Obama: “Modestly Optimistic” Much Of Fiscal Cliff Will Be Averted

Urges Senate leaders to strike a deal. Hill leaders indicate sequester, debt ceiling likely to be excluded from final agreement.

Jonathan Ernst / Reuters

WASHINGTON — In a meeting at the White House on Friday, President Barack Obama and congressional leaders determined that they would likely not reach a deal by the end of the year to address the debt ceiling and the automatic spending scheduled to go into effect, according to a Republican source.

“[House Speaker John] Boehner said we would not turn off the sequester without commensurate spending cuts to replace it,” the source said. “By the end of the discussion, it was clear that the sequester is not likely to be addressed in any immediate agreement.”

“Similarly, based on the scale of a potential agreement, it is not expected the debt limit will be a component,” the source added.

Even so, Obama said in a statement in the White House briefing room later Friday that he is “modestly optimistic” a deal of some magnitude can still be reached to avert at least part of the fiscal cliff before the end of the year. The focus of the negotiations currently appears to be on tax reform.

But major sticking points remain there as well, according to a source familiar with the meeting, including the income threshold at which tax rates will increase: Senate Minority Leader Mitch McConnell remains skeptical that he could persuade his conference to support raising taxes on any income below $400,000, if that.

In addition, Republicans maintain that the estate tax should be kept at 35 percent while Democrats hope to increase it to 45 percent.

The president has delegated the task of hashing out these disagreements to Senate Majority Leader Harry Reid and McConnell, and indicated that he will sign whatever compromise package they come up with.

“At President Obama’s request, I am readying a bill for a vote by Monday that will prevent a tax hike on middle-class families making up to $250,000, and that will include the additional, critical provisions outlined by President Obama,” Reid elaborated in a statement. “In the next twenty-four hours, I look forward to hearing any good-faith proposals Sen. McConnell has for altering this bill.”

But, at the same time, the president detailed a back-up plan: An “up or down” vote in the Senate on the president’s plan to extend tax cuts from income up to $250,000, but that would not necessarily address the rash of spending cuts set to take effect.

“That’s the bare minimum that we should be able to get done,” Obama told reporters.

The president delivered his statement roughly one hour after he concluded a 65-minute-long meeting with congressional leaders in the Oval Office, which he called “good and constructive.” Present at that gathering, according to a White House official, were Boehner, House Minority Leader Nancy Pelosi, Reid, McConnell, Vice President Joe Biden and Treasury Secretary Timothy Geithner.

During the meeting, “the group agreed that the next step should be the Senate taking bipartisan action,” an aide to Boehner said later.

“The leaders spent the majority of the meeting discussing potential options and components for a plan that could pass both chambers of Congress,” the aide said in a prepared statement. “The speaker told the president that if the Senate amends the House-passed legislation and sends back a plan, the House will consider it — either by accepting or amending.”

In a separate statement, an aide to McConnell confirmed that “the president and Congressional leaders today agreed that the Senate must now act.”

“This will require a bipartisan approach. Members of the Senate will continue to work toward producing a bipartisan package in a timely manner to protect American taxpayers and jobs from a massive tax hike in January.”

Following the meeting, McConnell and Reid returned to the Senate and huddled with some members of their respective conferences during a vote. Reid appeared to spend most of his time talking quietly with his liberal wing, while McConnell spent considerable time speaking with fellow Kentuckian Sen. Rand Paul.

After the vote, Reid and McConnell informed their colleagues that they would work on the details of a deal over the next 24 hours and would present that framework to their members Sunday afternoon once the chamber returns to work.

If successful in the Senate, the Reid-McConnell bill would likely be taken up by the House after the new year and before the 112th Congress ends on Wednesday — a narrow window that could allow the measure to be scored as a tax cut, even for the nation’s wealthiest.

But Boehner would still face a critical challenge from conservative members of his conference in passing such a compromise — although in recent days he has hinted he could take up a fiscal cliff deal even if the majority of his conference does not support it.

John Stanton contributed reporting.

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