'Cliff' Talks Move 'Significantly Closer' to the Edge
After days of optimism that a deal could be reached to avoid the "fiscal cliff," the gloves came off Thursday with Republican and Democratic leaders accusing each other of not making any substantive offers.
In dueling news conferences, Republican House Speaker John Boehner blasted the Obama administration, saying "the White House has to get serious." And Senate Majority Leader Harry Reid accused the GOP of delay tactics.
"We're still waiting for a serious offer from the Republicans," Reid said. "Now is the time to for Republicans to move past this 'happy talk' about revenues—and put specifics on the table. ... We're not going to kick the can down the road — we're going to finalize this this year."
The comments came after Treasury Secretary Timothy Geithner met with congressional leaders. Reid told CNBC's Eamon Javers that Geithner did not offer any specific new proposal. Reid said Obama made an offer two weeks ago.
The sessions appeared to move the two sides no closer to a deal to avoid the more than half a trillion dollars in tax hikes and spending cuts to be triggered on Jan. 1 without an agreement. It's feared that a tumble down the "fiscal cliff" will throw the country back into recession.
New York Fed President William Dudley highlighted the problems that lawmakers are causing for both hiring and the economy with each day they fail to strike a deal to avoid a pending fiscal crisis. Dudley warned that, if it is not addressed, the economic contraction is likely to be larger than normal because interest rates are so low.
Stocks declined after Boehner's statement, but later rose. (Read More: Stocks Rise in Choppy Trading on 'Cliff' Remarks.)
"I think unfortunately it seems pretty clear that the market is trading very much off the reading of the tea leaves on how these fiscal cliff negotiations are going," said Eric Kuby, chief investment officer at North Star Investment Management in Chicago. "I think we're hostage to this for the rest of the year."
Boehner complained that the administration had not put forward a plan to cut spending.
Boehner characterized the talks as "frank and direct." "I was hopeful we'd see a specific plan for cutting spending," he said, but added that he "remained hopeful" a deal can be reached before the Dec. 31 deadline.
Boehner criticized President Barack Obama for planning "campaign-style rallies," such as a scheduled apperance by the president Friday at a toy manufacturing company in Pennsylvania.
"The Democrats have yet to get serious about real spending cuts," Boehner said, adding that no substantive progress had been made in the past two weeks.
"Jobs are on the line, the American economy is on the line, and this is a moment for adult leadership. ... The White House has to get serious."
Top Senate Republican Mitch McConnell of Kentucky also offered a pessimistic take following his separate meeting with Geithner.
"To date, the administration has remained focused on raising taxes and attending campaign-style events, with no specific plans to protect Medicare and Social Security or reduce our national debt in a meaningful way," McConnell said in a statement. "And today, they took a step backward, moving away from consensus and significantly closer to the cliff."
After meeting with Geithner, House Minority Leader Nancy Pelosi called Boehner's comments a negotiating "tactic."
Earlier, some Republicans expressed pessimism about a deal to avoid the fiscal cliff on Jan. 1, when more than half a trillion dollars in tax increases and spending cuts would automatically go into effect.
"It is not going to happen soon," Republican Sen. John Barrasso of Wyoming, the Senate's fourth-ranking Republican, said in a Fox Business News interview Wednesday evening.
"I think right now" it's "a little bit of a standoff," Sen. John Thune, the third-ranking Republican in the Democratic-controlled Senate, told CNN late Wednesday.
Obama and Boehner conferred by phone for 15 minutes Wednesday night, their first one-on-one discussion in five days, amid increasing anxiety that the White House and top Republicans are wasting time needed to negotiate a way out of the crisis.
Geithner met first with Reid, then headed to a session with Republican leaders of the House, including Boehner, Majority Leader Eric Cantor and House Budget Committee Chairman Paul Ryan, fresh off his Republican vice presidential campaign.
There has been little evident progress in negotiations between the two sides. Republicans complain that the White House is slow-walking the talks and has yet to provide specifics on how Obama would curb the rapid growth of benefit programs like Medicare and Medicaid.
"We have not seen any good-faith effort on the part of this administration to talk about the real problem that we're trying to fix," Cantor said.
At immediate issue is whether the tax cuts that originated in the administration of President George W. Bush should be extended beyond Dec. 31 for all taxpayers including the affluent, as Republicans want, or just for less wealthy taxpayers, with income under $250,000, as Obama wants.
Obama is mounting a public campaign to build support and leverage in the negotiations, appearing at the White House with middle-class taxpayers and launching a campaign on Twitter to bolster his position.
"Right now, as we speak, Congress can pass a law that would prevent a tax hike on the first $250,000 of everybody's income," Obama said. "And that means that 98 percent of Americans and 97 percent of small businesses wouldn't see their income taxes go up by a single dime."
Obama also hosted a private lunch on Thursday for his defeated Republican rival Mitt Romney. The president has cast his victory over Romney as a sign that Americans back his tax proposals, which were a centerpiece of his re-election campaign.
Despite a few cracks in Republican ranks, most notably from Republican Rep. Tom Cole of Oklahoma, neither side has budged significantly from its position, leaving the markets and political analysts alike to grasp at wording nuances.
It's become clear during the post-election lame-duck session of Congress that until the two sides get over the immediate tax issue, they will not move forward to serious discussions on longer-term deficit reduction and tax reform, though both have expressed interest in doing so.
Keeping the nation in suspense down to a white-knuckled deadline has become the rule rather than the exception for Congress in recent years.
Whether the risk has been a government shutdown or, as in the events that led to the fiscal cliff, default for failure to raise the U.S. government's borrowing power, Republicans and Democrats have needed the pressure of time and possible disaster to bring them together.
The last standoff, over the debt ceiling in 2011, was settled by scheduling across-the-board automatic-budget cuts of about $500 billion — the sequestration part of the fiscal cliff — to take effect just as the tax cuts expire.
While little visible progress has been made on either element of the cliff, Congress could make quick work of it once a deal is reached, as no elaborate legislation is necessarily required just to get passed the twin deadlines.
Once "off that fiscal cliff," said Thune, "and we're on to the New Year and the markets will be happy. And the people will smile."