WASHINGTON — President Obama convened top congressional leaders at the White House on Friday as areas of possible compromise over the looming deadline to avert federal tax hikes and spending cuts begin to come into focus.
Republicans and Democrats remain far from a deal, which is needed by year-end to avoid a fiscal contraction that economists warn could launch another recession. But the outlines of a compromise can be seen as House Speaker John A. Boehner has signaled Republicans are open to new tax revenue and Obama has softened his insistence that income tax rates must rise to the top 39.6% rate from the Clinton era.
“My hope is this is going to be the beginning of a fruitful process that we’re able to come to agreement that will reduce our deficit in a balanced way, that we will deal with some of these long-term impediments to growth and we’re also going to be focusing on making sure that middle-class families are able to get ahead,” Obama said as he opened the meeting in the Roosevelt Room. “We’re going to get to work.”
Friday’s closed-door gathering of the principal players is the first sit-down since the election, which emboldened Obama and his allies on Capitol Hill. Americans spoke at the polls, they maintain, preferring the Democratic approach, which asks the wealthiest taxpayers to contribute more revenue, while preventing steep cuts in domestic spending.
At the same time, rank-and-file Republicans emerged from the election with the take-away that voters want the GOP House majority to hold the final “line of defense,” as Boehner puts it, against what they see as government overreach. All tax rates will rise on Jan. 1 if no action is taken — about a $2,000 hit for average Americans.
Resolving the tax issue is, in many ways, the cornerstone to a deal, as the two sides have found common ground in their desire to reverse the coming automatic spending cuts. On Jan. 2, massive across-the-board cuts would hit defense and domestic accounts, triggered as part of a deal last year when Republicans and the White House failed to develop a broader deficit-reduction plan.
Tax revenue could be raised by closing tax loopholes or capping deductions for the wealthiest Americans — couples earning incomes above $250,000, or $200,000 for singles — though experts say that may not raise enough money to deliver the big deficit-reduction deal that both parties want, unless tax rates are also increased. Boehner has resisted lifting rates beyond the top bracket of 35%, which has been in place since the George W. Bush era.
As talks begin both sides are aiming for a broad deficit-reduction deal that could slash some $4 trillion off the nation’s deficits over the next decade by tax and spending reforms.
Any deal on taxes would also require a compromise from Democrats to rein in spending on Medicare, Medicaid and other entitlement programs that are drivers of the nation’s long-term deficit problems. Obama has put forward plans to do that.
With the year-end deadline looming, Obama has repeatedly sought to pressure House Republicans to at least extend the expiring tax rates for middle-class families while talks on the upper-income rates continue. The president has warned that even the threat of new taxes in the New Year could dampen the coming holiday shopping season.
All sides have tried to resist drawing the lines of a stalemate. The meeting opened Friday with the cordial greetings officials use on such occasions.
In a moment of brevity, Obama offered birthday wishes to Boehner, who turns 63 on Saturday, and the two shook hands.
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