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White House ‘Hopeful’ on Talks Even As McConnell Declares ‘Impasse’

The White House says it remains “hopeful” that the fiscal cliff will be averted, despite comments from Senate Minority Leader Mitch McConnell, R-Ky., that the talks are at an “impasse.”

“We remain hopeful and optimistic that we can reach a deal,” White House Press Secretary Jay Carney told reporters at the White House. “We are engaging with Congress. … With a little give, we can get it done.”

But Carney poured cold water on the key Republican ask: that new revenue in any deal come from slicing tax breaks for the highest earners, not from higher rates. Rate increases and caps on deductions are both needed to reach a deficit reduction deal, Carney said.

President Barack Obama wants about $1.6 trillion in tax revenue from people making more than $250,000, as part of a $4 trillion deficit reduction package; some of that would come from higher rates, some from shrinking deductions. But that’s twice the sum that Obama and Speaker John A. Boehner, R-Ohio, discussed during their “grand bargain” talks in 2011.

The GOP, meanwhile, has complained that Obama hasn’t yet committed to serious entitlement changes even as they are being asked to give in on revenue.

Carney said Obama phoned Boehner and Senate Majority Leader Harry Reid, D-Nev., over the weekend to discuss the cliff, and the president’s staff continues to have conversations with their counterparts on Capitol Hill. Beyond that, Carney offered little new as to the White House’s position and thinking on the topic.

McConnell, speaking on the Senate floor, complained that the president hasn’t yet proposed a plan that can pass — while also urging him to support an approach like that proposed by a majority of the National Commission on Fiscal Responsibility and Reform, known as the Simpson-Bowles commission, which would raise revenue while lowering tax rates.

“We have been open to revenue by closing loopholes as long as it’s tied to spending cuts and pro-growth tax reform that broadens the base and lowers rates,” McConnell said. “This is the model laid out by the Simpson-Bowles commission, and it’s a model both parties should step forward and embrace. Without compromising our principles, we put skin in the game and recognition of the fact that, while Democrats don’t run this town, neither do we.”

McConnell added, however, that the talks remain “at an impasse,” blaming a “Thelma and Louise crowd” on the far left who “dream about higher taxes and the bigger government it will pay for.”

McConnell called on Obama to take on the left wing of his party.

“He’s the one who has to present a plan for success. So we’ll continue to wait on the president and hope that he has what it takes to bring people together and forge a compromise. If he does, we’ll get there, and if he doesn’t, we won’t. It’s that simple.”

Talking to Mr. Bowles

Boehner also gave a shout-out to Simpson-Bowles in a statement, although not to the fiscal-commission plan per se. (House Republican leaders rejected the commission’s plan when it was released).

Boehner and other House Republican leaders will meet with Erskine Bowles, the former chief of staff for President Bill Clinton, as well as members of the “Fix the Debt” coalition, which Bowles co-founded.

“People in both parties agree we need a ‘balanced approach’ to deal with our deficit and debt and help our economy create jobs,” Boehner said. “As we’ve seen in recent days, the American people support an approach that involves both major spending cuts and additional revenue via tax reform with lower tax rates. We look forward to talking to Mr. Bowles and other members of the coalition about their ideas to avert the ‘fiscal cliff’ without tax hikes that target small businesses and cost jobs.”

No Specifics

While McConnell was on the Senate floor practically begging Obama to present a new plan to bring the parties together, Carney stonewalled on several questions.

“I’m not going to get into specifics,” he said.

He refused to detail which changes the president would be willing to make on entitlements; the White House continues to have no position on whether to extend the payroll tax cut, and there are no meetings scheduled with the top Congressional leaders. Carney dismissed the value of such meetings as well as the value of the president’s reaching out to members of Congress for “cocktails” to try to resolve the situation. Carney said the idea that everything can be solved over drinks is more appropriate to 1801 than to modern Washington.

The White House in the meantime released a new study warning that not extending the Bush-era tax cuts for the middle class would reduce consumer spending by about $200 billion next year; it ignored the potential impact of not extending the payroll tax cut.

Alan Krueger, chairman of the Council of Economic Advisers, could not say whether extending the payroll tax cut would be better for the economy than the Bush tax cuts, although he reiterated the White House’s non-position on the payroll tax cut — that extending it remains “on the table” for discussion. Krueger did say that the payroll tax cut helped the economy this year, contributing to the highest level of consumer confidence in four years.

Top White House aides met with senior business leaders Monday to talk about the fiscal cliff; among them were U.S. Chamber of Commerce President Tom Donohue and John Engler, president of the Business Roundtable. Aides on the Hill see pressure from the business community as key to getting votes for any year-end package.

Senate Republican sources said that much of the staff-level conversation to date has been between Boehner’s office and the White House. One source said they are playing a “secondary role.”

“Our people are in the room” but are mostly deferring to House Republicans, the source said, adding, “When we aren’t in meetings, Boehner’s people are filling us in.”

Sorting It Out

As for this week’s schedule, most of it seemed up in the air on Monday, with staffers and principals filtering back to Washington from vacation and trying to map out a path toward an agreement in the next few weeks.

The staff talks that happened over the break focused largely on the broad but contentious policy pieces of any big agreement, with Democrats tasked with coming up with entitlement options and Republicans searching for acceptable revenue raisers.

With both caucuses in both chambers split on how to move forward on the issues that each considers crucial, aides were guarded as to the details of the ongoing work or the extent to which it has been happening at all.

Aides also have been trying to sort out which policies can be addressed before the end of the year and which will be left for the next Congress to deal with in a second package.

Meredith Shiner contributed to this report.

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