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Last updated: November 28, 2012 11:09 pm
President Barack Obama has dispatched Tim Geithner, Treasury secretary, to Congress for a series of meetings on Thursday with leaders of both political parties in a bid to jolt negotiations to avert the fiscal cliff.
Mr Obama’s move comes as the Federal Reserve reported that alarm about the looming tax hikes and spending cuts was spreading across a swath of US business, based on the central bank’s regular collection of anecdotal reports from executives around the country.
“A number of contacts across [Fed] districts expressed uncertainty about business conditions for the months ahead as the firms and their customers waited for the outcome of federal budget negotiations,” the Fed said.
The concern relayed by the Fed came in the middle of a frenzied day of activity and positioning by US political leaders facing an urgent end-of-year deadline to reach an agreement, or see the economy potentially plunge back into recession.
In a sign that negotiations are intensifying, Mr Geithner and Rob Nabors, a top White House official, will on Thursday morning meet with John Boehner, the Republican speaker of the House of Representatives, as well as senior House Republicans including Paul Ryan, the party’s vice-presidential nominee this year.
A spokesman for Mr Boehner suggested the gathering had the potential for real progress. “We accepted this meeting with the expectation that the White House team will bring a specific plan for real spending cuts – because spending cuts that Washington Democrats will accept is what is missing from the ‘balanced approach’ that the president says he wants.”
Mr Geithner and Mr Nabors will also meet with Democratic congressional leaders and Mitch McConnell, the top Republican in the Senate.
Both Mr Obama and Mr Boehner sounded optimistic about the prospects for a deal to be struck in time, contributing to a rebound in US equity markets as investors were encouraged by their confidence.
“I believe that both parties can agree on a framework that does that in the coming weeks. In fact, my hope is to get this done before Christmas,” Mr Obama said.
The White House and Congressional leaders are embarking on high-stakes talks to avoid a looming fiscal cliff
But so far there have been no big breakthroughs on the most contentious issues – such as the Democratic insistence on higher tax rates for the wealthy, and Republican demands for cuts to popular healthcare and pension programmes.
Earlier in the day, Erskine Bowles, the former White House chief of staff under Bill Clinton who co-chaired a high-profile fiscal commission in 2010, appeared discouraged by the slow pace of the negotiations and the distance between the sides on both taxes and spending.
“I think the probability is we’re going over the cliff,” Mr Bowles said. “I’m hopeful but, boy, I wouldn’t put me down as optimistic.”
Meanwhile, Mr Obama intensified the political theatre by launching a new social media campaign to persuade Republicans to accept higher taxes on the wealthy and pave the way for a deal.
Mr Boehner has said he is willing to put “revenues” on the table in the talks by limiting deductions, but will not allow lower Bush-era tax rates on Americans earning more than $250,000 a year to lapse at the end of the year.
“I’m asking Americans all across the country to make your voice heard,” Mr Obama said, suggesting emails, phone calls and the use of social media such as Facebook and a new Twitter hashtag called #My2k, a reference to the $2,000 tax increase per family that would occur if the US plunged over the fiscal cliff.
“I want to make sure everybody understands this debate is not just about numbers. It’s a set of major decisions that are going to affect millions of families all across this country in very significant ways,” Mr Obama said.
But what actually is a fiscal cliff and what does it mean for the US economy?
On Wednesday, Mr Obama met with a group of top corporate executives, including some who supported Republican Mitt Romney in the presidential contest, including Arne Sorenson of Marriott, Ed Rust of State Farm, and Caterpillar’s Douglas Oberhelman. Lloyd Blankfein, chief executive of Goldman Sachs, was also included on the invitation list, giving a prominent Wall Street figure a seat at the table.
On Thursday, Mr Obama was due to host Mr Romney for a private lunch at the White House – their first meeting since the election.
One sign that Republican opposition to higher tax rates might begin to unravel came when Tom Cole, a conservative lawmaker from Oklahoma, said his party should accept Mr Obama’s call for extending Bush-era tax rates for 98 per cent of America, and dealing with the fate of those for the wealthiest next year, allowing them to expire.
But the political pressure facing Republicans who are beginning to balk at the “pledges” they once signed to never raise taxes was also evident when Erick Erickson, the influential conservative blogger, said he was considering a primary challenge against Saxby Chambliss, the veteran Georgia senator who recently said he cared more about his country than adhering to a 20-year-old promise he made to anti-tax crusader Grover Norquist.
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