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‘Fiscal cliff’ nudges deal-making talk

Leaders of both political parties stick to their guns

  • Speaker of the House John Boehner, Ohio Republican, talks at the Capitol in Washington on Nov. 7, 2012, about the elections and the unfinished business of Congress. (Associated Press)Speaker of the House John Boehner, Ohio Republican, talks at the Capitol in Washington on Nov. 7, 2012, about the elections and the unfinished business of Congress. (Associated Press)
  • Traders work on the floor of the New York Stock Exchange on Nov. 7, 2012, the day after President Obama was re-elected. U.S. investors dumped stocks and turned their focus to a world of problems, including a "fiscal cliff" of tax increases and spending cuts at home and a deepening recession in Europe. (Associated Press)Traders work on the floor of the New York Stock Exchange on Nov. 7, 2012, the day after President Obama was re-elected. U.S. investors dumped stocks and turned their focus to a world of problems, including a "fiscal cliff" of tax increases and spending cuts at home and a deepening recession in Europe. (Associated Press)
  • **FILE** President Obama listens Feb. 20, 2009, as Vice President Joe Biden speaks in the East Room of the White House. (Associated Press)**FILE** President Obama listens Feb. 20, 2009, as Vice President Joe Biden speaks in the East Room of the White House. (Associated Press)
  • A trader on the floor of the New York Stock Exchange looks at images of the presidential contenders on Nov. 7, 2012, the day after President Obama was re-elected. U.S. investors dumped stocks and turned their focus to a world of problems, including a "fiscal cliff" of tax increases and spending cuts at home and a deepening recession in Europe. (Associated Press)A trader on the floor of the New York Stock Exchange looks at images of the presidential contenders on Nov. 7, 2012, the day after President Obama was re-elected. U.S. investors dumped stocks and turned their focus to a world of problems, including a "fiscal cliff" of tax increases and spending cuts at home and a deepening recession in Europe. (Associated Press)
  • An investor looks at the stock price monitor at a private securities company in Shanghai on Nov. 8, 2012. Asian stock markets tumbled after a ratings agency threatened to downgrade the U.S. if a solution to the so-called fiscal cliff isn't negotiated among lawmakers and newly re-elected President Obama. (Associated Press)An investor looks at the stock price monitor at a private securities company in Shanghai on Nov. 8, 2012. Asian stock markets tumbled after a ratings agency threatened to downgrade the U.S. if a solution to the so-called fiscal cliff isn't negotiated among lawmakers and newly re-elected President Obama. (Associated Press)
  • Luke Scanlon (left) of MND Partners Inc., works Nov. 7, 2012, on the floor of the New York Stock Exchange in New York. (Associated Press)Luke Scanlon (left) of MND Partners Inc., works Nov. 7, 2012, on the floor of the New York Stock Exchange in New York. (Associated Press)
  • A man stands outside a securities firm in Tokyo on Nov. 8, 2012. Asian stock markets tumbled after a ratings agency threatened to downgrade the U.S. if a solution to the so-called fiscal cliff isn't negotiated among lawmakers and newly re-elected President Obama. (Associated Press)A man stands outside a securities firm in Tokyo on Nov. 8, 2012. Asian stock markets tumbled after a ratings agency threatened to downgrade the U.S. if a solution to the so-called fiscal cliff isn't negotiated among lawmakers and newly re-elected President Obama. (Associated Press)
  • A television feed on the floor of the New York Stock Exchange shows President Obama (left) and his daughter, Malia, on Nov. 7, 2012, the day after he was re-elected. U.S. investors dumped stocks and turned their focus to a world of problems, including a "fiscal cliff" of tax increases and spending cuts at home and a deepening recession in Europe. (Associated Press)A television feed on the floor of the New York Stock Exchange shows President Obama (left) and his daughter, Malia, on Nov. 7, 2012, the day after he was re-elected. U.S. investors dumped stocks and turned their focus to a world of problems, including a "fiscal cliff" of tax increases and spending cuts at home and a deepening recession in Europe. (Associated Press)
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House Speaker John A. Boehner offered the first olive branch Wednesday in what is expected to be a frenetic spate of postelection deal-making to avert the looming "fiscal cliff," saying the GOP will let the government collect more tax revenue if President Obama will drop his plan to raise tax rates on the wealthy.

Voters on Tuesday re-elected Mr. Obama and expanded Democrats' majority in the Senate, while keeping Republicans in charge of the House — albeit with fewer numbers.

With the needle tilting slightly but decidedly toward Democrats, Mr. Boehner's overture sets the stage for the lame-duck session of Congress, which begins next week, and for the full 113th Congress, which opens in January.

