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The Globe and Mail

As deadline to fix 'fiscal cliff' looms, Obama tells lawmakers to 'cool off'

U.S. President Barack Obama


America's leaders left Washington for Christmas without resolving their differences in high-stakes budget talks, setting the stage for an intense period of post-holiday wrangling in which failure could result in a recession.

President Barack Obama made a rare Friday evening appearance in the White House press briefing room to call on lawmakers to use the next few days to "cool off" and apply some perspective to what has become yet another partisan standoff between Democrats and Republicans over taxes and spending.

"Nobody can get 100 per cent of what they want," Mr. Obama said before boarding Air Force One with his family for their annual Christmas vacation in the President's native Hawaii. "This is not simply a contest between parties in terms of who looks good and who doesn't. There are real-world consequences to what we do."

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At issue is the "fiscal cliff," the term that's come to describe some $500-billion in tax increases and $100-billion in spending cuts scheduled for 2013. Economists say that is more austerity than the fragile economy of the United States can handle, predicting a recession if existing measures are left unresolved. But after running four consecutive budget deficits in excess of $1-trillion, lawmakers have resolved to constrain the growth of their country's debt. The President and congressional lawmakers talk about Jan. 1 as the deadline for avoiding the so-called "cliff," even though the various measures would be felt only gradually over time.

Stock markets plunged Friday as traders began to lose faith in Washington's ability to reach a deal.

House Speaker John Boehner appeared at a loss, telling reporters it was up to Mr. Obama and Democratic congressional leaders to come up with a proposal that would pass his chamber. Senate Majority Leader Harry Reid was unmoved, accusing Mr. Boehner of abandoning the negotiating table. Both the House and the Senate adjourned until Dec. 27.

"I think we're going over the cliff," Mick Mulvaney, a Republican congressman from South Carolina, told Bloomberg Television on Friday.

The President's intervention came almost 24 hours after the chess match between Democrats and Republicans appeared at a stalemate following one of the most humiliating moments of Mr. Boehner's career.

Mr. Boehner, the top Republican in Washington, is a weakened figure after failing to unite his members around a bill that would have cancelled legislated tax increases for all but those with annual incomes of more than $1-million.

The manoeuvre appeared designed to give Mr. Boehner some leverage in talks with Mr. Obama, who wants to draw a line for tax increases at $400,000. But the move backfired. Mr. Boehner and his lieutenants failed to muster enough support for the higher threshold, suggesting that if Mr. Boehner wants to secure a bipartisan agreement, he will have to do so with Democratic votes.

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At a news conference Mr. Boehner rejected suggestions his position as Speaker was in jeopardy. He said he remained open to working with Democratic leaders, although he offered no suggestions on how to end the impasse.

"How we get there, God only knows," Mr. Boehner said.

Mr. Obama offered a clue, reiterating his call that lawmakers at a minimum protect the middle class from tax increases, and conceding that the country's budget issues may have to be addressed in "several steps" rather than in one comprehensive agreement.

The President told reporters he would be back in Washington next week, which means he intends to cut short his vacation to focus on securing a deal by the end of the year. Mr. Obama met with Mr. Reid in person and spoke with Mr. Boehner by phone before making his statement Friday.

"Call me a hopeless optimist, but I actually still think we can get it done," Mr. Obama said.

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