‘Fiscal cliff’ talks bogged down by dispute over cost of retirement programs

Negotiations to avert the year-end “fiscal cliff” advanced at a glacial pace Wednesday, with a dispute over how to tackle the soaring cost of federal retirement programs emerging as the latest roadblock to progress.

Democrats complained that Republicans have yet to name their price for enacting legislation that would preserve tax cuts for the vast majority of Americans next year while raising revenue from the wealthiest 2 percent.

Republicans, meanwhile, insisted that it is up to President Obama to offer a plan to restrain the cost of Medicare, Medicaid and Social Security — the government’s biggest and fastest-growing programs — in exchange for GOP concessions on taxes.

As the White House announced that it will dispatch Treasury Secretary Timothy F. Geithner and Rob Nabors, its top congressional negotiator, to Capitol Hill on Thursday for the first high-level meetings in nearly two weeks, aides to House Speaker John A. Boehner (R-Ohio) encouraged them to arrive with a detailed proposal to rein in health-care and retirement spending.

“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,” Boehner spokesman Michael Steel said.

White House press secretary Jay Carney told reporters that Obama has already offered a plan to slice $340 billion from federal health programs, in part by charging wealthy seniors more for Medicare, and that he is open to additional proposals for health-care savings.

But top Democrats, including Senate Majority Leader Harry M. Reid (Nev.) and Senate Majority Whip Richard J. Durbin (Ill.), have resisted changes to entitlement programs as part of the fiscal-cliff negotiations. With few signs of progress and barely four weeks remaining until more than $500 billion in automatic tax increases and spending cuts are set to take effect, a sense of gloom was descending over the Capitol.

Erskine Bowles, a former Democratic White House chief of staff who has returned to Washington this week to act as an informal envoy between Republicans and the White House, said he sees only a one in three chance of an agreement before the fiscal cliff hits in January — in part because of Democratic recalcitrance over entitlement savings.

“Am I an optimist? No, but I am hopeful,” Bowles told reporters after emerging from a meeting at the Capitol with Boehner and other House Republican leaders.

“I think it’s at most a one-third probability we’ll get something done before the end” of the year, he said earlier at a breakfast with reporters hosted by the Christian Science Monitor. “There has been no serious discussion yet about entitlement reform.”

Bowles met Tuesday with Obama and other top administration officials, who told him that they are willing to show “flexibility” on another key difference between the two sides: where to set tax rates for the wealthy in 2013.

Republicans have insisted that the George W. Bush-era rates be extended for all taxpayers, a move that would maintain the top tax rate at 35 percent. Democrats, including Obama, have called for the Bush rates for the wealthy to expire, a move that would send the top rate to 39.6 percent and raise about $850 billion in revenue over the next decade.

In a news conference two weeks ago, Obama suggested that he was open to setting the top rate somewhat lower than 39.6 percent; some Democrats have suggested a rate as low as 37 percent. Obama expressed that openness more directly this week, Bowles said, saying some of the $800 billion could come from limiting deductions and other tax breaks, as Republicans prefer.

The White House believes “that the only way you can make it real is to have it come in the form of higher rates. But it all doesn’t have to come out in the form of higher rates. Some of it can come in the form of deductions and credits,” Bowles said. “I heard it not only from the team but from the president.”

At the Capitol, Boehner was firm in his insistence that Republicans would not compromise on tax rates. During a closed-door meeting of House Republicans on Tuesday morning, Boehner brushed aside a suggestion from Rep. Tom Cole (Okla.) that Republicans acquiesce to Democratic demands to pass legislation that would extend the Bush tax cuts only for income under $250,000 a year.

Cole, a close Boehner ally, told his colleagues that maintaining rates for the vast majority of Americans would be the smart political move. But no other Republican spoke in favor of that position, according to those present. And Boehner later told reporters that he thinks Cole’s position is wrong.

“We’re willing to put revenue on the table as long as we’re not raising rates,” Boehner said.

Negotiations are set to resume Thursday when Geithner and Nabors meet with Boehner and other top Republicans, including Majority Leader Eric Cantor (Va.), Ways and Means Chairman Dave Camp (Mich.) and Budget Committee Chairman Paul Ryan (Wis.). Ryan, fresh off the campaign trail as Republican presidential candidate Mitt Romney’s running mate, has agreed to help Boehner vet ideas and round up GOP support for an eventual deal.

Geithner and Nabors are scheduled to meet separately with Senate Minority Leader Mitch McConnell (R-Ky.), as well as Reid and House Minority Leader Nancy Pelosi (D-Calif.).

Obama, meanwhile, expressed optimism Wednesday about the odds of a deal coming together. Speaking at the Eisenhower Executive Office Building, he urged voters to pressure Congress to freeze tax rates for the middle class, warning that congressional inaction could cost the average family more than $2,000 next year.

“When the American people speak loudly enough, lo and behold, Congress listens,” Obama said, introducing a Twitter hashtag, #My2K, for venting complaints. “My hope is to get this done before Christmas.”

Lori Montgomery covers U.S. economic policy and the federal budget, focusing on efforts to tame the national debt.
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