Obama and Boehner Circle Each Other on Budget Impasse

Mr. Obama, in his first formal remarks since the night of his re-election, said he would open discussions with Congressional leaders next week to seek a compromise, and then, before an applauding crowd of supporters in the White House’s East Room, defended the “detailed plan” that he campaigned on — including higher taxes on the wealthy.

“I’m not wedded to every detail of my plan. I am open to compromise. I am open to new ideas,” he said. “But I refuse to accept any approach that isn’t balanced.”

“We have to combine spending cuts with revenue, and that means asking the wealthiest Americans to pay a little more in taxes,” he said, calling for Congress to immediately extend existing tax rates for 98 percent of taxpayers.

Mr. Boehner, citing a “cordial” conversation with the president on the morning after the election, said that he was “hopeful that productive conversations can begin soon so that we can forge an agreement that can pass the Congress.”

But he insisted, as the Repulicans put it throughout the campaign, that “the problem with raising tax rates on the wealthiest Americans is that more than half of them are small-business owners.” He added, “Raising tax rates will slow down our ability to create the jobs that everyone says they want.”

Their dueling appearances seemed almost like a reprise of the debates over tax proposals, which were the sharpest point of division in the presidential election.

Asked if the results of the election had weakened his hand, Mr. Boehner said: “There is a Republican majority here in the House. The American people re-elected the Republican majority.”

Indeed, his hands are tied partly because members of his party still have a wary eye on the electoral landscape. Senator Mitch McConnell of Kentucky, the Republican leader and a crucial player in the budget talks, is up for re-election in 2014 and may resist any deal that could foster opposition back home.

But many members of Congress clearly see recent events as creating an opening in the postelection session of Congress, when some retiring and defeated lawmakers could have a freer hand on voting for legislation, absent political consequences. Republicans were weakened by losing seats in both the House and the Senate, while Democrats are eager to move to issues like immigration, which animated Latino voters and helped deliver victory on Tuesday.

“The conditions are there to act,” Senator Bob Corker, Republican of Tennessee, said on Thursday. “I think the environment is different now.”

One reason is that if Washington were to remain in complete gridlock, all tax brackets would revert automatically to those under President Bill Clinton and spending would be cut automatically across the board – the abrupt changing of economic gears known as the “fiscal cliff” because of its likely economic effects.

The nonpartisan Congressional Budget Office underscored the stakes in a report Thursday that framed Washington’s dilemma. It said that if automatic spending cuts went into force and all the Bush-era tax cuts expired, the nation would slip into recession next year and unemployment would rise to 9.1 percent, from October’s rate of 7.9 percent. But simply canceling those deficit-reduction measures would risk a financial crisis that would make matters worse, the report said.

The report suggested that allowing the Bush-era tax cuts to expire for households earning more than $250,000 a year — favored by the White House and its Democratic allies, but strenuously opposed by Congressional Republicans — would have relatively modest economic effects.

Congressional aides said that on a conference call of House Republicans on Thursday, a number of lawmakers spoke up to say they needed to give their leaders breathing room and avoid brinkmanship.

“I don’t want to box myself in,” Mr. Boehner said on Friday. “I don’t want to box anybody else in. I think it’s important for us to come to an agreement with the president. But this is his opportunity to lead.”

But the forces arrayed against a budget deal remain powerful, and the gap between the parties — at least in their public postures — is wide. Liberals, backed by Senator Harry Reid of Nevada, the majority leader, say Social Security should not be part of any deal.

“House Republicans must end their intransigence on tax cuts for the very wealthy and sit down on a bipartisan basis to finish the work of this Congress,” said Representative Sander M. Levin of Michigan, the ranking Democrat on the House Ways and Means Committee, where tax legislation is written.

Mr. Boehner said that “by lowering rates and cleaning up the tax code, we know that we’re going to get more economic growth.”

“It’ll bring jobs back to America,” he said. “It’ll bring more revenue.”

But a second Congressional Budget Office report released Thursday threw cold water on Republican beliefs that a simplified tax code that lowered income and payroll taxes and closed loopholes to make up for lost revenue would substantially close the deficit by increasing economic growth. Such a plan would raise about $100 billion a year by 2020, far less than what Democrats say is necessary, the report said.

There are other pressing and potentially costly matters facing the lame-duck Congress, too. One is an extension and overhaul of farm programs, including emergency relief for the drought, which persists over much of the nation’s middle.

Another is providing federal assistance to the states hit hard by Hurricane Sandy, a bill that could easily come to tens of billions of dollars.

Then there is the looming deadline for raising the debt ceiling, a matter that may prove hard to untangle from the related questions of spending and taxation.

“It is an issue that is going to have to be addressed, sooner rather than later, ” Mr. Boehner said on Friday.

The Treasury Department expects the country to hit its debt ceiling, a legal limit on the amount the government is allowed to borrow, close to the end of the year. That would give Congress only a matter of weeks to raise the ceiling, now about $16.4 trillion, before sending financial markets into a panic.

In 2011, Congressional Republicans would not raise the debt ceiling without a broader agreement to cut the country’s deficit and set it on a better fiscal path. The impasse over finding spending cuts and tax increases to do that led to the creation of the automatic spending cuts that loom on Jan. 1, the same time the Bush-era tax cuts were also set to expire.

Reporting was contributed by Jonathan Weisman, Jennifer Steinhauer, Annie Lowrey and Helene Cooper.

Article source: http://www.nytimes.com/2012/11/10/us/politics/obama-and-boehner-circle-each-other-on-budget-impasse.html?partner=rss&emc=rss