress. In January, more than $600 billion in spending cuts and tax increases, the so-called fiscal cliff, are scheduled to begin.
“The president and speaker had a frank meeting in the Oval Office,” Boehner spokesman Brendan Buck said in an e-mailed statement, adding that the “lines of communication remain open.”
As was the case following their most recent meeting on Dec. 9, the White House and Boehner’s office issued almost identical statements. Treasury Secretary Timothy Geithner attended yesterday’s session, according to an administration official who sought anonymity.
Obama and Boehner have been stymied in negotiations, with the president and congressional Democrats saying they won’t discuss spending cuts unless Republicans agree to higher tax rates for top earners. Republicans are insisting on reductions to entitlement programs such as Medicare.
White House and congressional officials told their staffs this week that they may be spending the holidays in Washington, as both sides publicly refused to budge from their positions. Boehner is scheduled to travel to his home state of Ohio for the weekend without any indication that the two sides have narrowed their differences.
Obama has been negotiating directly with Boehner, with the two keeping other leaders of their parties informed. Obama and Senate Majority Leader Harry Reid, a Nevada Democrat, spoke by phone yesterday, according to a Senate Democratic aide.
The two parties remain hundreds of billions of dollars apart on taxes and spending, and they continue to disagree on whether a year-end deal should include a debt-limit increase and programs to boost the economy.
Obama this week reduced his demand for new tax revenue to $1.4 trillion from $1.6 trillion. Boehner, who has proposed $800 billion in new tax revenue paired with $900 billion in cuts to entitlement programs, has said Obama’s plan couldn’t be passed by the Republican-controlled House or the Democratic-controlled Senate.
Senator Carl Levin, a Michigan Democrat, said on a conference call with reporters today that any attempt to use the current debate to start a corporate tax overhaul should raise money by limiting companies’ “offshore gimmicks.”
Congress is “considering major cuts in education and Medicare and national defense and a whole lot of critical programs, and at the same time corporate taxes, effective tax rates are continuing to go down,” Levin said.
Passing any agreement through the House wouldn’t be easy, Representative Jason Chaffetz, a Utah Republican, said in an interview.
“Everybody knows it’s going to be a tough set of votes and issues,” said Chaffetz. “We want to get on with it and not drag this out with seconds left on the scoreboard. There is a clear understanding that no one person is going to get everything they want.”
Boehner yesterday repeated his insistence that the president’s budget proposal was “anything but” balanced and accused Obama of not being serious about cutting spending.
Still, the speaker, during his weekly news conference, didn’t rule out allowing a House vote on extending tax cuts for income up to $250,000 a year for married couples, as Obama has demanded, if a broader tax-and-spending deal isn’t reached soon.
“The law of the land today is that everyone’s income taxes are going to go up on Jan. 1,” Boehner said when asked by reporters if he would rule out such a vote. “I have made it clear I think that is unacceptable. Until we get this issue resolved, that risk remains.”
Reid said the Senate won’t consider a limited bill to avoid an expansion of the alternative minimum tax or a cut in Medicare reimbursements to physicians unless a broader budget deal is reached that raises top earners’ tax rates.
“As long as they do something on rates, I am happy to talk to them about anything,” Reid said in an interview. Pressed on whether he would refuse to advance a smaller-scale bill if Republicans won’t budge on rates, he said, “That’s right.”
House Minority Leader Nancy Pelosi took a similarly hard line, telling reporters that talk of deeper spending cuts demanded by Republicans should await discussions on a tax-code overhaul next year.
“Don’t even think about using” an increase in the Medicare eligibility age to reduce spending, said Pelosi, a California Democrat. She added that Democrats won’t throw “America’s seniors over the cliff to give a tax cut to the wealthiest in America.”
Sixty-five percent of Americans say Obama has a mandate for his plan to increase taxes for top earners, according to a Bloomberg National Poll of 1,000 adults conducted Dec. 7-10. Majorities of about 2-to-1 also saw the election results as an endorsement of Obama’s pledge to protect Social Security and Medicare benefits.
U.S. stocks retreated, extending yesterday’s drop. The Standard & Poor’s 500 Index fell 0.2 percent to 1,416.32 at 10:03 a.m. New York time. The Dow Jones Industrial Average dropped 5.48 points, or less than 0.1 percent, to 13,165.24.se. Treasuries rose for the first time in four days as the yield on the benchmark 10-year note decreased two basis points, or 0.02 percentage point, to 1.71 percent at 9:22 a.m. New York time.
The alternative minimum tax, a parallel tax system created to ensure that wealthy individuals couldn’t avoid all taxes, is scheduled to affect about 28 million additional households for tax year 2012, up from about 4 million otherwise.
Without legislation to prevent that, the Internal Revenue Service has said it would delay tax filing scheduled to start in January until at least late March for more than 60 million filers. Action isn’t required, though inaction would cost taxpayers $92 billion in early 2013, according to the nonpartisan Joint Committee on Taxation.
If Congress doesn’t act by Jan. 1, Medicare payments to physicians will drop by 26.5 percent. Lawmakers regularly act to prevent the cut or restore it retroactively in what has become known as the “doc fix.”
Senator Dick Durbin of Illinois, the chamber’s second-ranking Democrat, told reporters that Democratic leaders met with physicians who were concerned about the cut in reimbursement rates.
Senator Charles Schumer of New York told reporters that Obama has the upper hand in the negotiations and will stick to his demand that tax rates rise for top earners.
“The election was fought on revenues, we won it on revenues, the public is with us on revenues, and if they don’t come to a compromise, all the ensuing problems on Jan. 1, almost all of them, will really be on their shoulders, and I think the public knows that,” Schumer said.
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