Obama, Boehner discuss fiscal cliff by phone

WASHINGTON (AP) — President Barack Obama and

House Speaker John Boehner spoke by phone Wednesday about the "fiscal


that threatens to knock the economy into recession, raising the

prospect of fresh negotiations to prevent tax increases and

spending cuts set to kick in with the new year.

Officials provided no details of the conversation, which came on the same day the president, hewing to a hard line, publicly

warned congressional Republicans not to inject the threat of a government default into the already complex issue.

"It's not a game I will play," Obama told a group of business leaders as Republicans struggled to find their footing in talks

with a recently re-elected president and unified congressional Democrats.

Among the Republicans, Sen. Tom Coburn of Oklahoma became the latest to break ranks and say he could support Obama's demand

for an increase in tax rates at upper incomes as part of a comprehensive plan to cut federal deficits.

Across the Capitol, House Majority Leader Eric Cantor said Republicans want to "sit down with the president. We want to talk

specifics." He noted that the GOP had made a compromise offer earlier in the week and the White House had rejected it.

Officials said after the talk between Obama and Boehner, R-Ohio, there was no immediate plan for a resumption of negotiations

to avert the cliff. At the same time, they said that for the first time in a few days, at least one top presidential aide

had been in touch with Republicans by email on the subject.

Each side has been declaring that the crisis can be averted if the other will give ground.

"We can probably solve this in about a week, it's not that tough," Obama said in lunchtime remarks to the Business Roundtable.

It has been several days since either the president or congressional Democrats signaled any interest in negotiations that

both sides say are essential to a compromise. Presidential aides have even encouraged speculation that Obama is willing to

let the economy go over the "fiscal cliff" if necessary and gamble that the public blames Republicans for any fallout.

Eventually, Democrats acknowledge, there

will be compromise talks, possibly quite soon, toward an agreement that

raises revenues,

reins in Medicare and other government benefit programs, and

perhaps raises the government's $16.4 trillion borrowing limit.

For now, the demonstration of presidential

inflexibility appears designed to show that, unlike two years ago, Obama

will refuse

to sign legislation extending top-rate tax cuts and also to allow

public and private pressure to build on the Republican leadership.

Treasury Secretary Tim Geithner underscored

the president's determination when he told CNBC the administration was


prepared to have the economy go over the so-called cliff if its

terms aren't met. "The size of the problem is so large that

it can't be solved without rates going up," he said.

So far, the GOP has offered to support non-specified increases to raise tax revenues by $800 billion over a decade but has

rejected Obama's demand to let the top income tax rate rise from 35 percent to 39.6 percent.

To buttress their case, Republican officials

in Congress pointed to numerous proposals that Obama has previously


that could generate the same amount of revenue he is seeking —

without raising rates. The list includes limiting the tax deductions

taken by upper-income taxpayers, raising taxes on the oil and gas

industry and curbing or eliminating the deductibility of

tax-exempt bonds.

Separately, in a bit of political theater, Senate Republican leader Mitch McConnell urged Democrats to allow a vote on Obama's

current plan, which calls for a $1.6 trillion tax increase over a decade, in an attempt to show it lacks support.

The majority leader, Democratic Sen. Harry Reid of Nevada, refused.

The "fiscal cliff," with its year-end

deadline, refers to increases that would affect every worker who pays

federal income

tax, as well as spending cuts that would begin to bite defense and

domestic programs alike. Economists in and out of government

say the combination carries the risk of a new recession, at a time

the economy is still struggling to recover fully from the

worst slowdown in decades.

Obama delivered his latest warning at the meeting of the Business Roundtable a few blocks from the White House.

He said he was aware of reports that Republicans may be willing to agree to higher tax rates on the wealthy, then seek to

extract spending cuts from the White House in exchange for raising the government's borrowing limit.

"That is a bad strategy for America, it's a bad strategy for your businesses and it's not a game that I will play," Obama

said, recalling the "catastrophe that happened in August of 2011."

That was a reference to a partisan standoff that led the Treasury to the brink of the nation's first-ever default and prompted

Standard & Poor's to reduce the rating for government bonds.

Avoiding that crisis led directly to the current standoff, since part of the compromise then was to set in motion the spending

cuts that Obama and Congress are now trying to avoid.

Coburn, a conservative rebel within the GOP ranks, made it clear months ago he was ready to support higher tax revenue as

part of an overall deal to restrain government spending programs.

In an interview on MSNBC, he went one step further.

"I don't really care which way we do it," he said. "Actually, I would rather see the rates go up than do it the other way

because it gives us greater chance to reform the tax code and broaden the base in the future."

Sen. Chuck Schumer, D-N.Y., taunted members of the House GOP leadership. They are "like generals, hunkered away in a bunker,

who don't realize that their army in the field has already laid down its arms," he said.

A handful of other Republicans in both

houses have said in recent days they could support raising the top tax

rates. In the

House, conservatives say they suspect House Speaker John Boehner

let it be known he wouldn't mind the discussion, even though

he made a case in a closed-door meeting of the rank and file last

week that raising rates would be worse for the economy than

raising revenue by closing tax loopholes.

House Republicans opened the week by proposing a deficit reduction plan that includes raising $800 billion in higher revenue

and curtailing cost-of-living increases for Social Security and other government benefit programs as part of a plan to cut

deficits by $2.2 trillion over a decade.

In addition, they recommended raising the age of eligibility for Medicare beginning in a decade, a step that generates no

savings in the next 10 years but makes longer-term changes that would strengthen the program's financial foundation.

The White House ridiculed that plan as "magic beans and fairy dust," saying taxes must rise on families earning $250,000 or

more to generate enough revenue to deal with the nation's fiscal crisis.