Obama kicks off 'fiscal cliff' negotiations with Congressional leaders Friday

By Andrew Taylor, Associated Press / November 16, 2012

President Barack Obama was kicking off budget dealings with congressional leaders Friday with new leverage from his re-election to the White House, but he faces a tricky path to avoiding a market-rattling "fiscal cliff" that could imperil a still-fragile economy.

At issue is a combination of expiring tax cuts and across-the-board spending cuts set to hit in January ifObama and Congress can't reach a deal. Economists and business leaders warn the combination could send the economy back into recession, and all sides in Washington say they want to avoid going over the cliff.

Obama's Republican rivals promise greater flexibility on new tax revenues, but Democrats face pressure from liberal interest groups urging him to take a hard line and avoid cutting big benefit programs like Medicare — the government health care program that primarily benefits the elderly — and food stamps. It's up to Obamato navigate the course toward an agreement.

Attending the meeting with Obama are the top four leaders of Congress: Republican House Speaker John Boehner, Democratic Minority Leader Nancy Pelosi, Democratic Senate Majority Leader Harry Reid and Republican Minority Leader Mitch McConnell.

The White House says Obama's starting point for negotiations is his February budget plan, which combined $1.6 trillion in new revenues over the coming decade — chiefly from upper-income earners — with modest cuts to benefits programs. Obama's plan promises $4.4 trillion in deficit cuts over 10 years, but more than half of that comes by banking already accomplished cuts and questionable savings from winding down military operations in Iraq and Afghanistan.

Obama has been firm that taxes are going up on upper-bracket earners, though Boehner and McConnell are adamant that his campaign promise of raising the top income tax rate on family income exceeding $250,000 a year is a nonstarter.

"When it comes to the top 2 percent, what I'm not going to do is to extend further a tax cut for folks who don't need it," Obama said Wednesday.

Obama will press the leaders to make sure that taxes don't go up on 98 percent of American families and 97 percent of small businesses at the end of the year. The White House says Obama is willing to compromise on a deficit-reduction plan, but only if it asks for more revenues from wealthier Americans.

The bargaining landscape has shifted markedly in Obama's favor since his failed talks with Boehner in the summer of 2011 on a "grand bargain" on the budget. Then, Obama squared off against a conservative, anti-tax tea party-driven House on the need to extend the government's ability to borrow to avoid a market-crunching first-ever default on its obligations.

Now, freshly re-elected, Obama is putting Republicans on notice that he's willing to mount a national campaign blaming them for holding up renewing tax cuts for all with an ultimatum about renewing tax cuts for upper-income earners.

"If you have looked closely at what the president had to say and looked closely at what I have had to say, you know, there are no barriers here to sitting down and beginning to work through this process," Boehner said Wednesday.

McConnell has adopted a harsher tone.

"The only way we succeed is if the president steps up and leads," McConnell said Thursday in a chilly response to Obama recycling his February budget. "It starts by showing that he's serious about success. And let's be clear: An opening bid of $1.6 trillion in new tax hikes isn't serious."

The roadblocks to a deal may come from Obama's left flank as much as they do from his conservative Republican rivals. Liberal Democrats are adamant that the measure not touch Social Security, the government pension fund, or raise the eligibility age for Medicare. Both ideas were in the mix when Obama negotiated with Boehner last summer, but top Senate Democrat Reid insists that ideas like a lower inflation adjustment for Social Security are off the table now.

On Friday afternoon, Obama will continue his efforts to build a coalition of support for his position when he and Vice President Joe Biden meet with leaders of civil rights and other organizations. Obama has already met with leaders of labor and liberal organizations as well as corporate CEOs who have backed his call for greater tax revenue.