Obama takes fiscal cliff on the road; Republicans stew

Deadlock beginning to increase jitters in Europe stock mkts

WASHINGTON, Nov 30, (Agencies): President Barack Obama, reapplying his re-election campaign theme of protecting the middle class, heads to Pennsylvania on Friday suggesting that Republicans could spoil Christmas by driving the country over the “fiscal cliff.”

The president’s road trip, visiting a factory that makes Tinkertoys, is infuriating Republicans, with House of Representatives Speaker John Boehner calling it a “victory lap” Thursday as he rejected Obama’s proposals to avoid the cliff, which is a combination of tax increases and spending cuts set to start tak- ing effect in January.

But Boehner confronts challenges not only from Democrats but increasingly from other Republicans, some of whom have advocated greater flexibility than their leadership on Obama’s demand that Congress approve tax increases for the wealthy as well as extend tax cuts for the middle class as part of a deal to avoid the cliff. Most Republicans oppose raising any tax rates.

While Republicans are unhappy with the Obama’s opening bid of deficit reduction measures, drawn mostly from previous presidential budget proposals, they are nervously eyeing the markets as well as polls indicating that the public is likely to blame Republicans if there is no deal at year’s end to avoid the tax increases and severe spending cuts that economists say could tip the economy into a recession.

What the president is doing, Republican Representative Lee Terry of Nebraska told MSNBC on Thursday, “is setting us up to be the fall people for going over the fiscal cliff. And, frankly, going over the fiscal cliff is a win for the president. So either way, we’re going to get it.”

The president wants Bush-era tax breaks to be extended for all but the wealthiest earners, but Republicans have balked at tax hikes of any kind. In this file photo, traders work on the floor of the New York Stock Exchange. Uncertainty over whether US leaders can resolve a critical budget deadlock and figures showing the eurozone’s unemployment rate at a record high capped any

gains to be made in the markets Friday. (AP)

Bargaining

In the maiden bargaining session, Geithner, the president’s lead negotiator, proposed raising tax revenues by $1.6 trillion, congressional aides confirmed. That figure is in line with what Obama has said is necessary to achieve long-term deficit reduction of $4 trillion over 10 years.

The administration also sought at least $50 billion in new economic stimulus spending.

Obama’s negotiators also sought the ability to raise the nation’s borrowing limit unilaterally. Currently, Congress must approve an increase in the debt ceiling, and it was an impasse over that issue that brought the country perilously close to default in 2011.

Politicians in both major US parties are showing no signs of giving up on the deep partisan divisions that have crippled legislative action in Washington despite Obama’s strong victory for a second White House term.

The uncertainty over whether the US can resolve the critical budget deadlock is beginning to increase jitters in stock markets in Europe, where eurozone countries have already returned to recessionary economies.

European investor sentiment had been buoyed this week by upbeat reports on the US economy, including economic growth and consumer confidence. But markets failed to sustain their rally Friday as trading became increasingly focused on the difficult talks between the White House and Congress.

A top Republican declared that “no substantive progress has been made” in two weeks of talks between President Barack Obama and a divided Congress on looming austerity measures that threaten to send the country back into recession if a deal can’t be made to avoid them by the end of the year. Republican House Speaker John Boehner’s comment Thursday came after a closed-door discussion with Treasury Secretary Tim Geithner.

“Unfortunately, many Democrats continue to rule out sensible spending cuts that must be part of any significant agreement that will reduce our deficit,” Boehner declared.

Democrats swiftly replied that any delay in progress was the fault of Republicans who refuse to accept Obama’s call to raise tax rates on the richest Americans. “There can be no deal without rates on top earners going up,” White House press secretary Jay Carney said.

Republicans rejected as “ridiculous” Thursday a White House plan to raise $1.6 trillion in new taxes over the next decade, as crunch talks on the US deficit took a turn for the worse.