* Lawmakers increasingly look toward retroactive fix
* Stock lower in early trading
By Fred Barbash
WASHINGTON, Dec 28 President Barack Obama and
congressional leaders were to meet on Friday for the first time
since November with no sign of progress in resolving their
differences over the federal budget and low expectations for a
"fiscal cliff" deal before Jan. 1.
Instead, members of Congress are increasingly looking at the
period immediately after the Dec. 31 deadline to come up with a
retroactive fix to avoid the steep tax hikes and sharp spending
cuts that economists have said could plunge the country into
With taxes on all Americans set to rise when rates
established under former President George W. Bush expire on Dec.
31, lawmakers would be able to come back in January and take a
more politically palatable vote to cut some of the tax rates.
U.S. stocks fell on Friday, with the Dow Jones industrial
average dropping 0.48 percent as investors fretted about the
lack of certainty.
But some in the market were resigned to Washington going
beyond the New Year's Day deadline, as long as a serious
agreement on deficit reduction comes out of the talks in early
"Regardless of whether the government resolves the issues
now, any deal can easily be retroactive. We're not as concerned
with Jan. 1 as the market seems to be," said Richard Weiss, a
Mountain View, California-based senior money manager at American
The new factor in the mix was involvement by Republican
Senate Minority Leader Mitch McConnell of Kentucky, who held
conversations with Obama this week and said he expected a new
proposal from the president that he would consider.
The White House spent much of Thursday stifling expectations
for any new offer from Obama, beyond the limited fallback plan
he outlined in vague terms on Dec. 21, which would protect what
he described as "middle class Americans" from the tax hikes,
extend unemployment insurance and lay the "groundwork for
further work" on deficit reduction and tax reform.
The major sticking point on taxes is Republican opposition
to hikes on anyone, particularly in the absence of heavy cuts in
spending for so-called entitlement programs such as Medicare and
Medicaid, the government-run health programs for senior citizens
and the poor.
Democrats in Congress want to keep lower tax rates for most
Americans but raise them on those earning above $250,000 a year.
"The wealthy have got to kick in," Senator Debbie Stabenow,
a Michigan Democrat, said Friday on CNN. "The tough part is in
the House, where they have taken this very extreme position" of
"protecting the wealthy at all costs," she said.
"It's feeling very much to me like an optical meeting than a
substantive meeting," said Republican Senator Bob Corker of
Tennessee, noting that it was not a sign of urgency to set a
meeting for mid-afternoon with a deadline just days away.
"Any time you announce a meeting publicly in Washington,
it's usually for political theater purposes," Senator Lindsey
Graham, a South Carolina Republican, said on Thursday on Fox
"When the president calls congressional leaders to the White
House, it's all political theater or they've got a deal. My bet
is all political theater," said Graham, adding that he did not
believe an agreement could be reached before the deadline.