December 17, 2012 7:51 pm

Aides wary as Boehner paves way for fiscal deal

With the US in a state of raw shock as details of the deadly school shooting in Connecticut emerged last Friday, John Boehner, the Republican speaker of the House of Representatives, crossed the Rubicon on taxes.

In a call with Barack Obama, the US president, that day, he abandoned his party’s long-held opposition to higher tax rates – saying that he could make an exception for millionaires in order to avert the fiscal cliff.

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Mr Boehner’s move was rejected by Mr Obama, who is pushing for tax rates to increase for households earning more than $250,000 a year, well below the $1m threshold proposed by the Republican speaker.

But it set the stage for an acceleration of the talks that could yield a deal just in time for the year-end deadline to prevent a $600bn combination of automatic tax increases and spending cuts that has been threatening to tip the US back into recession.

Even if there is no agreement, Mr Boehner’s concession on tax rates – a matter of principle that has long been sought by Mr Obama – could pave the way for a more limited fallback option in which middle-class tax cuts are extended. This would avoid the worst of the contraction in the fiscal cliff, even in the absence of any other broad deficit reduction measures.

As Mr Obama and Mr Boehner met again at the White House on Monday for a new round of private talks, congressional aides remained cautious that a deal was finally in hand. One senior Republican staffer in the Senate complained that Mr Obama was still not willing to put sufficient spending cuts on the table and had not tempered his tax demands enough. “There are a lot of major arguments. Tell me one concession the White House has made?,” asked the Republican aide. “Every story I’ve read on the issue has one thing in common: the White House saying no.”

Meanwhile, conservative unrest at the prospect of Republican leaders striking a deal that would include higher taxes and a higher borrowing limit was intensifying.

“First, Speaker Boehner offered to raise tax rates after promising not to, and now he’s offering to raise the debt ceiling. Raising tax rates is anti-growth and raising the debt ceiling is pro-government growth – and this is the Republican position?” said Chris Chocola, president of the Club for Growth, an anti-tax conservative group.

Even if Mr Obama and Mr Boehner reach an agreement to avert the fiscal cliff, it will usher in a new period of anxiety over the ability of these measures to pass Congress.

In particular, the question will be whether Mr Boehner will be able to carry a majority of his Republican caucus with him in favouring the deal, or whether he will have to rely on mostly Democratic votes. The latter scenario could imperil his position as speaker, which is up for re-election on January 3.

Despite the scepticism, Mr Obama and Mr Boehner appear to be coming together in a way that has so far eluded them.

As well as agreeing on tax rises – likely to be slightly in excess of $1tn over 10 years – and spending cuts – likely to fall just short of $1tn – other sticking points remain, such as Mr Obama’s demands for extra short-term stimulus. But the political posturing appears to have finally given way to nitty-gritty talks.

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