"By working together and creating a fairer, simpler, cleaner tax code, we can give our country a stronger, healthier economy. A stronger economy means more revenue, which is what the president seeks," the Republican speaker said.

A day after the election, leaders on all sides said the message they took from voters was that Congress and the White House must work together to find a solution to the tax increases and automatic spending cuts that are looming in early January.

"I know how to fight. I know how to dance. I don't dance as well as I fight, but I'd much rather dance anytime," said Senate Majority Leader Harry Reid, a Nevada Democrat who said he approached negotiations with an open mind and wouldn't draw any lines in the sand.

Still, the outlines of stalemate were emerging.

Mr. Reid said he read Tuesday's election as a mandate for raising taxes on the wealthy — something Mr. Obama ran on as a centerpiece of his campaign.

"Look at all the polling. The vast majority of the American people — rich, poor — everybody agrees that the rich — richest of the rich — have to help a little bit," Mr. Reid said.

Mr. Boehner, though, said Republicans in the House won't accept increases in tax rates. His own proposal relies on cutting out tax loopholes, which would bring in more revenue, then using that money to lower income tax rates for everyone. He argues that the resulting tax code would be better for economic growth, which he said would produce more money for the federal government in the long run.

Missing from the public conversation Wednesday was Mr. Obama, who is once again the key player in negotiations. He placed private calls to Mr. Reid and Mr. Boehner, as well as Senate Minority Leader Mitch McConnell and House Minority Leader Nancy Pelosi, in which he pleaded for a "balanced" approach to cutting the deficit.

But Mr. Obama did not make any public statements, instead leaving Vice President Joseph R. Biden to talk with reporters.

"On the issue of the tax issue, there was a clear, a clear sort of mandate about people coming much closer to our view about how to deal with tax policy," he said, adding that he expects "some real soul searching" on the part of Republicans to decide where they are willing to cooperate.

Part of the problem is that the tools for cutting big deals in Congress have calcified in recent years, and would need to be restored. The Senate hasn't passed a budget in three years, and House Republicans this year have run into trouble in trying to pass big legislation such as the farm bill. Each side seems to have concluded that dealing with the other is tantamount to political death.

Mr. Biden said one way to do "a little confidence building" between the two sides was to tackle something easier. He said that could come on corporate tax rates, which all sides agree are too high and riddled with exceptions.

But the bigger problems loom with the "fiscal cliff."

Unless Congress takes action, the George W. Bush-era tax cuts are slated to expire Jan. 1, and a day later $110 billion in automatic spending cuts — the result of last year's debt deal — also will take effect.

Together, they would plunge the U.S. into a short but deep double-dip recession — though they also would leave the federal budget in much better shape and would produce a stronger economy by the end of the decade, according to the Congressional Budget Office.

Both sides in Congress, though, say the tax increases and spending cuts are simply too much to stomach right now.

Democrats on Tuesday expanded their majority to at least 54-45 in the Senate, with one senator, Maine independent Angus King, not saying with which party he will caucus. In the House, the Republican majority dropped, though 10 seats were still to be decided as of Wednesday evening.

In the race for the White House, Mr. Obama's 2008 margins dropped in the popular vote and the Electoral College — and Florida was still too close to call Wednesday. But even without Florida, Mr. Obama has won another four years in office to try to fulfill his election promises.

Mr. Boehner said any deal with Mr. Obama must have the White House agree to lower spending on entitlement programs such as Medicare and Medicaid, which take up an ever-increasing share of government spending.

Grover Norquist, head of Americans for Tax Reform, which sponsors an influential no-new-taxes pledge to which many Republicans are beholden, said the revenue deal Mr. Boehner is offering passes muster.

"I heard the speaker say again and again, let's not raise taxes, let's have economic growth," Mr. Norquist told The Washington Times. He said raising growth to 4 percent a year, up from the 2 percent that he said Mr. Obama has struggled to hit, would mean an additional $5 trillion in tax revenue over 10 years.

He said that comes without raising tax rates, but still would give Mr. Obama solid revenue numbers to point to — though it's unlikely the CBO, which keeps official score of legislation, would calculate it that way.

"We're trying to get the president to actually put something down in writing and to engage in governing So let's take it a step at a time. This is new to him," Mr. Norquist said.

Mr. Obama ran for re-election on a call to raise income tax rates on Americans with the highest incomes, while holding rates low for everyone else. Republicans, though, said raising taxes on the wealthy amounted to a tax increase on small businesses.

Mr. Boehner pointed back to discussions he had with Mr. Obama last year, during the height of the debt showdown, when he said they talked about a deal that would lower tax rates but close enough loopholes to bring in more money into federal accounts.

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