* Signs of headway in talks, but deal still uncertain
* Obama lowers revenue demand to $1.4 trillion
* Boehner aide says that's not low enough
* Reid says difficult to do deal by Christmas
By Richard Cowan and David Lawder
WASHINGTON, Dec 11 Negotiations to avert the
"fiscal cliff" ahead of a year-end deadline intensified as
President Barack Obama and U.S. House of Representatives Speaker
John Boehner spoke by phone on Tuesday after exchanging new
It was latest sign of possible progress in efforts to avoid
the automatic steep tax hikes and spending cuts set for Jan. 1
unless Congress intervenes.
White House and congressional aides confirmed that Obama
gave Boehner a revised offer in talks on Monday, and the
Republican responded with a counterproposal on Tuesday.
In his proposal, Obama slightly reduced his demand for the
amount of new tax revenue he was seeking to $1.4 trillion from
$1.6 trillion over 10 years, congressional aides said. Boehner
was no happier with that number, an aide said.
After getting the new offer, Boehner took to the House floor
on Tuesday to demand that Obama give more details on the
spending cuts the White House would accept in any final deal.
"We're still waiting for the White House to identify what
spending cuts the president is willing to make as part of the
balanced approach that he promised the American people," Boehner
The White House fired back that the administration had
submitted extensive proposals to reduce spending but Republicans
had not offered specifics on increasing revenues.
"There is a deal out there that's possible," White House
spokesman Jay Carney told reporters. It could include reduced
spending, more revenues and tax reform as long as Republicans
accepted higher tax rates on the wealthiest Americans, he said.
"We do believe the parameters of a compromise are pretty
clear," Carney said.
In an interview with ABC News, Obama said he expected a deal
before the end of the year.
"I'm pretty confident that Republicans would not hold
middle-class taxes hostage to trying to protect tax cuts for
high-income individuals," Obama said in the interview. "I don't
think they'll do that."
Obama and Boehner have each proposed cutting deficits by
more than $4 trillion over the next 10 years, but they differ on
how to get there. Economists have warned that failure to strike
a deal could send the economy back into a recession.
Obama and Democrats demand that tax rates rise for the
wealthiest 2 percent of Americans. Republicans want existing
lower rates continued for all brackets and prefer to raise more
revenue by eliminating tax loopholes and reducing deductions.
Republicans also want deeper spending cuts than those sought
by Obama and fellow Democrats, particularly on social
entitlement programs like the government-funded Medicare and
Medicaid healthcare plans.
"I'm an optimist. I'm hopeful we can reach an agreement,"
Boehner said during his speech on the House floor.
But Senate Democratic leader Harry Reid said it would be
difficult to reach an agreement before Christmas.
"Until we hear something from Republicans, there's nothing
to draft," Reid told reporters, referring to writing legislation
based on a deal. "It's going to be extremely difficult to get it
done before Christmas."
Boehner spokesman Michael Steel said the counteroffer from
Boehner would achieve tax and entitlement reforms that would
solve the looming debt crisis, but he offered no more details.
Stocks rose on Tuesday, with the S&P 500 reaching its
highest close since Election Day. Markets endured a sharp
selloff after the Nov. 6 re-election of Obama, as investors
focused on the fiscal cliff concerns.
"I guess in our own dysfunctional way, there is progress,"
said Frank Davis, director of sales and trading at LEK
Securities in New York. "Since conversations are occurring, it
clarifies at least they are taking some action. My personal gut
is they'll jostle this into the holiday week and try to do a
FRAMEWORK FOR A DEAL
While senior figures from both parties caution they are far
from a deal, a softening of partisan rhetoric in recent days and
the increased frequency of talks has created speculation that
negotiations are going well.
If there is a fiscal cliff deal, congressional leaders will
have to decide the most efficient way to move the legislation
forward. Aides said those decisions had not been made as
negotiators are still focused on the elements of a possible
The most frequently discussed scenario involves Democrats
getting the higher rates on the top earners in exchange for
significant concessions on reducing costs in entitlement
programs. The two parties could then work together next year on
comprehensive tax reform aimed at creating more revenues, in
part by eliminating some tax breaks.
Adding pressure on Republicans to give some ground on taxes,
a group of high-profile chief executives called for a deal that
could include raising tax rates on the wealthiest Americans.
The group had previously backed extending tax cuts for all
Americans as a stopgap solution.
"We recognize that part of that solution has to be tax
increases," said David Cote, the chief executive of Honeywell
who has been active in Washington on fiscal issues. About 160
CEOs signed the letter under the umbrella of the Business
Roundtable, a non-partisan group of U.S. chief executives.
Complicating the talks is the looming need for an increase
in U.S. borrowing authority that Obama wants before Congress
wraps up for the year. Without the authority, the government
will hit its $16.4 trillion borrowing limit by year's end and
run out of steps to stave off default by mid-February.
Obama has asked for the power to raise U.S. borrowing
authority without legislation from Congress in hopes of avoiding
another confrontation with Republicans like the 2011 showdown
that led to an embarrassing downgrade of the U.S. credit rating.
Also in the mix is a payroll tax "holiday" set to expire,
which, if not extended, will quickly reduce the take-home pay of
a large segment of the U.S. workforce.
The holiday, now in its second year, has been providing
workers with an average of about $1,000 a year in extra cash.
Significant divisions remain on the payroll tax question in part
because it funds the Social Security retirement program.