Earlier Wednesday, Obama called Boehner and other top lawmakers to urge them to put aside partisan interests to bolster the economy and advance the interests of the American people. Obama favors raising taxes on the wealthy to help close the nation’s yawning budget hole.
Senate Majority Leader Harry M. Reid (D-Nev.) also extended a hand, saying: “It is better to dance than to fight. . . . It is better to work together.”
The conciliatory remarks came as U.S. stock markets tumbled amid investor concerns that Washington would remain gridlocked in the face of economic threats, including the year-end “fiscal cliff” of automatic government spending cuts and sharp tax hikes.
The comments could offer a path for avoiding the fiscal cliff, which economists warn could plunge the nation into recession, and for forging a compromise to slow the nation’s unsustainable borrowing. Such a deal, in turn, could pave the way for bipartisan agreement on other hot-button issues, such as immigration reform, during Obama’s second term.
But a huge gap still remains, with the White House on Wednesday claiming an electoral mandate to pursue its tax policies and Republicans remaining opposed to any proposals for raising tax rates on the wealthy. Beyond tax policy, there are also divisions over what types of changes, if any, to make to federal entitlements such as Medicare and Social Security.
Amid fears that the brutal election campaign has failed to produce new prospects for compromise, U.S. stocks slid about 2.5 percent, to a three-month low. The Dow Jones industrial average fell 312.95 points to 12,932.73, and the Standard & Poor’s 500-stock index fell 33.86 points to 1395.53.
The upcoming debate over spending and taxes could have huge consequences, beyond whether the nation goes over the fiscal cliff. Both parties could face a stiff cost if Americans believe they are playing politics with the health of the economy. Exit polling Tuesday showed that most voters believe the economy is weak and not improving.
Also at stake are the legacies of Obama and Boehner. Both men say they are seeking a long-term budget deal that controls federal borrowing and reforms entitlements so they are sustainable as waves of baby boomers retire in the years to come. In pursuit of that goal, Obama and Boehner carried out negotiations in the summer of 2011 over a “grand bargain,” but that effort failed amid mutual recriminations.