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December 13, 2012

No budging as fiscal cliff talks appear stalled

WASHINGTON — Republicans aren’t budging on tax rates, and Democrats are resisting steps like raising the eligibility age for Medicare. Negotiations on averting a year-end fiscal train wreck combining big automatic tax hikes and sweeping spending cuts again appear stalled.

There are less than three weeks before the government could careen off this “fiscal cliff,” but the chief GOP negotiator, House Speaker John Boehner, R-Ohio, said Wednesday that “serious differences” remain between him and President Barack Obama after an exchange of offers and a pair of conversations this week.

Boehner spoke after a closed-door meeting with fellow GOP lawmakers in which he advised them not to make plans for the week after Christmas.

Neither side has given much ground, and his 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 offered $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 yesterday, 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. “He said it’s looking like trench warfare,” said Rep. John J. Duncan Jr., R-Tenn., referring to Boehner.

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.

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 January 3rd because that’s when he would be re-elected as speaker,” Rep. Chris Van Hollen of Maryland, ranking Democrat on the House Budget Committee, told The Associated Press. “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.”

Many conservatives say they would oppose a deficit-cutting package negotiated by Boehner that included higher tax rates.

“I’ll say no, because the focus has got to be on economic growth,” said Rep. Jim Jordan, R-Ohio. “The simple fact is raising taxes is not going to grow our economy.”

Others wouldn’t rule it out completely.

“If there’s real cuts in spending, if there’s real reform of entitlement programs, I think all of us would have to reconsider our position,” Rep. Raul Labrador, R-Idaho, said Wednesday. “But the problem is, I don’t see real cuts, real cuts. I’m not saying yes and I’m not saying no.”

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 retirement age and a less generous inflation adjustment for calculating Social Security COLAs.

House Minority Leader Nancy Pelosi warned Republicans against insisting on raising the Medicare eligibility age as part of any deal.

“Don’t go there,” Pelosi said on “CBS This Morning.” She said raising the retirement age wouldn’t contribute much savings toward an agreement in the short term, adding, “Is it just a trophy that the Republicans want to take home?”

Raising the Medicare age from 65 to 67 could cut Medicare costs by $162 billion over a decade, according to a Congressional Budget Office estimate last year. But by 2035, it would cut Medicare’s projected budget by 7 percent.

That estimate, however, assumes the eligibility age would increase rather abruptly and hit people just about to retire. Republicans have instead in the past that their Medicare proposals won’t affect now those 55 and above.

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,” said Rep. Joe Crowley, D-N.Y.

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.

“The president and his allies have taken so many things off the table the only thing left is the varnish,” said Senate Minority Leader Mitch McConnell, R-Ky.

But in an ABC interview Tuesday, Obama did not reject a Republican call to raise the age of Medicare eligibility from 65 to 67. The proposal is “something that’s been floated,” Obama said, not mentioning that he had tacitly agreed to it in the deficit-reduction talks with Boehner more than a year ago that ended in failure.

“When you look at the evidence, it’s not clear that it actually saves a lot of money,” Obama said. “But what I’ve said is, let’s look at every avenue, because what is true is we need to strengthen Social Security, we need to strengthen Medicare for future generations, the current path is not sustainable because we’ve got an aging population and health care costs are shooting up so quickly.”

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