Obama: He and Boehner 'pretty close' to a deal

WASHINGTON (AP) - Optimistic despite a tightening deadline, President Barack Obama says he and Speaker John Boehner are "pretty close" to a grand fiscal deal that would avoid a first-of-the-year shock to the economy, but says congressional Republicans "keep on finding ways to say no as opposed to finding ways to say yes."

Obama cast a resolution to the "fiscal cliff" as a matter of political will. He said in the aftermath of the massacre of school children in Connecticut, the nation deserves a compromise by its political leaders.

"Goodness, if this past week has done anything, it should just give us some perspective," he said. And he urged lawmakers to "peel off the partisan war paint" and strike a deal.

Obama spoke to reporters at the White House after announcing an administration-wide response to Friday's shooting at an elementary school in Newtown that killed 26 people including 20 first graders.

His comments came shortly after the White House threatened to veto Boehner's backup plan for averting the "fiscal cliff." Boehner's measure, a so-called Plan B, would block tax increases from being triggered Jan. 1 on everyone but those whose incomes exceed $1 million.

Boehner is planning a House vote on his proposal on Thursday, hoping it would raise pressure on President Barack Obama to make concessions as both sides continue reaching for a bipartisan deal on averting the "fiscal cliff." Without an agreement among lawmakers, broad tax increases on nearly all taxpayers and budget-wide spending cuts will be triggered in early January.

Obama, however, dismissed Boehner's proposal, saying it would not provide unemployment insurance for 2 million jobless Americans and would result in higher taxes for families that benefit from various tax credits.

"That violates the core principles that were debated during the course of this election and that the American people determined was the wrong way to go," Obama said. Instead, Obama said, he and Boehner in their own talks had moved significantly toward each other before talks reached a lull on Tuesday.

"What separates us is probably a few hundred billion dollars," Obama said. "The idea that we would put our economy at risk because you can't bridge that gap doesn't make a lot of sense."

Boehner spokesman Brendan Buck said White House opposition to the GOP backup plan "is growing more bizarre and irrational by the day." He said Republicans prefer a deficit-cutting plan that is balanced between tax increases and spending cuts, but Obama has yet to offer such a proposal.

"If Democrats disapprove of this bill, then there is a simple solution: amend it in the Senate and send it back to the House," Buck said in a written statement.

Senior administration officials said there have been no talks advancing the negotiations on a big fiscal cliff deal since Monday, after Boehner called Obama to say he was going to take a Plan B to the House. The officials spoke on condition of anonymity, citing the sensitivity of the negotiations.

In the absence of a deal with Obama, Boehner's Plan B is attracting support from Republicans eager to cast a vote preventing tax increases on as many people as possible.

Boehner's prospects for pushing Plan B through the House received a boost Wednesday when anti-tax activist Grover Norquist said the measure would not violate his anti-tax pledge, which most GOP members of Congress have signed.

Norquist said the "sole purpose" of Plan B is to prevent tax increases - not mentioning that it would allow higher taxes on people earning over $1 million, which until recently had been a non-starter among Republicans.

But Club for Growth, a conservative group that often finances challengers to Republicans it considers too moderate, urged lawmakers to oppose Plan B because it would raise taxes on the wealthy, as well as on capital gains and dividends.

Obama's latest offer - focusing tax boosts on incomes above $400,000 - would affect nearly 1.1 million taxpayers. Limiting the tax boosts to income exceeding $1 million would target just 237,000 households, according to the latest Internal Revenue Service figures for 2009.

Boehner's backup plan could serve other purposes besides letting GOP supporters vote to protect more than 99 percent of taxpayers from paying higher levies.

Allowing a vote on Plan B might increase GOP support for a negotiated compromise with Obama. Some Republicans might feel more comfortable supporting an accord with Obama - which would likely include more tax increases than they want - after being given a chance to vote for Boehner's narrower tax increase on millionaires because it would let them show voters that they preferred a smaller tax boost.

Even so, House GOP leaders are laboring to line up enough support for the backup measure in the face of conservatives reluctant to boost anyone's taxes. Even if it could survive in the House, Senate Majority Leader Harry Reid, D-Nev., has declared it dead in his chamber and now the White House has promised to veto it should it somehow reach Obama's desk.

The backup plan by Boehner would do nothing to head off deep cuts in defense and domestic programs scheduled to begin taking effect in January. And it contains none of the spending reductions that both Obama and Boehner have proposed in their efforts to strike a compromise.

"The speaker is trying to get as much leverage as he can to deal with the president," said Rep. Charles Boustany, R-La., describing the pressure Republicans were hoping it would put on the White House. But he added that he wasn't sure the plan was the best way to get that leverage.

"I'm still trying to figure that out," Boustany said.

Others were more supportive. Rep. Patrick Tiberi, R-Ohio, said Plan B would let Republicans vote to protect as many people as possible from tax hikes while leaving Democrats with the blame if it failed.

If the Senate decides not to vote on the House bill or ignores it, "That's not our problem," Tiberi said. "The ball's in Harry Reid's court."

Besides letting tax rates rise only on incomes exceeding $1 million, Boehner's Plan B also would boost the top rate on capital gains and dividends from their current 15 percent to 20 percent for earnings over $1 million, preventing higher increases. It would continue current tax levels on inherited estates - less than Obama wants - and prevent the alternative minimum tax from raising taxes owed by 28 million middle- and upper-class families.

Boehner unveiled his backup plan on Tuesday. He did so even though he and Obama have come tantalizingly close to finding a politically palatable combination of revenue increases and budget savings that could slice around $2 trillion from projected federal deficits over the coming decade.

Both sides say those efforts will continue.

Obama has reduced his demands for tax increases to $1.2 trillion over 10 years, to be imposed on incomes exceeding $400,000 annually. In so doing, the president abandoned his campaign season insistence that he would raise taxes on individuals earning over $200,000 and couples making more than $250,000.

Boehner has boosted his revenue offer to $1 trillion, including raising income tax rates on incomes over $1 million. That is a major concession from the leader of a party that has made opposition to higher rates a fundamental tenet for a quarter century.

"I think it's a mistake for the Republican Party," said Rep. Jim Jordan, R-Ohio, a leader of House conservatives. "So that's what I think a lot of members are struggling with."

Obama has also departed from his party's orthodoxy by proposing smaller annual cost-of-living increases for Social Security recipients. The new formula for measuring inflation would affect other benefit programs as well and push more people into higher income tax brackets.

The president's embrace of a plan that would over time cut Social Security benefits has aroused outcries from liberal groups that defend programs for the elderly and poor and that generally support Democrats.

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Associated Press writers Andrew Taylor, Jim Kuhnhenn and Stephen Ohlemacher contributed to this report.