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Updated Friday, December 28, 2012 at 06:05 AM

Obama to host meeting as deadline edges 'fiscal cliff'

By JONATHAN WEISMAN
The New York Times

WASHINGTON — President Obama is expected to meet with congressional leaders Friday and House Republicans summoned lawmakers back for a Sunday session in a last-ditch effort to avert a fiscal crisis brought on by automatic tax increases and spending cuts scheduled to hit next week.

The development capped a day of growing urgency in which Obama returned early from a Hawaiian vacation while lawmakers snarled across a partisan divide over responsibility for gridlock on key pocketbook issues.

Adding to the woes confronting the middle class was a pending spike of $2 a gallon or more in milk prices if lawmakers failed to pass farm legislation by year's end.

The Obama administration also disputed reports that Obama was sending lawmakers a scaled-down plan to avoid the "fiscal cliff" of tax increases and spending cuts.

Administration officials confirmed the Friday meeting at the White House in a bare-bones announcement that said the president would "host a meeting."

Some Republicans expressed a flicker of hope Thursday that a deal could be reached to at least avert most of the tax increases Tuesday, to prevent a sudden cut in payments to medical providers treating Medicare patients and to extend expiring unemployment benefits. But both parties' leaders said time is running out.

"Here we are, five days from the new year, and we might finally start talking," said Sen. Mitch McConnell of Kentucky, the Senate Republican leader.

The overriding emotion Thursday, as senators convened for a rare session between Christmas and New Year's Day, appeared to be embarrassment.

The continuing impasse "demonstrates a tremendous lack of courage here in Washington to address the issues that need to be addressed — at every level," said Sen. Bob Corker, R-Tenn.

Lawmakers and aides from both parties cautioned that the burst of activity could be more about making sure the other side gets the blame than any real search for a resolution before the Jan. 1 deadline. Under Senate rules, no deal could clear all procedural hurdles in time for a final vote before deadline without all the senators agreeing not to slow progress.

"I have to be very honest," Sen. Harry Reid of Nevada, the majority leader, said Thursday. "I don't know timewise how it can happen now."

Obama administration officials continued to put the onus on Republicans to clear a procedural path to a quick vote on a negotiated deal.

"The only way America goes over the cliff is if the Republican leaders in the House and the Senate decide to push us by blocking passage of bills to extend tax cuts or the middle class," said Dan Pfeiffer, the White House communications director. "It's a question of their willingness to put country before party."

There was no legislation pending and no sign of negotiations in either the House or the Senate on a bill to prevent the tax increases and spending cuts that economists say could send the economy into a recession.

Republicans said there was nothing preventing Reid from putting formal legislation on the Senate floor, and to date, no such bill has been written.

But the contours of a fallback deal came into view Thursday, even as the will to achieve it lagged.

Republicans involved in the talks said both sides would probably be able to agree to extend expiring Bush-era tax cuts up to some income threshold higher than Obama's $250,000 cutoff but lower than the $1 million sought by the House speaker, Ohio's John Boehner.

To that, leaders would probably agree to add provisions to stop the alternative minimum tax from suddenly enlarging to hit more middle-class households, and possibly to extend expiring unemployment benefits.

Republicans would be far less receptive to Obama's call to temporarily suspend across-the-board spending cuts unless such a suspension was accompanied by significant and immediate spending cuts elsewhere.

No such deal could be reached without significant, face-to-face negotiations involving the president, Senate leaders and House leaders, aides said. McConnell aides said a phone call between the president and the Senate Republican leader Wednesday night was the first outreach that McConnell has had from any Democrat since Thanksgiving.

"It appears to me the action, if there is any, will be on the Senate side," McConnell said Thursday on the Senate floor.

The risk of higher milk prices stems from the possibility that existing farm programs will expire at year's end, and neither chamber of Congress has scheduled a vote on even a temporary extension to prevent a spike. There have been unverified estimates that the cost to consumers of a gallon of milk could double without action by Congress.

After a House Republican leadership conference call Thursday, Rep. Eric Cantor of Virginia, the majority leader, said House members would return to Washington on Sunday for legislative business, with votes in the evening. Lawmakers were warned that the House might be in session through Jan. 2, the day the 112th Congress disbands. The next day, the 113th Congress will convene, wiping out any unfinished work of the past two years.

Between such glimmers of hope, the rhetoric in Washington on Thursday was anything but conciliatory. Rep. Steny Hoyer of Maryland, the No. 2 House Democrat, said Republicans would use an imminent fight over raising the government's statutory borrowing limit to fight for big spending cuts, and compared that to taking one's own child hostage and threatening to kill it.

On the Senate floor Thursday, Reid excoriated House Republicans for failing to consider a Senate-passed measure that would extend lower tax rates on household income up to $250,000. He urged House members to return to the Capitol to put together at least a modest deal to avoid the more than half-a-trillion dollars in automatic tax increases and spending cuts set to begin in January.

He also accused Boehner of running a dictatorship, citing his refusal to call a vote on legislation to keep taxes steady for most while letting them rise at upper incomes.

Boehner seems "to care more about keeping his speakership than keeping the nation on a firm financial footing," Reid added.

Brendan Buck, a spokesman for Boehner, said: "Harry Reid should talk less and legislate more if he wants to avert the fiscal cliff."

A few hours later, McConnell expressed frustration and blamed the standoff on Obama and the Democrats. "Republicans have bent over backward. We stepped way, way out of our comfort zone," he said, referring to GOP offers to accept higher tax rates on some taxpayers.

Failure to avoid the "fiscal cliff" doesn't necessarily mean tax increases and spending cuts would become permanent, since the new Congress could pass legislation canceling them retroactively after it begins its work next year.

But gridlock through the end of the year would mark a sour beginning to a two-year extension of divided government that resulted from last month's elections in which Obama won a new term and Republicans retained their majority in the House.

Material from The Associated Press is included in this report.

Schatz sworn in

to Inouye seat

Vice President Joe Biden administered the oath of office to Brian Schatz on Thursday in a chamber peopled by a dozen Democratic senators and a handful of Republicans.

Schatz, 40, had flown to Washington hours earlier on Air Force One with President Obama. Democratic Gov. Neil Abercrombie named Schatz, who had been lieutenant governor, to succeed Sen. Daniel Inouye. Inouye, 88, died last week.

The selection of Schatz went against the dying wishes of Inouye, who had wanted Rep. Colleen Hanabusa to succeed him.

Schatz said his top priorities in the Senate would be addressing global climate change, preserving federal funds used in Hawaii for things such as military spending and transportation and getting federal recognition for Native Hawaiians to form their own government, similar to many Indian tribes.

— The Associated Press


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