Winnipeg Free Press - PRINT EDITION

U.S. party leaders upbeat about avoiding 'fiscal cliff'

Options weighed in discussions with president

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WASHINGTON -- Congressional leaders from both parties voiced fresh optimism Friday after meeting with newly re-elected U.S. President Barack Obama about avoiding year-end "fiscal cliff" tax increases and spending cuts that would hammer the middle class and risk plunging the economy into recession.

House Speaker John Boehner of Ohio said Republicans are willing to consider increased revenue "as long as it is accompanied by spending cuts" as leaders in a divided government get to work on a possible deal after a fierce election campaign.

He presented a framework that one official said called for a deficit down-payment of unspecified size by year's end, to be followed by comprehensive tax reform and an overhaul of Medicare and other benefit programs in 2013.

Democrats indicated some spending cuts would be fine with them. "I feel confident that a solution may be in sight," said House Democratic leader Nancy Pelosi of California.

The goal of the high-pressure talks to come is to produce a multi-trillion-dollar deficit-reduction plan that can take the place of the across-the-board tax increases and spending cuts slated to take effect Jan. 1.

In remarks while reporters were present, Obama stressed that time was short as he welcomed the leaders to the White House for the first time since winning re-election this month. "We have urgent business to do," he said.

The mood seemed good around the table in the Roosevelt Room of the White House. Obama noted it would soon be Boehner's birthday and said he wasn't "going to embarrass him with a cake because we didn't know how many candles were needed."

"Yeah, right," said Boehner, who turns 63 today, chuckling as he playfully poked the president in the elbow.

There was no indication the meeting touched on Obama's campaign-long call to raise tax rates at upper incomes.

In their public comments, neither the president nor the lawmakers dwelt on long-standing differences that doomed previous deficit negotiations. Senate Republican leader Mitch McConnell came closest, telling reporters that while Republicans are willing to discuss increased revenue, most members of his party "believe we are in the dilemma we are in not because we tax too little, but because we spend too much."

Obama ran for a new term calling for a "balanced approach" to deficit reduction that includes raising taxes on income over $200,000 a year for individuals and $250,000 for couples. And while the president has stated a willingness to pull federal savings out of benefit programs, including Medicare and Medicaid, Democratic leaders have been reluctant to go along.

Raising taxes has long been anathema to Republicans, who say government spending must be cut to reduce deficits and taxes reduced to stimulate job creation in an economy where unemployment is 7.9 per cent.

Under current law, tax cuts that took effect more than a decade ago will expire at all income levels at the end of the year, as will Bush-era reductions for investors, married couples, families with children and others. The two per cent payroll tax cut would end, and an additional 26 million taxpayers would come under the alternative minimum tax. The defence budget would be cut by $55 billion and domestic programs would incur the same reduction.

-- The Associated Press

Republished from the Winnipeg Free Press print edition November 17, 2012 A22

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