'Fiscal Cliff' Talks Appear To Be Heating Up

President Obama and House Speaker John Boehner met in person again Monday to discuss a budget deal that would undo the massive tax hikes and spending cuts set to take effect Jan. 1. The Republican leader has offered to increase tax rates on people who make over $1 million. The president has responded with a counteroffer.

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DAVID GREENE, HOST:

On a Tuesday it's MORNING EDITION from NPR News. I'm David Greene.

Talks between President Obama and Republican House Speaker John Boehner, aimed at avoiding the fiscal cliff, appeared to be heating up. Boehner broke the ice over the weekend, saying he was willing to accept higher tax rates for millionaires. Now the president has responded with a counter-offer.

And for more on this, we're joined by NPR White House correspondent Scott Horsley. Good morning, Scott.

SCOTT HORSLEY, BYLINE: Good morning, David.

GREENE: So we've been talking about these negotiations for a little while now.

(LAUGHTER)

GREENE: Where do things stand?

HORSLEY: Well, the president and Speaker Boehner met for about 45 minutes yesterday at the White House. And Mr. Obama has come down on what he's seeking in terms of tax revenue. He had been asking for higher tax rates on all income over a quarter million dollars. Now the president says he'll settle for higher tax rates on income above $400,000. That would mean less revenue for the government, but the president also wants to raise money by limiting tax deductions in a way that wouldn't hit the middle class.

Now, remember, the president can get higher tax rates on everybody, even if there's no deal. But this proposal also calls for things he can't get automatically, including more federal spending on infrastructure and an extension of unemployment benefits. He's also seeking a two-year reprieve from fighting over the debt ceiling.

GREENE: OK, so the president has budged a bit when it comes to who would be affected by higher taxes rates among the wealthy. Anything else in this for Republicans?

HORSLEY: Well, yes. The president has increased his offer to cut spending. He was proposing $600 billion in spending cuts over a decade, with half of that coming from the big government health care programs. He's nudged that up now to $800 billion. And he's also said he'd be willing to go along with an adjustment in the way inflation is calculated. This is something we talked about on this program last Friday.

GREENE: Right.

HORSLEY: That would have the affect of slowing the growth in Social Security payments. And also, because parts of the tax code are indexed to inflation, it would result in some additional revenue for the government.

GREENE: OK. Well, I mean all this sounds like movement.

I mean it sounds like specifics. This is all designed to try and avoid, you know, these automatic spending cuts and tax increases that we've been calling the fiscal cliff. I mean does this get us a lot closer to a deal?

HORSLEY: Well, we're closer than we have been, David. You can say the two parties have scaled the walls of ideology and now they just have to wade through the muck of math.

GREENE: I like the metaphor.

HORSLEY: The House speaker has dropped his insistence that any increase in tax rates is destructive to the economy. The president has dropped his insistence that Social Security should be off limits for these conversations; although the White House does want to include some protections for the most vulnerable recipients of Social Security. But now the two sides can really put aside their posturing and do some deal-making.

That's not to say we're there. The rank-and-file Republicans could still balk at the tax hikes. Rank-and-file Democrats could rebel over the benefit cuts. But a spokesman for speaker Boehner said last night they are moving in the right direction and they hope to keep talking.

GREENE: You know, Scott, when we had Cokie Roberts on yesterday, we asked her, you know, if the tragedy up in Connecticut had changed the dynamic at all in all of these conversations. I mean do you sense a difference in the White House and the Republicans? And, you know, are we going to get some deal before the holidays come?

HORSLEY: It's always hard to say what moved the pieces, but certainly there is a sense that people in Washington need to behave like grown-ups now, if that sense wasn't there before. And in Congress, you know, things always seem impossible right up until the moment they seem inevitable. And things could move fairly quickly now. The clock is ticking though.

Yesterday, the Senate majority leader, Harry Reid, warned his members they need to be ready to come back to work right after Christmas. Even if we had a handshake deal between the president and the speaker in the next day or two, it would take some time to nail down the specifics of the legislation and get it through the legislature.

GREENE: No holiday planning yet.

(LAUGHTER)

GREENE: NPR's Scott Horsley, thanks so much.

HORSLEY: Good to be with you.

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