Obama invites congressional leaders to seek 'cliff' compromise

WASHINGTON -- President Barack Obama will meet with congressional leaders at the White House today in search of a compromise to avoid a year-end "fiscal cliff" of across-the-board tax increases and deep spending cuts.

The development capped a day of urgency in which Obama returned early from a Hawaiian vacation while lawmakers snarled across a partisan divide over responsibility for gridlock on key pocketbook issues. Speaker John Boehner called the House back into session for a highly unusual Sunday evening session.

Adding to the woes confronting the middle class was a pending spike of $2 per gallon or more in milk prices if lawmakers failed to pass farm legislation by year's end.

Four days before the deadline, the White House disputed reports that Obama was sending lawmakers a scaled-down plan to avoid the fiscal cliff of tax increases and spending cuts.

Administration officials confirmed the Friday meeting at the White House in a bare-bones announcement that said the president would "host a meeting."

An aide to Senate Republican Leader Mitch McConnell said the Kentucky lawmaker "is eager to hear from the president."

A spokesman for House Speaker John Boehner issued a statement that said the Ohio Republican would attend and "continue to stress that the House has already passed legislation to avert the entire fiscal cliff and now the Senate must act."

While there was no guarantee of a compromise, Republicans and Democrats said privately elements of any agreement would likely include an extension of middle class tax cuts with increased rates at upper incomes, as well as cancellation of the scheduled spending cuts. An extension of expiring unemployment benefits, a reprieve for doctors who face a cut in Medicare payments and possibly a short-term measure to prevent dairy prices from soaring could also become part of a year-end bill, they said.

That would postpone politically contentious disputes over spending cuts for 2013.

Senate leaders remain ready to seek a last-minute agreement. Yet there was no legislation pending and no sign of negotiations in either the House or the Senate on a bill to prevent the tax hikes and spending cuts that economists say could send the economy into a recession.

Senate Majority Leader Harry Reid, D-Nev., accused Boehner of running a dictatorship, citing his refusal to call a vote on legislation to keep taxes steady for most while letting them rise at upper incomes. The bill "would pass overwhelmingly," Reid predicted, and said the Ohio Republican won't change his mind because he fears it might cost him re-election as speaker when the new Congress convenes next week.

Boehner seems "to care more about keeping his speakership than keeping the nation on a firm financial footing," Reid said.

A few hours later, McConnell expressed frustration and blamed the standoff on Obama and the Democrats. "Republicans have bent over backward. We stepped way, way out of our comfort zone," he said, referring to GOP offers to accept higher tax rates on some taxpayers.

"We wanted an agreement, but we had no takers. The phone never rang, and so here we are five days from the new year and we might finally start talking."

Still, McConnell warned: "Republicans aren't about to write a blank check for anything the Democrats put forward just because we find ourselves at the edge of the cliff."

Brendan Buck, a spokesman for Boehner, responded in a similar vein to Reid's comments. "Harry Reid should talk less and legislate more if he wants to avert the fiscal cliff. The House has already passed legislation to do so," he said, referring to a measure that extends existing cuts at all income levels.

Addressing the GOP rank and file by conference call, Boehner said the next move is up to the Senate, which has yet to act on House-passed bills to retain expiring tax cuts at all income levels and replace across-the-board spending cuts with targeted savings aimed largely at social programs.

"The House will take this action on whatever the Senate can pass -- but the Senate must act," he said, according to a participant in the call.

Boehner told Republican lawmakers the House would convene on Sunday evening. Rep. Tom Cole, R-Okla., an ally of the speaker, quoted him as having said "he didn't really intend to put on the floor something that would pass with all the Democratic votes and few of the Republican votes."

The risk of higher milk prices stems from the possibility that existing farm programs will expire at year's end, and neither chamber of Congress has scheduled a vote on even a temporary extension to prevent a spike. There have been unverified estimates that the cost to consumers of a gallon of milk could double without action by Congress.

The president flew home from Hawaii overnight after speaking with top congressional leaders.

Before leaving the White House last Friday, the president had called on lawmakers to pass scaled-down legislation that prevents tax increases for the middle class, raises rates at upper incomes and renews expiring unemployment benefits for the long-term jobless. He said he still supports a more sweeping measure to include spending cuts to reduce deficits, but said they could wait until the new year.

That capped an unpredictable week in which Boehner pivoted away from comprehensive deficit reduction talks with Obama to an aborted attempt to push legislation through the House that retained existing tax levels except above $1 million. Anti-tax Republicans rebelled at raising rates on million-dollar earners, and Boehner backpedaled and canceled the planned vote.

Without congressional action, current tax rates will expire on Dec. 31, resulting in a $536 billion tax increase over a decade that would touch nearly all Americans. In addition, the military and other federal departments would have to begin absorbing about $110 billion in spending cuts.

Failure to avoid the "fiscal cliff" doesn't necessarily mean tax increases and spending cuts would become permanent, since the new Congress could pass legislation canceling them retroactively after it begins its work next year.

But gridlock through the end of the year would mark a sour beginning to a two-year extension of divided government that resulted from last month's elections in which Obama won a new term and Republicans retained their majority in the House.

The tax issue in particular has been Obama's first test of muscle after his re-election in November. He ran for a new term calling for higher taxes on the wealthy, and postelection public opinion polls show continued support for his position.

Boehner's decision to support higher rates on million-dollar earners marked a significant break with long-standing GOP orthodoxy, but the resistance among his rank and file so far has trumped him as well as any mandate the president claims.