U.S. House Speaker John Boehner repeated his insistence that President Barack Obama’s budget proposal is “anything but” balanced, and accused the president of being “not serious” about cutting spending.
Still, the speaker today didn’t rule out allowing a House vote on extending tax cuts for income up to $250,000 a year for married couples, as Obama has demanded, if a broader tax-and- spending deal isn’t reached soon.
“The law of the land today is that everyone’s income taxes are going to go up on Jan. 1,” Boehner said when asked by reporters if he would rule out such a vote. “I have made it clear I think that is unacceptable. Until we get this issue resolved, that risk remains.”
More than $600 billion in tax increases and spending cuts are scheduled to start taking effect in January unless Congress acts to avert them. Obama is seeking to retain the tax cuts for most Americans while letting them expire for the top 2 percent of earners.
“He wants far more in tax hikes than spending cuts,” Boehner, an Ohio Republican, said of the president.
Obama, responding to questions from reporters as he walked to a holiday event across the street from the White House, said the negotiations are “still a work in progress.”
Senate Majority Leader Harry Reid, a Nevada Democrat, said today he is “really mystified that we haven’t had significant movement from the Republicans” in the talks. He said Obama has indicated he would agree to “take some looks” at spending cuts once Republicans agree on higher tax rates for top earners.
House Minority Leader Nancy Pelosi, a California Democrat, said that talk of deeper spending cuts demanded by Republicans should await discussions on a tax overhaul next year.
“Don’t even think about using” an increase in the Medicare eligibility age to cut spending, Pelosi said. Democrats won’t throw “America’s seniors over the cliff to give a tax cut to the wealthiest in America,” she said.
The Standard & Poor’s 500 Index (SPX) snapped a six-day gain after Boehner spoke, offsetting a better-than-estimated jobless claims report.
The Standard & Poor’s 500 Index fell 0.2 percent to 1,425.56 at 11:38 a.m. New York time. The Dow Jones Industrial Average dropped 21.02 points, or 0.2 percent, to 13,224.43. The benchmark 10-year Treasury bond yield rose three basis points to 1.73 percent and touched 1.74 percent, the most since Nov. 7.
Yesterday, Federal Reserve Chairman Ben S. Bernanke warned that Fed monetary stimulus can’t offset the full effect of higher taxes for all earners and federal spending cuts, and that doubts about the White House and Congress reaching a deal are having a chilling effect on the economy.
“It’s already affecting business and hiring decisions by creating uncertainty,” Bernanke, who popularized the term “fiscal cliff” to describe the deadline for action, said at a news conference. “Clearly this is a major risk factor.”
“People finally realized that we still have the fiscal cliff waiting in the wings,” Thomas Garcia, head of equity trading at Santa Fe, New Mexico-based Thornburg Investment Management Inc., said in an e-mail.
While administration officials said both sides are in contact and talking, they remain hundreds of billions of dollars apart on taxes and spending. The parties also continue to disagree on whether a year-end deal should include an increase in the debt limit and stimulus measures to boost the economy.
Democrats say Boehner’s unwillingness to let income tax rates increase for the top 2 percent of earners is hampering an agreement, while Republicans blame Obama’s refusal to offer additional spending cuts to programs like Medicare.
Obama this week reduced his demand for new tax revenue to $1.4 trillion from $1.6 trillion. Even still, Boehner said the plan wouldn’t pass the Republican-controlled House.
“We’ve got some serious differences,” Boehner told reporters yesterday, after what he described as a “frank” conversation with the president on Dec. 11.
Republicans said their offer on taxes remained largely unchanged from last week. Though they oppose raising rates, Boehner has offered to raise $800 billion in revenue by limiting deductions and other breaks for wealthy taxpayers.
White House press secretary Jay Carney said the president will hold firm on his insistence that the tax rates for top earners must rise. He dismissed the Republican argument that their proposal could raise enough revenue to help close the deficit without the increase.
“Those magic beans are just beans, and that fairy dust is just dust,” he said. “It is not serious.”
Senator Jim DeMint, a South Carolina Republican who is stepping down early next month to head the Heritage Foundation, a conservative think tank in Washington, said today that Obama will “probably get his tax increases one way or another.”
“We’re going to be raising taxes not just on the top earners,” he said on CBS’s “This Morning” program. “Everyone’s going to pay more taxes next year.”
DeMint, a businessman most of his life, said that economic uncertainty because of the protracted debate over spending cuts and tax increases means “you’re already going to see some downturn in our economy, because of what’s going on here.”
“We can’t fix it Christmas Eve and expect it all to bounce back in January,” he said.
Administration officials and Democratic lawmakers maintain they have the upper hand in negotiations because Obama won re- election on a promise to increase taxes on the top earning Americans. That view is backed by polls.
Sixty-five percent of Americans say Obama has a mandate for his stance, according to a Bloomberg National Poll of 1,000 adults conducted Dec. 7-10. Majorities of about 2-to-1 also see the election results as an endorsement of Obama’s pledge to protect Social Security and Medicare benefits.
Republicans are demanding cuts in entitlement programs as part of a deal. In a Dec. 11 interview with ABC News, Obama signaled some flexibility. “The current path is not sustainable because we’ve got an aging population and health care costs are shooting up so quickly,” he said.
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