With US ‘fiscal cliff’ deadline nearing, parties still at odds

Reuters: Republicans in the US Congress on Monday called on President Barack Obama to detail long-term spending cuts to help solve the country’s fiscal crisis, while holding firm against the income tax rate increases for the wealthy, that Democrats seek.

In a further sign of tense relations between negotiators who are trying to avert a year-end ‘fiscal cliff’ of steep tax increases and spending cuts, the White House expressed doubts that ‘balanced’ deficit reductions can be achieved merely by limiting tax breaks and cutting spending, as Republicans propose.

The White House is already on record threatening to veto any bill that does not include income tax rate increases on the wealthy that are opposed by Republicans.

While Congress returned from its Thanksgiving holiday break amid increasing talk about long-term tax reform plans and a need to compromise, the two parties showed no signs yet of having found a way around the short-term tax obstacle necessary to head off the fiscal cliff on 31 December.

“We remain at an impasse,” Senate Republican Leader Mitch McConnell of Kentucky said during a floor speech.

The lack of progress helped push financial markets down slightly, as fiscal cliff worries made investors less willing to buy stocks.

“My fear is that the can gets kicked down the road for at least a six-month period” to search for a long-term fiscal deal, said Bonnie Baha of DoubleLine Capital, an asset management firm. “The market is going to hate it, especially the stock market.”

Obama spoke with House Speaker John Boehner, a Republican from Ohio, about the budget negotiations during the weekend, as well as with Senate Majority Leader Harry Reid, a Nevada Democrat, a White House official said.

Obama spokesman Jay Carney said the President would speak with them again “At the appropriate time.”

“People in both parties agree we need a ‘balanced approach’ to deal with our deficit and debt and help our economy create jobs,” Boehner said. But the two parties were clearly at odds over what constitutes a balanced approach.

The fiscal cliff’s approximately US$ 600 billion in tax hikes and spending cuts that would begin in 2013 would push the US economy back into recession, according to the non-partisan Congressional Budget Office.

A new CNN poll found that the public is now closely watching the debate unfolding in Washington over how to tame budget deficits that have exceeded US$ one trillion for four consecutive years.

The poll found that two-thirds of those surveyed fear the country would face major problems without a remedy to the fiscal cliff and 77% believed their own financial situation would suffer. Republicans would get more of the blame than Obama, according to the survey.

The remedy preferred by two-thirds in the poll was a mix of spending cuts and tax increases to get the country’s finances in order.

Seconding that Monday was Warren Buffett, the legendary investor who changed the debate about US tax reform in 2011 with a call for the rich to pay more.

In a New York Times op-ed column printed on Monday, Buffett suggested Congress move immediately to implement minimum taxes of 30% on incomes of US$ one million to US$ 10 million and 35% above that.

Others offered up different approaches to raising revenues. Republican Senator Bob Corker of Tennessee, for example, said he has talked to congressional leaders about capping tax deductions at US$ 50,000 instead of raising income tax rates. Similar ideas were earlier floated by failed Republican Presidential candidate Mitt Romney.

The business community, concerned about a potential deadlock in Congress, is continuing its lobbying campaign for a quick deal.

On Wednesday, Aetna health insurer head Mark Bertolini is planning, along with other CEOs, to visit Washington to persuade lawmakers to take action to avert the fiscal cliff.

Marion Blakey, head of the Aerospace Industries Association, said Congress should find added revenues and savings to major Government programs. His group has repeatedly warned that the US$ 109 billion in automatic spending cuts set to start in January half falling on defence would severely impact his industry.