Barack Obama and John Boehner Meet to Discuss Fiscal Cliff

Caution Cliff Edge

President Barack Obama and the leader of the Republicans in the House of Representatives have met in the latest attempt to break the stalemate in the fiscal crisis negotiations that could propel the US back into recession if no deal is secured by 1 January.

John Boehner, the house speaker, joined the president at the White House in a private meeting that had not been disclosed to the media in advance. After the event, the two political leaders remained tight-lipped over the nature of their conversation, which was their first since the Republicans produced their counter proposals on the "fiscal cliff" a week ago.

The two parties remain separated by a large practical and ideological gulf in their approaches to taxes and spending cuts. Obama has demanded increases in the tax rate for the top 2% of earners, arguing that he has an electoral mandate to drive that through following the November presidential election.

But the Republicans are resisting, offering instead $800bn of extra revenue by closing tax loopholes and deductions. They also want to see a more radical attack on entitlement programmes such as social security and Medicaid than the Democratic party is prepared to contemplate.

The fact that the two men met at all, and that they were clearly keen to have the fact known, is an indication of the political high stakes that are being played in the fiscal cliff game of poker. Neither side wants to concede ground on the main negotiating points, mindful that if they do so they will have to face the angry reaction of their own party members, but nor can either political leader be seen to be negligent in trying to avoid an automatic package of $600bn of spending cuts and tax rises that could prove deeply unpopular with voters.

Earlier on Sunday Christine Lagarde, the head of the International Monetary Fund, urged the Democrats and Republicans to try to find a comprehensive deal to the crisis that would involve a balance of spending cuts and tax rises. Speaking on CNN, she warned Washington that failure to act would hurt America more than anywhere else.

The US, she said, can chose to be its own best friend or worst enemy. Failure to find a compromise would see growth collapse to zero and lead to a sharp reaction in the markets, she predicted.

There were tentative signs that some senior Republicans in Congress might be moving towards conceding on the question of tax rises for the rich in return for a robust review of entitlements. Bob Corker, a US senator from Tennessee, told Fox News Sunday that given Obama's recent re-election and the fact that he had campaigned on tax increases for the wealthy it might not be sensible for Republicans to resist too hard.

"There is a growing group of folks looking at this and realising that we don't have a lot of cards as it relates to the tax issue before year end," he said.

Signs of flexibility on the Republican side are being matched by contrast by notable inflexibility on the part of the White House on the tax rate issue. Obama is playing a far tougher game than he did in the negotiations over the debt ceiling last summer, when he was widely criticised for having shown his hand too early.

Powered by article was written by Ed Pilkington in New York, for on Sunday 9th December 2012 22.33 Europe/London © Guardian News and Media Limited 2010


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