UPDATE 1-Obama holds out prospect of post-election 'grand bargain'

Matt Spetalnick

WASHINGTON, Oct 24 (Reuters) - President Barack Obama says he's confident that if re-elected he will secure within six months a deficit-reduction deal with Republicans equivalent to the ``grand bargain'' he failed to achieve last year.

Obama made the bold prediction on Tuesday to the Des Moines Register in remarks that were originally off-the-record. After the newspaper complained in a blog, the White House relented and released a transcript of the interview on Wednesday.

Win or lose the Nov. 6 election against Republican Mitt Romney, Obama faces a so-called ``fiscal cliff'' of automatic across-the-board spending cuts and tax increases set for the end of the year, before the swearing-in of a new Congress and the victor in the presidential race.

``It will probably be messy. It won't be pleasant,'' he said of the negotiations ahead. ``But I am absolutely confident that we can get what is the equivalent of the grand bargain that essentially I've been offering to the Republicans for a very long time, which is $2.50 worth of cuts for every dollar in spending, and work to reduce the costs of our health care programs,'' Obama said.

He also said a broader long-term deal could ``credibly meet'' the target of $4 trillion in deficit reduction over 10 years as proposed in December 2010 by a deficit reduction commission headed by Erskine Bowles and Alan Simpson.

``We're going to be in a position where I believe in the first six months we are going to solve that big piece of business,'' Obama said. The newspaper, the largest in the election battleground state of Iowa, is preparing to endorse a candidate in the presidential race.

Obama sought to counter criticism that he had failed to offer a clear picture of his second-term agenda. Despite that, his comments did not offer specifics on how the ``fiscal cliff'' could be avoided, especially given the climate of legislative gridlock and partisan rancor in Washington.

But Obama's time-frame for achieving a grand bargain conforms with the prevalent view on Capitol Hill that Congress and the White House will attempt some temporary fix on taxes and spending in order to work on something larger in the months after a newly elected Congress convenes.

Obama also said that in a second term, ``We can start looking at a serious corporate tax reform agenda,'' something he said was of common interest to both Democrats and Republicans.


Obama's comments on his fiscal plans - made public as he campaigned in Iowa at the start of a two-day blitz of swing states less than two weeks before most Americans vote - were quickly challenged by Republicans.

``The president talks about a 'balanced' approach to deficit reduction that includes spending cuts and reforms, but he has offered only tax hikes,'' said Kevin Smith, a spokesman for House of Representatives Speaker John Boehner, the top Republican in Congress.

``The credibility of anything the president says about 2013 is being demolished by the reality of his actions right now in 2012,'' he said.

Don Stewart, a spokesman for Senate Republican leader Mitch McConnell, said Obama was merely trying to recycle ideas he previously submitted to Congress and which Republicans rejected.

Obama and Boehner failed to reach a ``grand bargain'' on the deficit last year when talks over raising the debt ceiling for federal borrowing reached an impasse. Only an 11th-hour deal in August 2011 prevented an historic government debt default.

Recriminations over who is to blame for the ``fiscal cliff'' that resulted have been a regular feature of the tight White House race, and whichever candidate wins the election will be faced with the fallout.

The spending cuts and tax hikes could take an estimated $600 billion out of the U.S. economy and push it into recession next year, according to the non-partisan Congressional Budget Office.