Fiscal Cliff Progress Suffers As Republicans, Democrats Remain Divided

FILE - In this June 26, 2012 file photo, Senate Minority Leader Mitch McConnell of Ky. speaks to reporters on Capitol Hill in
FILE - In this June 26, 2012 file photo, Senate Minority Leader Mitch McConnell of Ky. speaks to reporters on Capitol Hill in Washington. At the top of their roosts in Washington, leaders of Congress are, as usual, turning out to be niche players on the national campaign stage. More junior House and Senate leaders are out campaigning and raising money as well _ not just to win this year's races, but to shore up rank and file support for when it's their turn to run for the top jobs on Capitol Hill. (AP Photo/J. Scott Applewhite, File)

By Mark Felsenthal

HATFIELD, Pa., Nov 30 (Reuters) - With barely a month left before the "fiscal cliff," Republicans and Democrats remained far apart on Friday in talks to avoid the across-the-board tax hikes and spending cuts that threaten to throw the country back into recession.

While President Barack Obama visited a Pennsylvania toy factory to muster public support for tax hikes on the rich, portraying Republicans as scrooges at Christmas time, his primary adversary in negotiations, Republican House Speaker John Boehner, continued to describe the situation as a stalemate.

The argument will resume on Sunday when Boehner, along with Obama's Treasury secretary, Timothy Geithner, and others, take to weekly political talk shows and pick up further steam next week with a possible confrontation in the House of Representatives between Democrats and Republicans over the timing of a vote on tax hikes.

Lawmakers are nervously eyeing the markets as the deadline approaches, with gyrations likely to intensify pressure to bring the drama to a close.

The markets, in turn watching the politicians, fell as Boehner spoke, but recovered afterward. It was a repeat of the pattern earlier in the week when the speaker offered a similarly gloomy assessment.

The latest round of high-stakes gamesmanship focuses on whether to extend the temporary tax cuts that originated under former President George W. Bush beyond their Dec. 31 expiration date for all taxpayers, as Republicans want, or just for those with incomes under $250,000, as Obama and his fellow Democrats want.

After five days of increasingly confrontational exchanges, the work week drew to a close with an announcement by Democrats of a long-shot effort next week to force an early tax-hike vote in the Republican-controlled U.S. House to break the deadlock.


House Minority Leader Nancy Pelosi said she would undertake the rarely successful effort unless Boehner agreed by Tuesday to bring a bill to the floor allowing taxes on the wealthy to rise, something Boehner is highly unlikely to do until he is ready.

"The clock is ticking," Pelosi said at a news conference. "The year is ending. It's really important with tax legislation for it to happen now. We're calling upon the Republican leadership in the House to bring this legislation to the floor next week."

While Boehner offered no immediate response to Pelosi's threat, Cathy McMorris Rodgers of Washington state, recently elected by Republicans to be the fourth-ranking party leader in the House, told Fox News in an interview not to expect any tax vote next week.

Amid the competing statements from the two sides, there were some actual, albeit modest, signs of potential movement.

Senate Minority Leader Mitch McConnell threw Republican proposals into the mix for reform of Medicare, the government health insurance program for seniors, which has exploded in cost in recent years and is a major contributor to the country's soaring deficit.

McConnell of Kentucky told the Wall Street Journal in an interview that Republicans would agree to more revenue - although not higher tax rates - if Democrats agreed to such changes as raising the eligibility age for Medicare and slowing cost-of-living increases in the Social Security retirement program.

Rodgers, in her Fox News interview, declined to completely rule out a much-discussed potential compromise in which Republicans would accept some increase in tax rates on the rich, but not to the level desired by Obama.


More House Republicans - although still just a handful -expressed flexibility beyond that of their party leaders about considering an increase in tax rates for the wealthy, as long as they are accompanied by significant spending cuts.

Most House Republicans refuse to back higher rates, preferring to raise revenue through tax reform.

Obama, speaking in Pennsylvania, said he was encouraged by the shifting views of some Republicans, and urged House approval of a bill that has already cleared the Democratic-controlled Senate that would lock in the middle-class tax cuts and raise the rates for the rich.

"If we can get a few House Republicans on board, we can pass the bill. ... I'm ready to sign it," Obama said.

But neither he nor the other principals in the debate budged from their basic positions.

Instead, Obama turned up the pressure on Friday, hitting the road to drum up support for his drive to raise taxes on the wealthy and warning Americans that Republicans were offering them "a lump of coal" for Christmas.

In a visit to the Pennsylvania toy factory, Obama portrayed congressional Republicans as scrooges who risked sending the country over the fiscal cliff rather than strike a deal to avert the tax increases and spending cuts that begin in January unless Congress intervenes.

"We already all agree, we say, on making sure middle-class taxes don't go up. So let's get that done. Let's go ahead and take the fear out for the vast majority of American families so they don't have to worry," Obama said at the Rodon Group factory, which makes K'NEX building toy systems as well as Tinkertoys and consumer products.

In Washington, Boehner said Obama's plan to raise taxes on the rich was the wrong approach.

"There is a stalemate. Let's not kid ourselves," the Ohio Republican said. "Right now we are almost nowhere."



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