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Obama resolute in showdown with GOP over ‘fiscal cliff’

Obama resolute in showdown with GOP over ‘fiscal cliff’
President Obama speaks before the Business Roundtable in Washington.
(Kevin Dietsch, Pool Photo)

WASHINGTON — President Obama brushed off the latest Republican gambit to gain leverage in averting the so-called fiscal cliff, bluntly telling business chief executives in a speech Wednesday, “I’m not going to play that game.”

That flash of swagger reflects growing White House confidence about its position in the year-end showdown over scheduled spending cuts and tax increases. With less than a month to act and the wind of an electoral victory at their back, White House officials think they are boxing in Republicans.

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The White House credits its strategy crafted from painful lessons of past go-rounds with the Republican-led House. Rather than engaging intensely with the GOP leadership in high-profile meetings, Obama has sought to isolate Republicans and pump up the pressure from all sides. He has picked a red line and is sticking to it. And now he’s waiting.

“The only time these guys have ever moved on something is when they have felt the outside pressure,” said an Obama advisor who requested anonymity to discuss strategy.

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Both sides say they are working to defuse the scheme of tax increases and budget cuts they enacted to force themselves to reach a larger deficit reduction deal. Experts say that if nothing is done, the double blow could send the economy back into recession.

For now, though, the president has reason to be resolute, even as Republicans call on him to counter their latest offer.

Treasury Secretary Timothy F. Geithner underscored that position Wednesday in an interview on CNBC. The administration is “absolutely” ready to go over the “fiscal cliff” if Republicans refuse to raise tax rates on the wealthy, he said.

“There’s no prospect in an agreement that doesn’t involve those rates going up on the top 2% of the wealthiest Americans,” he said.

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Public polling shows a majority of Americans not only support the president’s push to allow tax rates to rise on top earners but are prepared to hold the GOP responsible if negotiations fail. A new poll from the Washington Post and Pew Research Center found that 53% of Americans said Republicans should be blamed if there is no deal, compared with 27% who would blame the president.

Obama’s stance has bred discord and frustration among Republicans on Capitol Hill who find themselves in the politically awkward position of threatening a tax increase for all to preserve lower taxes for the wealthy. Tension bubbled up this week as Republicans floated a new strategy that would involve reviving a threat to let the U.S. default on its debt payments.

Under that scenario, Republicans would agree to raise taxes on the wealthiest 2% of taxpayers, as the president has demanded, but would defer talks about a larger deficit reduction package until the new year, when Obama would need their votes to avoid a federal default on the debt. Republicans could then demand concessions on the federal budget in return for voting to raise the nation’s debt limit.

“The debt ceiling is hanging out there, and the debt ceiling is the next point of leverage,” said Rep. Steve King, a conservative Republican from Iowa. “The president does not fear the fiscal cliff. He’s concerned about who’s going to get the blame. But he doesn’t fear the cliff.”

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A spokesman for House Speaker John A. Boehner (R-Ohio) also suggested that Republicans would try to extract spending cuts in return for a debt limit increase. “We agree there is no reason for drama surrounding a debt limit increase. All that is required is the president getting serious about spending cuts,” said Boehner spokesman Brendan Buck.

In his CNBC interview, Geithner said the administration would insist that any agreement include an increase in the debt ceiling.

Obama and Boehner spoke on the phone Wednesday. Neither side disclosed details of the call.

Obama’s strategy involves risks. His repeated attempts to bludgeon Republicans on taxes while offering no new concessions has engendered little goodwill, and he will need some Republican votes soon.

And his declaration that he won’t play chicken with the vote to raise the debt ceiling? Though that is the tough talk that some Democrats have craved, it has little practical meaning. Unless Republicans agree to his request to largely cede authority to raise the limit, he will need Congress to do it.

For Obama, the lesson on how to gain and use leverage began with the summer of 2011, when a marathon of high-level bargaining sessions with Republicans failed to produce a grand bargain on the federal budget.

After that, Obama set out to negotiate on the campaign trail, announcing his terms publicly as he rallied people behind them.

The Obama team added social media campaigns and testimonials from middle-class Americans, and managed to pass an extension of the payroll tax break in February. That’s when aides came to believe the president could shift the dynamic in talks with Capitol Hill.

Early signs are that the formula may be working again. The latest Twitter campaign has elicited more than 100,000 emails from people explaining how the middle-class tax increase would affect them.

And Obama’s outreach to interested parties is showing progress. Business leaders are worrying openly about the uncertainty around the fiscal cliff and debt ceiling.

At the Business Roundtable on Wednesday, Boeing’s chief executive introduced Obama by suggesting that business leaders could “serve a useful purpose in the dialogue.”

To be sure, there’s grousing about Obama’s negotiating posture. Sen. Mitch McConnell (R-Ky.), the chamber’s Republican leader, has complained that Obama is campaigning rather than working out the issues with his negotiating partners.

But the strategy is worth the aggravation, administration officials think. The president isn’t avoiding private negotiations, but doesn’t plan to start them until there is some movement.

“Once Republicans acknowledge that rates are going up for top earners,” White House Press Secretary Jay Carney said, “we believe that an agreement is very achievable.”

christi.parsons@latimes.com

kathleen.hennessey@latimes.com

Melanie Mason, Michael A. Memoli and Lisa Mascaro in the Washington bureau contributed to this report.


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