US Congress moves slowly on compromise to avert fiscal cliff

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November 28, 2012

WASHINGTON – Facing one of his most important political and economic challenges, President Barack Obama reached out to business leaders over the looming fiscal cliff, and Tuesday said he wants to extend low income tax rates for middle-class Americans, but let tax rates rise on income over $250,000 a year per family,

November 28, 2012

WASHINGTON – Facing one of his most important political and economic challenges, President Barack Obama reached out to business leaders over the looming fiscal cliff, and Tuesday said he wants to extend low income tax rates for middle-class Americans, but let tax rates rise on income over $250,000 a year per family,

The U.S. Congress advanced slowly on Tuesday toward compromise on taxes and spending, but a firm deal to avert the "fiscal cliff" at the end of the year still seemed miles away, despite growing pressure from business interests for action.

The government meanwhile reported another increase in planned U.S. business spending in October.

U.S. stock prices were broadly flat on Wall Street. The Dow Jones industrial average was at about 12,950, up 15 percent from a year ago despite market worries about fiscal policy.

Republicans have not shifted from their stance against any tax rate increases, but a few have been publicly disavowing a no-new-taxes pledge to which most of them have adhered for years, putting tax revenues, if not higher rates, on the negotiating table.

Republicans are in favor of extending low income tax rates, adopted during the administration of former President George W. Bush, for all income levels.

The tax rate dispute is the central obstacle to an agreement that would prevent the nation from plunging off the fiscal cliff.

House Speaker John Boehner, R-Ohio, pressed his case for revenue derived by reducing tax loopholes rather than raising tax rates on wealthy taxpayers, as President Barack Obama insists.

Boehner, voicing the Republican stance, said: "The American people support an approach that involves both major spending cuts and additional revenue via tax reform with lower tax rates."

At the White House, Obama spokesman Jay Carney reiterated the president's pledge not to sign legislation that extends current tax rates to the top 2 percent of income earners households with incomes over $250,000. "That is a firm position," Carney said.

Congress and Obama have until the end of the year to avoid across-the-board tax increases that would do away with rates set during the administration of President George W. Bush and restore higher tax rates in place during President Bill Clinton's administration when the economy was robust and the federal government had a budget surplus.

Obama spoke separately with House Speaker John Boehner and Democratic Senate Majority Leader Harry Reid over the weekend. The aides would not reveal details of the conversations. Obama last met with the bipartisan congressional leadership to discuss the fiscal cliff on Nov. 16. No new meetings have been announced.

Top officials from the U.S. Chamber of Commerce and from the Business Roundtable met with senior White House aides on Monday.

In addition to looming tax hikes, the new year could also result in steep spending cuts in defense and domestic programs.

Lawmakers and the White House fear that such a combined "fiscal cliff" would undercut the military and set back an economic recovery.

Republicans say that while they are open to revenue increases, Obama also has to agree to reductions in entitlement spending, particularly in massive health care programs such as Medicare and Medicaid.