Leaders appear divided as ever over 'fiscal cliff'

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WASHINGTON -- As the White House and Republican leaders enter the final month of negotiations to avoid a year-end "fiscal cliff," both sides struck an uncompromising tone Sunday, as warnings mounted that they will be unable to forge an agreement to stop an automatic series of deep spending cuts and large tax increases that could push the economy into recession.

Following private meetings last week, the senior negotiators for the White House and the Republicans took to the airwaves Sunday to accuse the other side of intransigence and to demand that the opposition concede on the central question of how much to raise taxes on the wealthy.

"Right now, I would say we're nowhere, period. We're nowhere," House Speaker John Boehner, R-Ohio, said on "Fox News Sunday." Mr. Boehner added that the Republicans have offered a way to break the stalemate -- by compromising on a tax code overhaul that would limit deductions that disproportionately benefit the rich.

But Treasury Secretary Timothy Geithner rejected that proposal Sunday, insisting that the wealthy pay higher tax rates and that Republicans come forward with a plan that meets that requirement. "There's no path to an agreement that does not involve Republicans acknowledging that rates have to go up on the wealthiest Americans," he said on NBC's "Meet the Press."

While it had always seemed likely that the two sides would reach a stalemate before finally coming to agreement -- as has been the pattern over the past two years -- lawmakers and congressional aides tracking the back-and-forth said there's a growing probability that no deal will be reached in time to avoid the fiscal cliff.

"I think we're going over the cliff," Sen. Lindsey Graham, R-S.C., said on CBS's "Face the Nation."

Mr. Geithner appeared on five Sunday morning news shows -- and Mr. Boehner on one -- amid an intensifying public-relations blitz related to the fiscal cliff. President Barack Obama took his first domestic trip since winning re-election, traveling Friday to the Philadelphia suburbs to press Republicans, which was followed by a Boehner news conference.

This week, Mr. Obama will gather with governors and make a speech to the Business Roundtable, a lobby group representing big business, to urge lawmakers to embrace his tax proposals. Mr. Boehner will meet with governors and rally with small-business owners against tax increases.

The debate over how to raise taxes on the wealthy is part of the broader discussion over how to reduce federal borrowing. At the end of the year, tax rates are scheduled to increase on nearly all Americans, raising hundreds of billions of dollars of new tax revenue but costing the average family about $2,000 a year in take-home pay.

Mr. Obama wants to freeze tax rates for most Americans while allowing them to rise as high as 39.6 percent for the wealthiest people -- defined as earning over $250,000 per year. That will reduce federal borrowing by about $1 trillion over a decade.

"There's just no reason why 98 percent of Americans have to see their taxes go up because some members of Congress on the Republican side want to block tax rate increases for 2 percent of the wealthiest Americans," Mr. Geithner said Sunday.

Next year, Mr. Obama wants to overhaul the tax code to clean out deductions and loopholes that benefit the rich and sectors such as the financial industry. That, the administration estimates, would generate about $600 billion in savings over a decade.

Meanwhile, in the wake of Republicans' electoral defeat last month, they have acknowledged that the wealthy will have to pay more. They want to raise about $800 billion in new revenue over the decade through an overhaul of the tax code that limits deductions. Higher rates, they say, will dissuade work and investment and hurt small businesses.

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