Dec. 19 (Bloomberg) -- Obama administration officials told leaders of business and financial services groups that negotiations with House Speaker John Boehner have deteriorated in the past 24 hours, a person familiar with the meeting said.
The officials told eight industry representatives at the White House that plans to vote on Boehner’s alternative proposal on taxes risk pushing the government past the deadline for spending cuts and tax increases to start, said the person, who asked for anonymity to discuss the private talks.
Treasury Secretary Timothy F. Geithner and White House Chief of Staff Jack Lew were among the administration officials who briefed the group, which included Business Roundtable President John Engler and U.S. Chamber of Commerce Chief Executive Officer Tom Donohue.
Engler said President Barack Obama and Boehner still must bridge differences on spending even as they’ve made progress on raising revenue.
“I’d just say that both sides have to work this out,” Engler said as he left the White House. “This is for the nation.”
Also in the meeting, which lasted almost an hour, were Jay Timmons, president of the National Association of Manufacturers; Tim Pawlenty, former Republican governor of Minnesota who is now CEO of the Financial Services Roundtable; Rob Nichols of the Financial Services Forum; Marion Blakey, CEO of the Aerospace Industries Association; Robert Stevens, CEO of Bethesda, Maryland-based Lockheed Martin Corp., and Dan Danner, head of the National Federation of Independent Business.
Obama and his advisers have been seeking support from corporate executives and business groups as he tries to pressure congressional Republicans to accept a tax-rate increase for top earners. The tax plan is part of Obama’s proposal to avert more than $600 billion in automatic spending cuts and tax increases that start taking effect next month, the so-called fiscal cliff.
Obama and Boehner blamed each other for the impasse during separate appearances today.
Obama said at the White House that he offered congressional Republicans a “fair deal” and accused them of “posturing” in the talks. Republicans need to “take the deal” he offered, the president said.
Boehner, who is pressing Obama to accept deeper spending cuts and a higher income threshold for tax-rate increases, said if the president doesn’t accept the Republican plan he’ll be responsible for “the largest tax increase in American history.”
The $4.6 trillion tax increase over the next decade, scheduled to start taking effect in January, would be about 2.3 percent of the U.S. gross domestic product. In those terms, it would be smaller than a 1942 tax increase during World War II, which was 5 percent of GDP according to the Treasury Department.
Obama’s latest budget offer would raise taxes by $1.2 trillion and increase tax rates for households earning more than $400,000 a year, up from $250,000 in his earlier proposal. Obama’s plan would cut $1.22 trillion in federal spending, including interest savings.
Boehner’s “Plan B” would raise tax rates on annual income exceeding $1 million. The House plans to vote on it tomorrow, he said.
House Republican leaders tonight introduced a version of a measure to cut $310 billion in spending that passed on a party-line vote in May, according to a notice on the House Rules Committee’s website. That measure, which died in the Senate, would have cut food stamps, federal workers’ benefits and other domestic programs to replace $55 billion of defense cuts in the automatic spending reductions set to begin in January.
Republicans including Representative Allen West of Florida had complained that Boehner’s tax measure didn’t include any spending cuts to offset the defense reductions. Without such cuts West said he was likely to vote against the tax measure.
Representative David Dreier of California, the Rules Committee Chairman, said the amounts of spending cut in the measure would reflect adjustments since its passage in May.
The Obama administration threatened a veto of Boehner’s plan, saying it “will not accept a deal that asks too little of the very wealthiest to increase revenue and instead shifts the burden to the middle class and seniors,” according to a White House statement. “The administration believes that it can work together with the Congress to resolve remaining differences and not miss this opportunity to avert the fiscal cliff.”
House Minority Leader Nancy Pelosi, a California Democrat, said Boehner’s statement seemed like “an act of desperation. It didn’t look like, to me, a person who had the votes.”
No talks have occurred between the White House and congressional Republicans since Boehner and Obama met Dec. 17, administration officials said in a background briefing for reporters today.
Obama also said today he won’t negotiate on whether to raise the federal debt limit, which the U.S. is projected to reach as early as mid-February.
“I’ve put forward a very clear principle: I will not negotiate around the debt ceiling,” he said. “We’re not going to play the same game that we saw happen” in 2011. That debate, resulting in a credit downgrade, “hurt our economy” and “provided more uncertainty,” he said.
The Standard & Poor’s 500 Index lost 0.8 percent to 1,435.81. The Dow Jones Industrial Average slipped 98.99 points, or 0.7 percent, to 13,251.97. The benchmark 10-year Treasury bond yield fell one basis point, or 0.01 percentage point, to 1.8 percent at 4:06 p.m. New York time after dropping earlier to 1.77, according to Bloomberg Bond Trader prices.