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White House Meeting a Last Try for a Fiscal Deal

http://www.fool.com/investing/general/2012/12/28/white-house-meeting-a-last-try-for-a-fiscal-deal.aspx

Associated Press
December 28, 2012

WASHINGTON (AP) -- President Barack Obama was preparing to present a limited fiscal proposal to congressional leaders at a White House meeting Friday, a make-or-break moment for negotiations to avoid across-the-board tax increases and deep spending cuts at the first of the year.

Lawmakers and White House officials held out a slim hope for a deal before the new year, but it remained unclear whether congressional passage of legislation palatable to both sides was even possible.

The Friday afternoon meeting among congressional leaders and the president -- their first since Nov. 16 -- was likely to center on which income thresholds would face higher tax rates, extending unemployment insurance, and preventing a cut in Medicare payments to doctors, among other issues.

For Obama, the eleventh-hour scramble represented a test of how he would balance strength derived from his reelection against an avowed commitment to compromise in the face of divided government. Despite early talk of a grand bargain between Obama and House Speaker John Boehner that would reduce deficits by more than $2 trillion, the expectations were now far less ambitious.

Although there were no guarantees of a deal, Republicans and Democrats said privately that any agreement would likely include an extension of middle-class tax cuts with increased rates at upper incomes, an Obama priority that was central to his reelection campaign.

A key question was whether Obama would agree to abandon his insistence during the campaign on raising taxes on households earning more than $250,000 a year and instead accept a $400,000 threshold like the one he offered in negotiations with Boehner. Another was whether Republicans would seek a higher income threshold.

The deal would also likely put off the scheduled spending cuts. Such a year-end bill could also include an extension of expiring unemployment benefits, a reprieve for doctors who face a cut in Medicare payments and possibly a short-term measure to prevent dairy prices from soaring, officials said.

If a deal was not possible, it would become evident at Friday's White House meeting, and Obama and the leaders would leave a resolution for the next Congress to address in January.

Such a delay could unnerve the stock market, which edged lower for a fifth day Friday amid worries that lawmakers would fail to reach a budget deal. Economists say that if the tax increases are allowed to hit most Americans and if the spending cuts aren't scaled back, the recovering but fragile economy could sustain a traumatizing shock.

Obama called for the meeting as top lawmakers on Thursday alternately cast blame on each other while portraying themselv