Boehner To Give Update On "Fiscal Cliff" Talks

by
Reuters
House of Representatives Speaker John Boehner will provide an update on Tuesday on "fiscal cliff" talks amid signs that negotiations are making headway, although both sides warned an agreement remained uncertain.

John Boehner

House of Representatives Speaker John Boehner will provide an update on Tuesday on "fiscal cliff" talks amid signs that negotiations are making headway, although both sides warned an agreement remained uncertain.

Boehner will open the House session at noon ET with an update, his office announced, as the pace of talks quickened to avert the automatic steep tax hikes and spending cuts set for the end of the year.

California Representative Kevin McCarthy, the Republican whip in the House, told Fox News on Monday night that the two sides were not close to finishing anything.

"There's nothing agreed to. They are just beginning to talk," he said of the two key figures in the negotiations, Boehner and President Barack Obama.

Representative Chris Van Hollen of Maryland, the top Democrat on the House Budget Committee, told MSNBC on Monday that Congress could resolve some of the issues by the December 31 deadline - among them the hikes in tax rates - but might have to leave others for the new Congress that takes office in January.

The two major elements of the so-called cliff are broad spending reductions starting January 1 and tax cuts that expire at the end of the year. Economists have warned the fragile economy could slip back into recession without a deal.

The biggest immediate conflict is over Obama's demand that tax rates rise for the wealthiest 2 percent of Americans. Republicans want existing lower rates continued for all brackets and prefer to raise more revenue by eliminating tax loopholes and reducing deductions.

Republicans also want deeper spending cuts than those sought by Obama and fellow Democrats, particularly on social entitlement programs like the government-funded Medicare and Medicaid healthcare plans.

U.S. BORROWING AUTHORITY AT ISSUE

Complicating the talks is the looming need for an increase in U.S. borrowing authority that Obama wants before Congress wraps up for the year. Without the authority, the government will hit its $16.4 trillion borrowing limit by year's end and run out of steps to stave off default by mid-February.

Obama has asked for the power to raise U.S. borrowing authority without legislation from Congress in hopes of avoiding another confrontation with Republicans like the 2011 showdown that led to an embarrassing downgrade of the U.S. credit rating.

Also in the mix is a payroll tax "holiday" set to expire, which, if not extended, will quickly reduce the take-home pay of a large segment of the U.S. workforce.

The holiday, now in its second year, has been providing workers with an average of about $1,000 a year in extra cash. Significant divisions remain on the payroll tax question in part because it funds the Social Security retirement program.

The payroll tax is paid by employers and employees each at a rate of 6.2 percent of wages, up to a maximum of $110,110. The holiday, enacted in 2010, reduced the rate by 2 percentage points on the portion paid by the worker.

Van Hollen said Republicans were coming around on the tax hikes, and there was a good chance of resolving that soon. But the other things might have to wait, he said, mentioning the budget cuts and the payroll tax.

If not complete by January 1, he said, "my belief is you would get it done very soon" after the New Year, noting that the government has some flexibility on withholding taxes that could limit the immediate hit to taxpayers while negotiations continued into 2013.

There were no travel plans Tuesday on Obama's public schedule, which observers on Capitol Hill hoped signaled more negotiations.