President Barack Obama warned Republicans Wednesday not to hold the US economy hostage in a new feud over raising government borrowing, as battle lines hardened in the “fiscal cliff” showdown.
Obama and Republican foes accused one another of intransigence as vital hours ticked away without serious negotiations on averting a year-end tax and spending crunch that could trigger a new recession without an 11th hour deal.
The president courted CEOs in Washington, and pledged to reject any deal that let Republicans wield new leverage next year over lifting the US debt ceiling — the amount the government can borrow to operate and pay its debts.
The New York Times had earlier reported that Republicans may bow to his demand to hike taxes on the rich this month, but then renew their austerity crusade when Obama asks for the debt ceiling to be raised in early 2013.
“We are not going to play that game next year,” Obama told the Business Roundtable.
“That is a bad strategy for America, it is a bad strategy for your businesses and it is not a game I will play.”
Republicans want to make raising the debt ceiling conditional on Obama agreeing to massive cuts in social programs. A similar showdown last year spooked global markets when America came close to defaulting on its debt.
The Treasury says the United States will hit its statutory borrowing limit of $16.39 trillion near the end of the year, but can take emergency measures to keep funds flowing for a few months.
Obama has proposed a new system whereby the president can raise the debt ceiling without asking Congress first — an idea Republicans have rejected.
The White House meanwhile insisted there would be no deal on averting the fiscal cliff without a rise in the top income tax rate for the richest Americans — upon which Obama based his re-election campaign.
Republicans have said they are ready to raise revenues — but only through closing tax loopholes and capping deductions — a solution Obama says will raise insufficient funds to make a significant impact on the deficit.
Taxes will go up on all Americans on January 1 when rate cuts dating from the George W. Bush era expire.
Obama wants to extend the tax cuts for the middle class and to raise $1 trillion to pay down the deficit by letting the top rate rise from 35 percent to 39.6 percent for families earning more than $250,000 a year.
House Speaker John Boehner wants to extend all the tax cuts and told fellow Republicans on Wednesday that Obama “has a responsibility to put forward a plan that can pass both chambers of Congress,” an official who was at a caucus meeting said.
Obama presented an initial offer last week, while Boehner presented a counter-bid. Both have been rejected outright by the other side.
“We can’t sit here and negotiate with ourselves,” Boehner told reporters, just 27 days before the US economy could plunge over the cliff.
The Republicans’ proposal would raise $800 billion in new revenue by closing tax loopholes and ending some deductions as a sign they are “ready and eager” to negotiate in good faith.
That’s part of the broader $2.2 trillion Republican package, including $1.2 trillion sliced from federal spending, with half of that coming directly from Medicare, the federal health program for the elderly.
Boehner insisted that Obama’s plan, including $1.6 trillion in new taxes and $600 billion in spending cuts, “couldn’t pass either house of the Congress.”
Kevin McCarthy, the House’s number three Republican, said Obama must show leadership.
“I think the next 72 hours are critical. If he sits back and continues to play politics, that will be your answer to where we’re going,” McCarthy said.
Some Republicans have broken ranks with the party and said they could agree to raising tax rates for the wealthy.
“Personally, I know we have to raise revenue; I don’t really care which way we do it,” Republican Senator Tom Coburn said Wednesday on MSNBC.
“Actually, I would rather see the rates go up than do it the other way (by capping deductions), because it gives us greater chance to reform the tax code and broaden the base in the future.”
A poll in Tuesday’s Washington Post showed that 53 percent of Americans would blame Republicans if the economy tumbles over the cliff, compared to 27 percent who would blame Obama and Democrats.