Last updated: December 19, 2012 12:15 am

US party leaders test fiscal cliff plans

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Boehner©Reuters

White House officials and Republican leaders in the House of Representatives huddled with members of their parties in Congress, testing their willingness to make the final compromises needed for a fiscal cliff deal in the coming days.

John Boehner, Republican speaker, held two meetings with rank-and-file conservatives on Tuesday in an attempt to shore up internal support for his recent proposal to allow tax rates to increase on those earning more than $1m. This concession has drawn scepticism from many House Republicans, though not enough outright opposition to scuttle any deal.

But Mr Boehner is likely to have to accept even more revenue, with tax rises hitting households earning substantially less than $1m per year, in any deal with Barack Obama.

At the same time, Rob Nabors, the top congressional liaison representing Mr Obama, was meeting with Democrats on Capitol Hill to explain the president’s latest offer, which includes some spending cuts that have dispirited members of his own party.

Among the most significant of Democratic concerns is Mr Obama’s offer this week to allow a less generous measure of inflation in the calculation of Social Security pension benefits.

With both sides hunkering down to gauge the level of support for a deal, the mood of the talks was slightly less bright than it had been on Monday when a flurry of concessions from both sides led to greater momentum in the negotiations.

Still, Mr Boehner and the White House continued to express confidence that a deal was within reach, as the differences narrowed between the sides. “In a perfect world, we are one meeting away from leaders coming out saying ‘we’ve got it’,” says Gabe Horwitz, director of the economic programme at Third Way, a centrist Democratic think-tank. “There’s always a chance a deal can go south but we’re just getting close,” he says.

Nevertheless, John Boehner, the Republican Speaker of the House of Representatives, said he was preparing a back-up plan to extend current tax rates for all Americans except millionaires, in case talks to avert the fiscal cliff collapsed.

“I believe it’s important that we protect as many American taxpayers as we can,” he added, dismissing the latest offer from Mr Obama as insufficient, arguing that the president’s planned tax rises on the wealthy remained excessive and the spending cuts too modest.

But Mr Boehner also suggested that a deal involving $1tn in new taxes combined with $1tn in fresh spending reductions would be acceptable to House Republicans, a goal that appears within reach.

The White House rejected Mr Boehner’s back-up plan, urging the Republican leader to remain focused on the main negotiations.

“The Speaker’s ‘plan B’ ... can’t pass the Senate and therefore will not protect middle-class families and does little to address our fiscal challenges with zero spending cuts,” said Jay Carney, the White House press secretary.

“The president is hopeful that both sides can work out remaining differences and reach a solution so we don’t miss the opportunity in front of us today,” Mr Carney said.

In depth: US fiscal cliff

US Capitol

The White House and Congressional leaders are embarking on high-stakes talks to avoid a fiscal cliff

The concessions began at the start of the week when Mr Boehner agreed to raise tax rates on households with incomes above $1m, dropping his party’s steadfast opposition to any tax rate increases.

Mr Obama then responded by saying that his threshold for tax rises was no longer $250,000 in earnings, a position on which he campaigned in both the 2008 and 2012 presidential elections, but somewhat higher at $400,000.

Sources close to the talks made it clear the White House offer was not final, leaving room for a final compromise. But both Mr Boehner and White House officials first needed to test the temperature of their allies in Congress ahead of the last push.

“Obviously leadership is doing whatever it can to see where members are on various thing, saying ‘how would you feel about this?’, that kind of thing,” said one Republican aide in the House. “You have to make sure people are OK with what the package is.”

However, Republicans believe there are no good options on the table.

Rob Woodall, a Republican congressman from Georgia, seemed to capture the views of many in his party when he said in a speech on the House floor last week that he would oppose any tax increases, but wanted Mr Obama to make it “difficult” for him to vote “no” against a deal by including “substantive reform” in the final compromise.

“Make those spending reductions so large, and so helpful to the American economy, that I would have no choice but to agree to your tax increases so that we can save the country from the real problem, which is spending,” Mr Woodall said.

But as well as making progress on the issue of taxes, Mr Obama and Mr Boehner have also found increasing common ground on the spending side and the terms for a rise in the debt ceiling.

Mr Obama dropped his main demand for short-term stimulus, in the extension of a payroll tax cut for all American workers, though he is still pressing for emergency jobless benefits and infrastructure spending to be approved.

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