Obama returns as fiscal cliff talks remain stalled
December 28 2012 01:06 AM
A grim Obama returns to the White House after cutting short his Christmas vacation.
A grim Obama returns to the White House after cutting short his Christmas vacation.


President Barack Obama returned yesterday to a sharply-divided Washington where lawmakers have stubbornly refused to compromise on a plan to avoid the so-called “fiscal cliff”.
With pressure mounting before hundreds of billions of dollars in higher taxes and spending cuts set in, Democrats and Republicans are essentially treating the crisis as a hot potato, blaming one another for the inaction.
Obama cut his Hawaiian Christmas vacation short to contend with the looming January 1 fiscal cliff deadline, as White House officials reportedly lashed out at the “congressional stupidity” gripping the capital.
President Barack Obama arrived at Andrews Air Force Base outside Washington after a flight from Hawaii yesterday on his way back to the White House to try to restart stalled negotiations with Congress.
Obama made phone calls to congressional leaders on Wednesday from his vacation in Hawaii to try to revive the stalled talks to prevent the “fiscal cliff” scenario, which would worry world financial markets and could push the US back into recession.
US stocks fell to session lows after Reid’s pessimistic remarks.
In addition, consumer confidence fell to a four-month low in December as the budget crisis sapped what had been a growing sense of optimism about the economy, a report released yesterday showed.
“People are hearing about (the cliff) and it negatively impacts confidence and investor sentiment and even holiday sales,” said Todd Schoenberger, managing partner at Landcolt Capital in New York.
The chances of a last-minute deal – at least one that would prevent tax hikes – remained uncertain, with Republicans and Democrats each insisting the other side move first amid continuing partisan gridlock.
The Senate, controlled by Democrats, was scheduled to meet later but on matters unrelated to the “fiscal cliff”.
Speaker John Boehner and other House Republican leaders, who say they are willing to take up a “fiscal cliff” measure only after the Senate acts on one, were to hold a conference call with Republican House members.
The expectation for the call was that lawmakers would be told to get back to Washington within 48 hours to consider anything the Senate might pass.
Weather permitting, that would bring them to Washington with perhaps three days left before the deadline for action. Storms affecting the Midwest, the South and the Northeast played havoc with airline schedules.
“This isn’t a one party or one house problem. This is (that) leaders in both parties in all branches of the government are not willing to make the deal that they know they have to make. Everybody wants their stuff but doesn’t want to give up what they don’t want to give up,” Republican US Representative Steven LaTourette told CNN.
With five days before the deadline, Democratic Senate Majority Leader Harry Reid accused Republican Senate Minority Leader Mitch McConnell and Boehner of stalling.
Reid said that Boehner was running a “dictatorship” in the House by refusing to put to a vote the Senate-passed bill which would prevent taxes from rising on all households making less than $250,000 per year.
“Without participation of Leader McConnell and Speaker Boehner, nothing can happen on the fiscal cliff – and so far they are radio silent,” a furious Reid said on the Senate floor.
Reid advised: “Take the escape hatch that we’ve left you” in the form of the Senate bill. “Put the economic fate of the nation ahead of your own fate as speaker of the House.”
Last week, Obama urged Congress to end the deadlock.
The situation has spooked markets, left Americans wondering whether they will pay thousands more in taxes next year, and worried the Pentagon, which fears defense cuts could undermine the military.
Complicating efforts to avoid fiscal disaster, Treasury Secretary Timothy Geithner has warned his department will need to take “extraordinary measures” to postpone the day the US government could default on its liabilities.
Geithner said in a letter to Reid that the nation will reach its statutory $16.39tn debt limit on December 31.
His measures would create some $200bn in headroom that under normal circumstances would last about two months, to the end of February.
But with “significant” budgetary uncertainty in 2013, “it is not possible to predict the effective duration of these measures”, Geithner said.
Experts say that a failure to strike a compromise by New Year’s Eve could plunge the world’s biggest economy into recession, and wrangling over the debt ceiling will only exacerbate the uncertainty.
But Congress has shown no signs of nearing any accord, and Boehner last week punted to the Democrat-led Senate, asking Obama and Reid to draft legislation that could pass both chambers.
Boehner insisted on Wednesday that “lines of communication remain open” but held firm that the Senate must make the next move.
In one potential ray of light, Boehner said that House would consider “whatever the Senate can pass”.
A White House official offered a blunt response.
“What we need is for (McConnell) not to block a vote and for Boehner to allow a vote,” the official told ABC News. “The hits to our economy aren’t coming from outside factors, they’re coming from congressional stupidity.”
With the cliff deadline fast approaching, Obama has pared back his hopes for a year-end, multi-trillion-dollar grand bargain that slashes the deficit over a 10-year period.
Instead, he said that Congress should approve a stop-gap measure that protects middle-class taxpayers while laying the groundwork for further deficit reduction next year.
Obama campaigned for re-election vowing to extend Bush-era tax breaks for households earning up to $250,000 a year, but even if all Democrats voted for such a plan, it would still need support from at least two dozen Republicans.
Most Republicans in Congress have signed a no-new-taxes pledge, however, and it was unclear just how many would violate that oath in order to strike a deal.
While the Senate resumed its work yesterday, the House was absent, with Speaker Boehner promising to give members 48-hours’ notice before recalling them.
Reid accused Boehner of wanting to go over the fiscal cliff and see all taxes rise, then allow Republicans to vote to reduce middle-class taxes to pre-2013 rates.

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