President Barack Obama summoned congressional leaders to a White House meeting three days before a year-end deadline to avoid $600 billion in spending cuts and tax increases as lawmakers gave little sign they intend to act together on a budget plan.
Obama, who had been negotiating one-on-one with House Speaker John Boehner, will meet today with Republicans Boehner and Senate Minority Leader Mitch McConnell, and Senate Majority Leader Harry Reid and House Minority Leader Nancy Pelosi, both Democrats.
The president returned early from his holiday in Hawaii yesterday as lawmakers disputed which party would be responsible for missing the deadline for a debt deal, a failure that could hurt the U.S. credit rating and cause an economic recession. The meeting will be held at 3 p.m. Washington time.
“We’ll see what the president has to propose,” McConnell, of Kentucky, said on the Senate floor yesterday. “Hopefully there is still time for an agreement of some kind that saves the taxpayers from a wholly preventable economic crisis.”
On Capitol Hill, pessimism was the prevailing mood as the deadline for the so-called fiscal cliff approached. The Republican-led House called an unusual Sunday session for the evening of Dec. 30, though the leaders didn’t say what action they planned to take.
Market Reaction
The Standard & Poor’s 500 Index fell for a fifth day, by 0.6 percent to 1,409.20 at 10:08 a.m. in New York. The benchmark index has slipped 1.4 percent this week. The Dow lost 76.24 points, or 0.6 percent, to 13,020.07 today.
The benchmark Treasury 10-year note yield declined four basis points, or 0.04 percentage point, to 1.7 percent at 9:09 a.m. in New York, according to Bloomberg Bond Trader prices.
In today’s meeting, Boehner will “continue to stress that the House has already passed legislation to avert the entire fiscal cliff and now the Senate must act,” Boehner spokesman Brendan Buck said in a statement late yesterday.
Senate leaders took to the chamber’s floor to accuse the other party of refusing to compromise on legislation aimed at trimming the debt.
“We wanted an agreement, but we got no takers. The phone never rang,” said McConnell.
“We have nobody to work with, to compromise,” said Reid of Nevada. “I don’t know time-wise how it can happen now.”
Tax Increases
If Congress does nothing, taxes will go up in 2013 by an average of $3,446 for U.S. households, according to the nonpartisan Tax Policy Center in Washington. Tax filing for as many as two-thirds of U.S. taxpayers could be delayed into at least late March. Defense spending would be cut, and the economy would probably enter a recession in the first half of 2013, according to the Congressional Budget Office.
Tax cuts enacted during George W. Bush’s presidency are scheduled to expire Dec. 31, though the effects of the higher tax rates and federal spending cuts would accumulate over a matter of months. Congress could reverse them by acting retroactively in 2013.
With the calendar closing in, Obama may be aiming for a deal in early January, said Joe Minarik, a budget aide in President Bill Clinton’s administration.
If the president “has the sense that there is a deal that can be struck, he will probably try to glide by the end of the year as smoothly as possible and not send any troubling signals,” Minarik said. “That would seem to be the best option in terms of the effect on the economy.”
Cup of Tea
Asked whether he expected Obama to push a specific proposal at the meeting, Senator Dick Durbin, an Illinois Democrat, said, “He came all the way back from Hawaii, and I’m sure it isn’t just to share a cup of tea.”
House Majority Leader Eric Cantor of Virginia, who announced plans for the Sunday session, said the House may meet through Jan. 2, the day before the next session of Congress will convene. The House held a brief pro-forma session yesterday although most members weren’t in Washington.
The House last convened on a Sunday on March 21, 2010, to vote on Obama’s health-care legislation. The House has met on 16 Sundays since World War II, according to records of the House clerk and historian’s offices.
“We are coming back primarily in the hope that we can fix this,” said Representative Tom Cole, an Oklahoma Republican. “The House is waiting on the Senate to act.”
Up to $250,000
Reid said the House should back Democrats’ plan to extend tax cuts on income of married couples up to $250,000 while letting the tax cuts expire for income above that level. Republicans oppose raising tax rates on any income level.
“I’m neither optimistic nor pessimistic,” Vice President Joe Biden told reporters while leaving the Capitol after swearing in new Democratic Senator Brian Schatz of Hawaii, who succeeded the late Senator Daniel Inouye.
Obama called Reid, McConnell, Boehner of Ohio, and Pelosi of California late Dec. 26 to receive an update on the negotiations, said Amy Brundage, a White House spokeswoman.
Obama’s administration is considering options on the budget and other expiring legislation such as extended unemployment benefits, Representative Steny Hoyer of Maryland, the second- ranking House Democrat, said at a news conference.
All Income Levels
The House passed a bill in August that would extend the expiring tax cuts for all income levels, and another bill Dec. 20 to replace the automatic spending cuts with other reductions. The House hasn’t addressed some expiring provisions, including a scheduled pay cut to doctors under Medicare and expanded unemployment insurance.
The Senate voted in July to extend income tax cuts for one year for individual income up to $200,000 and income of married couples up to $250,000. During talks with Boehner earlier this month, Obama offered to raise that threshold to $400,000.
The U.S. will reach the $16.4 trillion debt limit Dec. 31, Treasury Secretary Timothy F. Geithner said yesterday. Treasury can take so-called extraordinary measures to finance about $200 billion in deficits in 2013.
Typically, that would be enough for two months. Geithner didn’t set a specific deadline because of the lack of certainty about tax rates and spending.
The Senate bill is S. 3412. The House bills are H.R. 8 and H.R. 6684.
