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Fiscal cliff talks fizzle

| Sunday, Dec. 2, 2012, 9:42 p.m.

WASHINGTON — As the White House and Republican leaders enter the final month of negotiations to avoid a year-end fiscal cliff, both sides struck an uncompromising tone on Sunday, as warnings mounted that they will be unable to forge an agreement to stop an automatic series of deep spending cuts and large tax hikes that could push the economy into recession.

After private meetings last week, the senior negotiators for the White House and the Republicans took to the airwaves to accuse the other side of intransigence and to demand that the opposition concede on the central question of how much to raise taxes on the wealthy.

“Right now, I would say we're nowhere, period. We're nowhere,” House Speaker John Boehner, R-Ohio, said on “Fox News Sunday.” Boehner added that the Republicans have offered a way to break the stalemate — by compromising on an overhaul of the tax code that would limit deductions that disproportionately benefit the rich.

But Treasury Secretary Timothy Geithner rejected that proposal on Sunday, insisting that the wealthy pay higher tax rates and that Republicans come forward with a plan that meets that requirement. “There's no path to an agreement that does not involve Republicans acknowledging that rates have to go up on the wealthiest Americans,” he said on NBC's “Meet the Press.”

While it had always seemed likely that the two sides would reach a stalemate before finally coming to agreement — as has been the pattern during the past two years — lawmakers and congressional aides tracking the back-and-forth said there's a growing probability that no deal will be reached in time to avoid the fiscal cliff.

“I think we're going over the cliff,” Sen. Lindsey Graham, R-S.C., said on CBS' “Face the Nation.”

Geithner appeared on five Sunday morning news shows — and Boehner on one — amid an intensifying public-relations blitz. President Obama took his first domestic trip since winning re-election, to the Philadelphia suburbs, on Friday to press Republicans, which was followed by a Boehner news conference.

This week, Obama will gather with governors and make a speech to the Business Roundtable, a lobby group representing big business, to urge lawmakers to embrace his tax proposals. Boehner will meet with governors and rally with small-business owners against tax increases.

The debate over how to raise taxes on the wealthy is part of the broader discussion over how to reduce federal borrowing during the next decade. At the end of the year, tax rates are scheduled to increase on nearly all Americans, raising hundreds of billions of dollars of new tax revenue but costing the average family about $2,000 a year in take-home pay.

Obama wants to freeze tax rates for most Americans while allowing them to rise as high as 39.6 percent for top earners — defined as earning over $250,000 per year. That will reduce federal borrowing by about $1 trillion over a decade.

Then next year, Obama wants to overhaul the tax code to clean out deductions and loopholes that benefit the rich and some sectors, such as the financial industry. That, the administration estimates, would generate about $600 billion in savings over a decade.

Republicans, meanwhile, do not want to raise taxes on anyone. But in the wake of their electoral defeat last month, they have acknowledged that the wealthy will have to pay more. They want to raise about $800 billion in new revenue over the decade through an overhaul of the tax code that limits deductions. Higher rates, they say, will be a drag on economic growth.

Both sides agree that as a principle, keeping tax rates low while eliminating deductions is better than increasing tax rates. But Democrats say it's not possible to preserve enough spending on government programs without raising well over $1 trillion in new tax revenues during the next decade — and they don't believe it's possible to do that without raising rates on the wealthy, raising taxes on the middle class, or scaling back deductions such as the one for charitable giving.

Last week, in a meeting with Boehner, Geithner made the administration's opening bid in the fiscal cliff talks — largely a reprisal of policies the administration has advocated. In addition to $1.6 trillion in new tax revenue, the proposal called for $600 billion in spending cuts, a majority of it from Medicare and Medicaid, as well as a new policy to allow the president to raise the statutory limit on federal borrowing without a majority of Congress approving. That would occur on top of $1 trillion in spending cuts that were agreed to in 2011 and $800 billion in savings from the end of the wars in Afghanistan and Iraq.

Republicans dismissed the proposal as laughable. “I looked at him and said, ‘You can't be serious,' ” Boehner said. “I've just never seen anything like it.”

The White House also has opened the door to a compromise that would increase rates on upper-income earners by less than the full amount they are scheduled to rise next year.

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