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WASHINGTON (Reuters) - House of Representatives Speaker John Boehner said on Thursday that "fiscal cliff" talks with the White House had made no substantive progress and criticized President Barack Obama and Democrats for failing to get serious about including spending cuts in a final deal.
Boehner said he was "disappointed" after a phone call with Obama on Wednesday night and a meeting with Treasury Secretary Timothy Geithner on Thursday moved the two sides no closer to an agreement to avert the tax hikes and spending cuts that will be triggered at the start of 2013 unless Congress intervenes.
"I'm disappointed in where we are and disappointed in what's happened over the last couple of weeks," Boehner, of Ohio, told reporters after a private session with Geithner at the Capitol.
"No substantive progress has been made in the talks between the White House and the House over the last two weeks," he said. "There's been no serious discussion of spending cuts so far, and unless there is, there's a real danger of going off the fiscal cliff."
Markets dipped briefly into negative territory on Boehner's comments before finishing higher, continuing a pattern of gyration tied to the latest utterances about the outlook for an agreement to avert the fiscal cliff.
"Until the fiscal cliff is solved, the madness of the crowd will not subside," said James Dailey, portfolio manager at TEAM Asset Strategy Fund in Harrisburg, Pennsylvania.
The tone in Washington was in sharp contrast to the one expressed on November 16, the last time Obama met with congressional leaders. Boehner then stood next to Democratic leaders and voiced optimism they could find common ground in fiscal cliff negotiations.
Thursday, as Obama prepared for a campaign-style trip Friday to sell his argument to the public, Boehner said the last thing the country needs is "a victory lap" by the president.
There were also signs that the debate was about to get more, rather than less, complicated thanks to a renewed fight over raising the U.S. debt ceiling. That explosive issue, which could have been handled separately in the spring, was thrust into the fiscal cliff fray on Thursday in an exchange between Republicans and Democrats.
Boehner said any debt limit increase needed to be matched or exceeded by spending cuts to be proposed by Obama as part of the cliff negotiations.
White House spokesman Jay Carney responded by demanding that Congress go ahead and raise the debt ceiling as part of any year-end deal to avoid the cliff. To do otherwise, he said, would be "deeply irresponsible."
Geithner, for his part, requested in his meetings on Capitol Hill that the president be given new powers to raise U.S. borrowing authority, according to a Republican aide. Currently, Congress must pass legislation.
The last partisan fight over the nation's borrowing limit in 2011 was settled by a law that led directly to the fiscal cliff and to a downgrade of the government's credit rating.
Geithner, Obama's top negotiator in the talks, met with congressional leaders from both parties at the Capitol as the end-of-year deadline approaches to avoid the onset of $600 billion in tax hikes and spending cuts that analysts warn could push the U.S. economy back into recession.
The immediate issue is whether the tax cuts that originated in the administration of former President George W. Bush should be extended beyond December 31 for all taxpayers including the wealthy, as Republicans want, or just for taxpayers with income under $250,000, as Obama and his fellow Democrats want.
Republicans have said they are willing to consider new ways to raise revenue as long as Democrats and Obama agree to accompany it with significant spending cuts, particularly to entitlement programs like the government-sponsored Medicare and Medicaid healthcare plans.
Boehner said Geithner and the administration had not offered any new plans during the meeting to break the impasse, while Senate Democratic leader Harry Reid said Democrats were still waiting for a "reasonable" proposal from Republicans.
In the meetings with Republicans, Geithner set forth a series of proposals - most taken straight out of Obama's budget proposal last February - that include $1.6 trillion in new revenue increases and Medicare savings of more than $300 billion that mainly would hit healthcare providers.
The White House, according to the Democratic aide, also called for another extension of the 2 percentage point payroll tax cut that is due to expire on December 31. In recent weeks, Democrats in Congress had been talking about growing support for the tax cut extension to help stimulate the economy.
One of the Republican aides said the White House wants $75 billion in additional economic stimulus, which likely would consist of previously proposed White House initiatives, the Democratic aide said.
Just as Boehner begins serious wrestling with the White House, there were indications that his hand may be weakening with a small but growing number of House Republicans saying they believe some type of tax increase on the rich will be part of a fiscal cliff deal.
"I wouldn't have a problem with letting those tax rates go up," if they are coupled with spending cuts, Representative Mike Simpson of Idaho told Reuters on Thursday.
A similar sentiment expressed by about a half-dozen House Republicans in recent days likely will increase pressure on Boehner to reach a bipartisan agreement with Obama and his fellow Democrats.
In the absence of progress, or any realistic understanding as to when or if the cliff might be averted or a deficit reduction agreement reached, prodding has started to come on a regular basis from business leaders as well as Federal Reserve officials.
New York Fed President William Dudley and Richard Fisher of the Dallas Fed, highlighted the problems that U.S. lawmakers were causing for both hiring and the economy with each day they fail to strike a deal to avoid a pending fiscal crisis.
Dudley said on Thursday that if it is not addressed, the economic contraction is likely to be larger than normal because interest rates are so low.
Additional reporting by Rachelle Younglai, Thomas Ferarro and Kim Dixon; Writing by John Whitesides and Fred Barbash; Editing by Peter Cooney and Eric Walsh