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Fiscal Cliff Negotiations Drag On

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Dispute Over The U.S. Budget

President Barack Obama and House Speaker John Boehner met today at the White House to discuss the dispute over the U.S. budget. In what appears to be serious negotiations to prevent the so-called "fiscal cliff," representatives of both sides said the talks were "productive."

Amy Brundage, a White House spokesman said, "This afternoon, the president and Speaker Boehner met at the White House to discuss efforts to resolve the fiscal cliff."

That was countered moments later by Michael Steele, a spokesman for House Speaker John Boehner and former head of the Republican Party, who said almost the identical statement.

Neither gave further details.

Face-To-Face Conversation Between The Two Leaders

The meeting is the first known face-to-face conversation between the two leaders since Nov. 16, when Boehner and other congressional leaders sat down with Obama at the White House. There have been conversations by phone since then, but the most significant meeting for the president has been with Minority Speaker Nancy Pelosi.

What that could possibly accomplish to end the fiscal stalemate is anyone's guess.

Boehner and Obama are attempting to find some common ground that would prevent automatic cuts in the budget of $600 billion in spending cuts and tax increases taking effect in January.

Disputes Over Tax Rates and Spending Cuts

Disputes over tax rates, spending cuts and the debt ceiling are among the barriers to a deal.

The majority House Republicans are insisting on broader tax bases to generate revenue rather than raising rates, signaling no softening in their ongoing impasse with the president.

Here's the latest Republican offer:

Eight hundred billion dollars in additional revenue over the next decade, brought about in a fashion less likely to damage the economy than merely higher rates. That may mean allowing the tax rates on top earners expire.

That would likely be the less painful route and allow Republicans to escape the political slur of being "the party of the rich."

Will this all lead to an inevitable recession in 2013?

If no deal is reached, Republicans will "own" the recession that will inevitably follow, Senator Richard Durbin of Illinois, the second-ranking Democrat in the Senate, said Sunday.

The Democratic blame game continues in force evne though the clock shows 21 days left until time expires.

Senator Tom Coburn of Oklahoma and Representative Jeb Hensarling of Texas, both Republicans, said Sunday that Democrats needed to accept significant changes in entitlement programs.

"What happens to that early retiree?" he asked. "What about that gap in coverage between their workplace and Medicare," asked Sen. Coburn.

Will it all lead to higher rates, period?

Obama has called for higher rates on income of individuals above $200,000 and married couples above $250,000, wants $1.6 trillion in additional revenue, double what Republicans have offered. He has said that limits on tax breaks could generate only $300 billion to $400 billion.

Whatever the rhetoric, each side's argument on tax rates has gaps. Obama's own budget calls for more than $750 billion in revenue from top earners without raising rates, and he said last year that achieving $1.2 trillion without higher rates was possible.

Republicans however haven't been specific on exactly which tax breaks they would cut. Like the Democrats, they are not wild about stepping on any toes, but nevertheless, the clock still ticks.

The most politically volatile of these possible cuts are among the most popular, such as those for mortgage interest, charitable contributions, capital gains and employer-provided health insurance.

Here is the bottom line:

If Congress doesn't act by the end of the year, income taxes at all levels will go up, and the top tax rate will reach 39.6 percent, up from 35 percent now.

Automatic spending cuts, half in defense programs, will begin taking effect. The Congressional Budget Office estimates that inaction would lead to a recession in the first half of 2013.

The clock is ticking and nobody has blinked yet.

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