Fiscal cliff negotiations progress as Congress indicates cautious optimism

[MattB]

Fiscal cliff negotiations progress as Congress indicates cautious
optimism
Leaders express hope deal can be reached with Obama administration as
rhetoric of talks takes on more conciliatory tone


http://www.guardian.co.uk/world/2012/nov/16/fiscal-cliff-congress-negotiations

Congressional leaders expressed cautious optimism Friday about
reaching a deal with the Obama administration that will avert a debt
and spending crisis next year.

An hour-long meeting with Barack Obama at the White House, aimed at
finding a deal to avoid the so-called fiscal cliff, was described as
"constructive".

Republican leaders, normally vehemently opposed to tax rises, at least
for the wealthy, agreed to put revenue-raising measures on the table,
though without specifying what they might be. Democratic leaders
agreed to spending cuts, again without going into specifics.

With the need for a deal in place by 1 January to avoid the automatic
imposition of across-the-board tax rises and severe spending cuts,
there was a sign of some urgency entering the negotiations.
Republicans and Democrats agreed at the White House to continue
talking with administration officials through the weekend and into
next week, even though Obama will be away on a visit to Asia for most
of this time.

The aim, said one Republican official, is to have a deal ready to put
on the table after the Thanksgiving holiday.

he rhetoric from both sides is much more muted and conciliatory
compared with last year's all-out confrontation, with the Republicans
apparently chastened from their presidential election defeat and Obama
in a much more bullish and confident mood. They know that in the worst
case scenario that Democrats have the option of letting America go
over the fiscal cliff – with a resulting sharp rise in taxes for tens
of millions of Americans – and blame Republicans for the outcome.

Obama's press spokesman, Jay Carney, said after the meeting: "The
president and the leadership had a constructive meeting and agreed to
do everything possible to find a solution that averts the so-called
fiscal cliff, and to work together to find a balanced approach to
reduce our deficit that includes both revenues and cuts in spending
and encourages our long-term economic and job growth.

"Both sides agreed that while there may be differences in our
preferred approaches, we will continue a constructive process to find
a solution and come to a conclusion as soon as possible."

Stock markets reacted positively to the news. The Dow Jones Industrial
Average has fallen for three consecutive days on fears that talks were
likely to break down. Economists and business leaders have warned that
the fiscal cliff threatens to plunge the US back into recession and
the Congressional Budget Office has predicted unemployment will spike
to 9.1% next year if is a solution isn't found. The Dow and all the
other major US exchanges began to rise Friday as a breakthrough
appeared to be on the horizon.

One of the biggest sticking points is Obama's insistence that Bush-era
tax cuts for the wealthiest will come to an end in January, a move
that is opposed by Republicans. But there is room for compromise:
Obama could limit any tax rises to households earning more than
$500,000 a year rather than the $250,000 a year that he currently
proposes. He may also agree that the tax rate for these households
could rise to a level lower than the 39.6% he favours.

The Republicans, House speaker John Boehner and Senate minority leader
Mitch McConnell, speaking to reporters after the meeting, put the
stress on cutting the deficit, without specifying which areas they
have mind, though both have said in the past that healthcare spending
has to be curbed. The two Democrats, Senate majority leader Harry Reid
and the party leader in the House Nancy Pelosi, put the emphasis on
raising taxes.