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Boehner says next move up to Obama in ‘fiscal cliff’ stalemate

U.S. House Speaker John Boehner (R-OH) arrives to speak to the media on the "fiscal cliff" on Capitol Hill in Washington, December 21, 2012. Boehner said on Friday that congressional leaders and President Barack Obama must try to move on from House Republicans' failed tax plan and work together to resolve the looming U.S. "fiscal cliff." REUTERS/Yuri Gripas


U.S. House Speaker John Boehner, weakened by a failure to unite his Republican party around raising taxes on millionaires, says he will continue discussions with the White House on resolving the "fiscal cliff," although he insists that it is Democrats who now must make the next move.

U.S. stock markets sank Friday as traders reacted negatively to Washington's confusion over the next move in high-stakes budget negotiations. After suffering a humiliating defeat on Thursday night, Mr. Boehner shuttered the House of Representatives until after Christmas. He offered no path forward Friday, saying "God only knows" how Democrats and Republicans might bridge their differences over tax rates and entitlement spending.

"Republicans don't want taxes to go up," Mr. Boehner said at a news conference. "But we only run the House. Democrats continue to run Washington."

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The "cliff" represents some $600-billion (U.S.) in fiscal austerity measures scheduled for 2013, which most economists say would cause a recession if left unchanged. The beginning of the New Year has emerged as an arbitrary deadline for securing an agreement that would soften the blow of the tax increases and spending cuts, but also would commit legislators to a budget deficit that has exceeded $1-trillion in each of four consecutive years.

In New York, the Dow Jones Industrial Average, the Standard & Poor's 500 Index and the Nasdaq all had declined by more than 1 per cent at midday Friday, even as new economic data showed U.S. personal spending rose 0.4 per cent in November, a decent reading, and personal income increased 0.6 per cent, more than most Wall Street analysts were expecting.

"When you kick the chair out from the market's beliefs, bad things tend to happen," Alan Blinder, an economics professor at Princeton University and a former vice-chairman of the Federal Reserve, said Friday on a conference call hosted by Foreign Affairs magazine.

Mr. Boehner appeared in front of reporters in Washington about 14 hours after suffering one of the most embarrassing defeats of his long political career.

Seeking leverage in talks to avert the fiscal austerity measures scheduled to take effect in the New Year, Mr. Boehner on Thursday had planned to hold a vote on his "Plan B," which would have shielded every American who makes less than $1-million from broad tax increases in 2013. President Barack Obama wants tax rates to rise on incomes above $400,000.

However, the gambit failed because dozens of anti-tax Republicans refused to endorse a tax increase even on the country's wealthiest people. Mr. Boehner, who predicted earlier in the week that his initiative would pass, withdrew the bill before a vote. The inability to unite the Republican caucus called into question Mr. Boehner's hold on the speakership, which will be tested when the newly elected congressmen and women assemble for the first time on Jan. 3.

Mr. Boehner rejected the suggestion that he was at risk of losing the Speaker's gavel. He also rejected the notion that he was giving up on budget talks. He said his members are on notice that they could be recalled to Washington at any moment.

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Still, the collapse of Mr. Boehner's "Plan B" has left Washington in a state of chaos. The White House was silent on the "fiscal cliff" Friday, although Mr. Obama's spokesman said in a statement on Thursday night that the President is committed to working with congressional leaders to get an agreement. The Senate also was set to adjourn until Dec. 27.

Senate Majority Leader Harry Reid criticized Mr. Boehner for "wasting a week" on a "political stunt" and called on him so hold a vote on a Senate-backed bill that would protect households that make less than $250,000 a year from tax increases.

The top Republican in the Senate, Minority Leader Mitch McConnell, countered by calling on Mr. Reid to take up a House initiative that would extend current tax rates for a year while legislators overhauled the tax code, an exercise that could result in the revenue increases that Mr. Obama ultimately is seeking.

"Let's get this done," Mr. McConnell said. "It's called legislating. It's what we used to do in Congress."

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About the Author
Senior fellow at the Centre for International Governance Innovation

Kevin Carmichael is a senior fellow at the Centre for International Governance Innovation, based in Mumbai.Previously, he was Report on Business's correspondent in Washington. He has covered finance and economics for a decade, mostly as a reporter with Bloomberg News in Ottawa and Washington. A native of New Brunswick's Upper St. More


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