No deal in sight 1 month before U.S. ‘fiscal cliff’

WASHINGTON (AP) ― Washington politicians have one month to step back from the so-called “fiscal cliff,” across-the-board tax hikes and austerity-driven spending cuts likely to return the country to recession, and a top Republican declares there has been no real progress after two weeks of talks between President Barack Obama and a divided Congress.

The president, who has called for settling the issue before Christmas, visited a Philadelphia suburb to campaign for his demand that any deal include higher tax rates on U.S. couples earning more than $250,000 a year. He also wants to keep in place the smaller tax burden that lower income earners have had for about a decade.

Speaking at a toy factory, Obama said allowing taxes to rise for the middle class would amount to a “lump of coal” for Christmas.

Republican House Speaker John Boehner argued that Obama’s latest offer ― to raise revenue by $1.6 trillion over the next decade ― would be a “crippling blow’’ to an economy that is still struggling to find its footing. The Ohio Republican told reporters he would continue working with Obama on the issue but gave a gloomy assessment of the talks so far.

“There’s a stalemate. Let’s not kid ourselves,’’ Boehner said. “Right now, we’re almost nowhere.”

Democrats have said that any delay was the fault of Republicans who refuse to accept Obama’s call to raise tax rates on the richest Americans.

Obama’s speech came a day after his administration proposed nearly $1.6 trillion in new tax revenue over 10 years, $600 billion in savings from changes in mandatory spending programs including Medicare, and $200 billion in spending ranging from public works projects to help for the unemployed and struggling homeowners, according to administration officials.

Republicans rejected the offer as unreasonable. Republicans have said they are open to new tax revenue but not higher rates.

The austerity measures that automatically would take effect Jan. 1 unless a deal is made is the looming punishment for Washington’s inability, or unwillingness, in recent years to deal decisively with the country’s spending far more than it has been taking in.

Politicians in both major U.S. parties are showing no signs of giving up on the deep partisan divisions that have crippled legislative action in Washington despite Obama’s strong victory for a second White House term.

White House officials believe Obama’s trip Friday will build momentum for his case, even as Republicans describe it as an irritant and an obstacle to productive talks.

Obama said he believed both parties “can and will work together” to reach an agreement to get its long-term deficit under control “in a way that’s balanced and is fair.’’

He said both sides need to “get out of our comfort zones’’ to reach an agreement.

Obama toured and spoke at the Rodon Group manufacturing facility, showcasing the company as an example of a business that depends on middle-class consumers during the holiday season. The company manufactures parts for K’NEX Brands, a construction toy company.

Administration officials said the White House offer, presented to Hill Republicans by Treasury Secretary Tim Geithner, constituted much of what Obama has previously suggested in budget proposals and during the campaign.

Under the administration’s plan, the new tax revenue would include $950 billion generated by raising taxes on families with incomes over $250,000 and by closing certain tax loopholes. The remainder would be achieved through an overhaul of the tax system next year and would not become effective until 2014.

The uncertainty over whether the U.S. can resolve the critical budget deadlock is beginning to increase jitters in stock markets in Europe, where eurozone countries have already returned to recessionary economies.

European investor sentiment had been buoyed this week by upbeat reports on the U.S. economy, including economic growth and consumer confidence. But markets failed to sustain their rally Friday as trading became increasingly focused on the difficult talks between the White House and Congress.

Economists warn that sending the U.S. economy over the “fiscal cliff’’ would trigger a recession and cause a spike in already stubbornly high unemployment.

To avoid the danger, Obama and Congress are hoping to devise a plan that can reduce future deficits by as much as $4 trillion in a decade, cancel the tax increases and automatic spending cuts and expand the government’s ability to borrow beyond the current limit of $16.4 trillion.

Obama’s proposal, which the administration has also described to business and labor leaders, would require Congress and the White House to identify a “down payment’’ of cuts and tax loophole closings by the end of this year that would buy Congress and the president time to negotiate a tax overhaul and changes in entitlement programs between now and Aug. 1.

One new feature in the Geithner plan is a call for increasing the nation’s debt limit without the need for congressional approval. Under last year’s debt ceiling deal, Obama simply had to notify Congress that he was raising the debt ceiling, a move that could be blocked only if both houses of Congress passed resolutions of disapproval that Obama could veto. The administration wants a permanent extension of the debt ceiling with a similar legislative arrangement and with no offsetting spending cuts, as demanded by Republicans.

By counting $1 trillion in spending cuts agreed to last year, claiming $800 billion saved this year and over the next decade because of troop drawdowns in Iraq and Afghanistan and estimating $600 billion in lower interest payments on the national debt, the administration places its total deficit reduction over 10 years nearly $4.4 trillion.

In political terms, the White House proposal are nearly opposite what Republicans earlier lay down as their first offer, including a permanent extension of income tax cuts at all levels.