Fiscal Cliff Talks Vexing Both Sides In Washington

By ANDREW TAYLOR, The ASSOCIATED PRESS

WASHINGTON -- Five weeks after President Barack Obama won re-election and gained more leverage to make GOP conservatives bend on taxes, the new balance of power is proving vexing for both sides.

Republicans still aren't budging on Obama's demands for higher tax rates on upper bracket earners, despite the president's convincing election victory and opinion polls showing support for the idea.

Democrats in turn are now resisting steps, such as raising the eligibility age for Medicare, that they were willing to consider just a year and a half ago, when Obama's chief Republican adversary, House Speaker John Boehner, was in a better tactical position.

With less than three weeks before the government could careen off a "fiscal cliff" of automatic tax hikes and sweeping spending cuts, Boehner, R-Ohio, said "serious differences" remain between him and Obama after an exchange of offers and a pair of conversations this week.

Neither side has given much ground, and Boehner's exchange of proposals with Obama seemed to generate hard feelings more than progress. The White House has slightly reduced its demands on taxes - from $1.6 trillion over a decade to $1.4 trillion - but isn't yielding on demands that rates rise for wealthier earners.

Boehner responded with an offer very much like one he gave the White House more than a week ago that proposed $800 billion in new revenue, half of Obama's demand. Boehner is also pressing for an increase in the Medicare eligibility age and a stingier cost-of-living adjustment for Social Security recipients.

Boehner spokesman Michael Steel said the two men did not have any follow-up talks Wednesday.

"There were some offers that were exchanged back and forth (Tuesday), and the president and I had a pretty frank conversation about just how far apart we are," Boehner said after his meeting with fellow Republican lawmakers.

Federal Reserve Chairman Ben Bernanke weighed in as well. He said, "Clearly, the fiscal cliff is having effects on the economy," the uncertainty affecting consumer and business confidence and leading businesses to cut back on investment.

And on Thursday, Sen. Jim DeMint, a South Carolina Republican and leading conservative figure, predicted that Obama would prevail in the fight over taxes.

A leading conservative who's resigning from the Senate is predicting that President Barack Obama will win the battle over raising taxes.

"He's going to get his wish. I believe we're going to be raising taxes, and not just on the top earners," DeMint, who is leaving the Senate to become president of the Heritage Institution think tank, said in an appearance on "CBS This Morning."

DeMint said a tax increase would amount to a "political trophy" for Obama but said it would be bad for the country.

"The president's proposal is not a plan, it's not a solution," he said.

There is increasing concern about a Dec. 31 deadline to stop the expiration of Bush-era tax cuts and the start of across-the-board spending cuts that are the result of Washington's failure to complete a deficit-reduction deal last year. Even if an agreement can be reached, the halting pace of negotiations is jeopardizing chances that it could be written into proper legislative form and passed through both House and Senate before the new Congress convenes on Jan. 3.

Both sides accuse the other of slow-walking the talks. Democrats say Boehner is unwilling to crack on the key issue of raising tax rates on family income over $250,000 because he's afraid of a revolt on his right flank and from younger, ambitious members of his leadership team.

"I do have an increasing concern that the speaker ... is trying to string this out until Jan. 3 because that's when he would be re-elected as speaker," said Rep. Chris Van Hollen of Maryland, top Democrat on the House Budget Committee. "And I think he's nervous that if he can't get a majority of his House Republican members to support a reasonable agreement that that could put his speakership election in jeopardy. And so that might cause him to try and string these talks" along.

Republicans say it's Democrats who are dragging out the talks.

"In the past 48 hours, the president has not been negotiating in good faith in my opinion," said Rep. Pat Tiberi, R-Ohio, who said he was increasingly pessimistic that a deal could be reached.

"I believe we can get to a point on revenues that we can get something done, but the problem is the White House and the president refuse to get serious about spending," House Majority Leader Eric Cantor, R-Va., said.

While Republicans are flummoxed on taxes, liberal Democrats are trying to pull Obama in the opposite direction on Medicare and Social Security. Eighteen months ago, Obama had all but agreed to an increase in the Medicare retirement age and a less generous inflation adjustment for calculating Social Security COLAs.

Now, House Minority Leader Nancy Pelosi is warning against raising the Medicare eligibility age, saying such a move wouldn't contribute much savings toward an agreement in the short term.

Democrats are also pushing back against a GOP plan to reduce Social Security cost-of-living adjustments, another step back from where Obama and Boehner were just 18 months ago.

"Quite frankly, Social Security is off the table," Rep. Joe Crowley, D-N.Y., said.

The backtracking has Republicans fuming that Obama campaigned on a "balanced" fiscal solution but now is unwilling to pair tax increases with politically painful cuts to Medicare and other popular programs.

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Associated Press writers Alan Fram and Nyia Hawkins contributed to this report.