President Barack Obama walks off Marine One with daughters Sasha, right, and Malia.

Paul Beaty, Associated Press

President Obama, congressional GOP leaders call for compromise

  • New York Times
  • November 8, 2012 - 8:11 AM


Newly re-elected, President Obama moved quickly Wednesday to open negotiations with congressional Republican leaders over the main unfinished business of his term -- a deficit-reduction deal to avert a looming fiscal crisis -- as he began preparing for a second term that will include significant Cabinet changes.

Obama, while still at home in Chicago at midday, called Speaker John Boehner in what was described as a brief and cordial exchange on the need to reach some budget compromise in the lame-duck session of Congress starting next week. Later at the Capitol, Boehner responded before assembled reporters with his most explicit and conciliatory offer to date on Republicans' willingness to raise tax revenues, but not top rates, as part of a spending-cut package.

"Mr. President, this is your moment," said Boehner, a day after congressional Republicans suffered election losses but kept their House majority. "We're ready to be led -- not as Democrats or Republicans, but as Americans. We want you to lead, not as a liberal or a conservative, but as president of the United States of America."

His statement came a few hours after Sen. Harry Reid, leader of a Democratic Senate majority that made unexpected gains, extended his own olive branch to the opposition. While saying that Democrats would not be pushed around, Reid, a former boxer, added, "It's better to dance than to fight."

Their remarks followed Obama's own overture in his victory speech early Wednesday. "In the coming weeks and months," he said, "I am looking forward to reaching out and working with leaders of both parties to meet the challenges we can only solve together: reducing our deficit, reforming our tax code, fixing our immigration system, freeing ourselves from foreign oil."

After his speech, Obama tried to call Boehner and the Senate Republican leader, Mitch McConnell, but was told they were asleep. The efforts from both sides, after a long and exhausting campaign, suggested the urgency of acting in the few weeks before roughly $700 billion in automatic tax increases and across-the-board spending cuts take effect at year's end -- the so-called fiscal cliff. A failure to reach agreement could arrest the economic recovery.

Financial markets for months have been dreading the prospect of a partisan impasse. Stocks fell Wednesday, with the Standard & Poor's 500 Index closing down 2.4 percent. The reasons for the drop were unclear, given that stock futures did not drop significantly Tuesday night, as the election results became clear. Analysts cited fears about the economic impact of such big federal spending cuts and tax increases, but also about new economic troubles in Europe.

While Obama enters the next fray with heightened leverage, both sides agree, the coming negotiations hold big risks for both parties and for the president's ability to pursue other priorities in a new term, like investments in education and research, and an overhaul of immigration law.

The president flew back to Washington from Chicago late Wednesday, his postelection relief reflected in a playful race up the steps of Air Force One with his younger daughter, Sasha. At the White House, he prepared to shake up his staff to help him tackle daunting economic and international challenges. He will study lists of candidates for various positions that a senior adviser, Pete Rouse, assembled in recent weeks.

'New energy you want'

The most prominent members of his Cabinet will leave soon. Secretary of State Hillary Rodham Clinton and Treasury Secretary Timothy Geithner long ago said they would depart after the first term, and Defense Secretary Leon Panetta, previously the head of the CIA, has signaled that he wants to return to California sometime in the coming year. Also expected to depart is David Plouffe, one of the president's closest confidants. Obama is expected to reshuffle his inner circle and his economic team as he accommodates the changes. "They've been thinking about this for some time, and they're going to have a lot of positions to fill at the highest levels," said former Sen. Tom Daschle, who has close ties to the White House.

Presidents Bill Clinton and George W. Bush ended up replacing about half of their Cabinet members between terms, and Obama could end up doing about the same. There is talk about bringing in Republicans and business executives to help rebuild bridges to both camps.

John Podesta, a chief of staff for Clinton and Obama's transition adviser, said, "There's a certain amount of new energy you want to inject into any team."

It may be weeks before Obama starts making personnel announcements. His first priority is policy, and its politics -- positioning for the budget showdown in the lame-duck session, to try to avoid the fiscal cliff by agreeing with Republicans to alternative deficit-reduction measures.

Raising federal revenues

If Obama got a mandate for anything after a campaign in which he was vague on second-term prescriptions, he can and will claim one for his argument that wealthy Americans like himself and his vanquished Republican rival, Mitt Romney, should pay higher income taxes. That stance was a staple of Obama's campaign stump speeches. And most voters, in surveys of those leaving the polls, agreed with him.

Specifically, Obama has called -- over Republicans' objections -- for extending the Bush-era income tax cuts, which expire Dec. 31, only for households with taxable income below $250,000 a year.

"This election tells us a lot about the political wisdom of defending tax cuts for the wealthy at the expense of everything else," a senior administration official said.

But Boehner sought to avoid a White House tax trap that would have Republicans boxed in as defenders of the wealthy. Speaking for Republicans after a conference call with his colleagues, Boehner said he was ready to accept a budget deal that raised federal revenues, but not the top rates on high incomes. And the deal, he said, also would have to overhaul both the tax code and programs like Medicare and Medicaid.

Instead of allowing the top rates to go up, which Republicans say would harm the economy, Boehner said Washington should end some deductions and loopholes to raise revenues.

The economic growth that would result from a significant deficit reduction compromise would bring in additional revenues as well, he said.

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