Obama, Hill leaders optimistic on fiscal cliff

WASHINGTON -- Emerging from a closed meeting with President Obama at the White House on Friday, the administration and congressional leaders sounded optimistic on areas of possible compromise over looming fiscal deadlines for tax hikes and spending cuts begin to come into focus.

“The president and the leadership had a constructive meeting and agreed to do everything possible to find a solution that averts the so-called ‘fiscal cliff,’” said Press Secretary Jay Carney. “Both sides agreed that while there may be differences in our preferred approaches, we will continue a constructive process to find a solution and come to a conclusion as soon as possible.”

Administration and congressional leadership staff plan to work while the president travels to Asia, and through the Thanksgiving holiday week, on a framework to discuss once the parties return.

“It’s going to be incumbent on my colleagues to show the American people we’re serious,” said House Speaker John A. Boehner of Ohio as the congressional leaders emerged from the White House to deliver brief comments.

“We have the cornerstones of being able to work something out,” said Senate Majority Leader Harry Reid of Nevada. “This is not something we’re going to wait until the last day of December to get done. We have a plan; we’re going to move forward on it.”

Both Republicans and Democrats remain far from a deal, which is needed by year-end to avoid a fiscal contraction that economists warn could launch another recession. But the outlines of a compromise can be seen as Boehner has signaled Republicans are open to new tax revenue and Obama has softened his insistence that income tax rates must rise to the top 39.6% rate from the Clinton era.

Friday’s closed-door gathering of the principle players is the first sit-down after the election, which emboldened Obama and his allies on Capitol Hill. Americans spoke at the polls, they maintain, preferring the Democratic approach, which asks the wealthiest taxpayers to contribute more revenue, while preventing steep cuts to domestic spending.

At the same time, rank-and-file Republicans emerged from the election with the take-away that voters want the GOP House majority to hold final “line of defense,” as Boehner puts it, against what they see as excessive government overreach. All tax rates will rise on Jan. 1 if no action is taken – about a $2,000 hit for average Americans.

During the meeting, Boehner presented the outline of a deal that resembles the framework he proposed in the days after the election – insisting that the details of a large deficit-reduction package could not be resolved in the short lame-duck session of this Congress.

Instead, the speaker wants the parties to agree to long-term “targets” for tax revenues and spending cuts that would be binding by statute.

Resolving the tax issue is, in many ways, the cornerstone to a deal, as both sides have found common ground in their desire to reverse the coming automatic spending cuts. On Jan. 2, massive across-the-board cuts would hit defense and domestic accounts, forced as part of a deal last year when the two sides failed to develop a broader deficit reduction plan.

Tax revenue could be raised by closing tax loopholes or capping deductions for the wealthiest Americans, those couple earning incomes above $250,000, or $200,000 for singles -- though experts say that may not raise enough money toward a big deficit reduction deal that both parties want unless tax rates are also increased. Boehner has resisted lifting rates beyond the top bracket of 35%, which has been in place since the George W. Bush era.

As talks begin, both sides are aiming for a broad deficit-reduction deal that could slash some $4 trillion off the nation’s deficits over the next decade by tax and spending reforms.

Any deal on taxes would also require a compromise from Democrats to rein in spending on Medicare, Medicaid and other entitlement programs that are drivers of the nation’s long-term deficit problems. Obama has put forward earlier plans to do that.

With the year-end deadline looming, Obama has repeatedly sought to pressure House Republicans to at least extend the expiring tax rates for middle-class families, while talks on the upper-income rates continue. The president has warned that even the threat of new taxes in the New Year could damper the coming holiday shopping season.

All sides have tried to resist drawing the lines of a stalemate. The meeting opened Friday with the cordial greetings officials use on such occasions.

In a moment of brevity, Obama offered birthday wishes to the Boehner – the speaker turns 63 on Saturday. And the two shook hands.

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Lisa.mascaro@latimes.com

Twitter: @LisaMascaroinDC