State governors to meet with Obama, Boehner on "fiscal cliff"

U.S. President Barack Obama hosts a bipartisan meeting with Congressional leaders in the Roosevelt Room of White House to discuss the economy, November 16, 2012. Left of President Obama is Speaker of the House John Boehner.

WASHINGTON (Reuters) - With a few weeks remaining before the onset of "fiscal cliff," a bipartisan delegation of governors is set to meet Tuesday with President Barack Obama and congressional leaders in search of some answers about the impact of deficit reduction measures on their state budgets, which rely heavily on federal aid.

Federal grants to the states comprise about a third of state revenues in the United States, according to the Pew Center on the States.

Cutbacks in federal contracting due to the automatic budget cuts set for January 1 will also reduce employment levels regionally, with the heaviest impact expected in areas with large numbers of defense contractors.

The governors making the rounds Tuesday, who hold leadership positions in the National Governors Association, are Democrats Jack Markell of Delaware, Mark Dayton of Minnesota and Mike Beebe of Arkansas and Republican Gary Herbert of Utah, Scott Walker of Wisconsin and Mary Fallin of Oklahoma.

The so-called fiscal cliff refers to combination of government spending cuts and tax rises due to be implemented under existing law starting New Year's Day that may cut the federal budget deficit but also tip the economy back into recession.

But with Republicans and Democrats still in preliminary stages of negotiations over how to avoid the steep tax hikes and spending cuts set for the end of the year, these NGA leaders may leave frustrated, as have numerous other delegations of civic, union and business leaders trooping to Washington in the past few months.

Republicans proposed steep spending cuts on Monday but gave no ground on Obama's call to raise taxes on the wealthiest in their first formal proposal to avert the fiscal cliff.

The White House dismissed the Republican proposal within an hour of its being made public, the same treatment Republicans gave Obama's deficit reduction plan last week.

While the offers and counteroffers between Republicans and Democrats may ultimately create the conditions for actually getting in a room together and bargaining at length, so far the moves have been out in public and mostly for show.

It's "just a Kabuki theater you go through" so far, Erskine Bowles said in an interview Monday evening on PBS' "Newshour." Bowles was co-chair with former U.S. Sen. Alan Simpson of a deficit reduction commission widely praised for its recommendations two years ago but never accepted by either party.

"They're going to have to get together at some point in time when the time is right in a conference room and go through these three big items," Bowles said.

That theater is likely to continue Tuesday when Democrats in the House of Representatives begin an effort to force a vote on tax hikes on the wealthy, over the objections of the Republican-controlled House, which is not expected to bring a bill to the floor until a bargain is struck.

Under House rules, the minority Democrats would need about 26 Republican votes to succeed with their "discharge petition," and the process takes so long that it would likely be weeks before a vote would actually take place.

"We just don't know what Washington's going to do," Oklahoma Gov. Mary Fallin told The Oklahoman on the eve of her departure for Washington

The city is now awash in competing plans to cut the exploding Federal deficit.

A think tank with ties to the Obama administration laid out another one Tuesday, urging the president to go bold and seek more concessions from Republicans on tax hikes.

The $4.1 trillion deficit-cutting plan from the Center for American Progress seeks $1.8 trillion in new revenue, compared with Obama's call to raise $1.6 trillion.

It also calls for a 28 percent tax on capital gains income for high earners, whereas Obama has called for about a 24 percent tax rate, including new taxes from the healthcare overhaul.

(Editing by W Simon)