GOP’s Boehner ready to deal

House Speaker John Boehner of Ohio said Wednesday that he was ready to accept a budget deal that raises federal revenue as long as it is linked to an overhaul of entitlements and an overhaul of the tax code that closes provisions, curtails or eliminates deductions and lowers income-tax rates.

Boehner’s gesture - made a day after the Republican Party’s electoral setbacks - was the most explicit offer he has made to avert the “fiscal cliff” in January, when billions of dollars in tax increases and automatic spending cuts go into force.

“We’re willing to acceptnew revenue under the right conditions,” Boehner said.

His offer came hours after Sen. Harry Reid, D-Nev., the majority leader, offered his own olive branch, saying, “It’s better to dance than to fight.”

“Mr. President, this is your moment,” Boehner told reporters in the Capitol. “We’re ready to lead, not as Democrats or Republicans, but as Americans.”

The offer may be enough to get the parties to the table after an election that keptPresident Barack Obama in power, strengthened the Democrats’ grip on the Senate and chipped away at the still-large Republican majority in the House.

But Democrats and Republicans are still far apart. Boehner made clear that his vision for additional revenue includes a tax code that lowers even the top income-tax rate from where it is now, 35 percent, not where it would be in January when the Bushera tax cuts are set to expire - 39.6 percent. At least some of that additional revenue would come from economic growth that he said would be fueled by a simpler tax code.

Sen. Charles Schumer of New York, the third-ranking Democrat, has said those constructs are unacceptable. Democratic leaders say a tax overhaul that lowers tax rates across the board would either hurt the middle class by trimming vital tax benefits such as the home-mortgage deduction or would not raise enough taxes to meaningfully reduce the deficit.

Reid underscored Obama’s contention that tax rates on high earners must rise, saying that “the vast majority of Americans” support that, “including rich people.”

But in language and timing, the leaders of Congress’ two chambers left the impression that they want a deal at least large enough to avert the worst economic impacts of a sudden rise in tax rates on incomes, payrolls, capital gains, dividends, interest and estates that would affect virtually every American family,working or not.

Boehner has said for months that a deal to overhaul taxes and entitlements and substantially lower the deficit is not appropriate for a lame-duck Congress.

But facing a Congress next year that will be less Republican, he suggested Wednesday that he would favor a deal that would serve at least as “a down payment on - and a catalyst for - major solutions, enacted in 2013.”

He said he had spoken to the president Wednesday before making his statement to reporters.

“I’m not suggesting we compromise on our principles,” he said, “but I am suggesting we commit ourselves to creating an atmosphere where we can see common ground when it exists and seize it.”

Boehner said he would seek concessions from Obama.

“The president must be willing to reduce spending and shore up entitlement programs that are the primary drivers of our debt,” he said.

Obama enters the next fray with heightened leverage, both sides agree, especially on what he sees as the most immediate issue: whether Republicans will relent and extend the Bush-era income tax cuts, which expire Dec. 31, except for households with taxable income above $250,000 a year.

Yet if Obama received a mandate for nothing else after a campaign in which he was vague on second-term prescriptions, he can and will claim one for the proposition that the wealthiest Americans like himself and Mitt Romney should pay higher income taxes. That stance was a staple of Obama’s campaign stump speeches for more than a year. And in surveys of those leaving the polls Tuesday, voters overwhelmingly agreed with him.

“This election tells us a lot about the political wisdom of defending tax cuts for the wealthy at the expense of everything else,” a senior administration official said early Wednesday.

In his victory speech, Obama offered what the White House intended as an early olive branch. “In the coming weeks and months,” he said, “I am looking forward to reaching out and working with leaders of both parties to meet the challenges we can only solve together: reducing our deficit, reforming our tax code, fixing our immigration system, freeing ourselves from foreign oil.”

Much pre-election speculation held that a result like what occurred - essentially maintaining the status quo withObama in the White House; Democrats in control of the Senate, though now with an unexpectedly padded majority; and Republicans still leading the House - would makefor continued gridlock and a fall off the fiscal cliff at some cost to economic recovery.

Yet there are counter views. For one thing, had Romney won, the rough consensus in both parties was that he and Congress would have delayed the scheduled imposition of automatic tax increases and spending cuts for at least six months and up to a year to give him time to staff his administration and outline a plan. And that delay would have been compounded by an all-but-certain standoff between a new president dedicated to cutting taxes deeply, not raising them, and Democrats in Congress intent on getting tax increases on high incomes in exchange for their assent to future reductions in Medicare and Medicaid.

Also, as the administration and a few other optimists in both parties see it, with the same division of power, the two sides can immediately take up where they left off in 2011. That year, repeated efforts for a bipartisan budget deal ultimately collapsed on the tax issue and on Democrats’ refusal to consider reductions in the fast-growingentitlement programs such as Medicare and Medicaid unless Republicans compromised.

Each side said the voters would decide in November 2012. Now they have, and Obama and the two parties in Congress can get back to the bargaining table, where their differences remain in place but so, too, do some tentative agreements on spending cuts. Had Romney won, the two sides would have faced months of start-from-scratch, get-acquainted bargaining, farther apart than ever on the matter of taxes and entitlement benefits.

Vice President Joe Biden said the administration is prepared to work with the Republican leadership on “the two overarching problems right now,” the tax increases and automatic spending cuts scheduled to begin in January.

“There’s all kinds of potential to be able to reach a rational, principled compromise,” Biden told reporters traveling on his plane Wednesday.

Biden said he believes that there are at least six Republican senators who are prepared to compromise on fiscal issues, adding that Democrats“are going to have to compromise, too. It’s not like we’re going to go in and say: ‘This is our deal. Take it or leave it.’”

Biden said the election offered “a clear sort of mandate,” with voters “coming much closer to our view about how to deal with tax policy” than the Republican view.

While the president and Congress have been gridlocked for nearly two years, Biden said he thinks the election results mean that “the fever will break” in Washington. “And, you know, Barack’s reelected, so this sort of [GOP] cause to keep a second term from happening” is over, Biden said. Obama “is there for four years.”

Biden said he hopes that the election prompts “some real soul-searching” within the Republican Party, with the result that Republicans are more willing to cooperate with Democrats than duringthe past two years.

Senate Minority Leader Mitch McConnell, a Kentucky Republican who had said his goal was to make Obama a one-term president, in his statement congratulating Obama early Wednesday, said, “Now it’s time for the president to propose solutions that actually have a chance of passing the Republican-controlled House of Representatives and a closely divided Senate.”

McConnell, who faces his own re-election bid in two years, added: “To the extent he wants to move to the political center, which is where the work gets done in a divided government, we’ll be there to meet him halfway. That begins by proposing a way for both parties to work together in avoiding the fiscal cliff without harming a weak and fragile economy, and when that is behind us, work with us to reform the tax code and ourbroken entitlement system.”

Reid, his hand strengthened somewhat, called for Congress to work quickly to resolve the looming fiscal issues in the lame-duck session.

“I am going to do anything in my power to be as conciliatory as possible,” he said Wednesday at a news conference on Capitol Hill. “I want to work together. But I want everyone also to understand, you can’t push us around.”

Reid said Democrats were “not going to mess with Social Security” as part of revisions to entitlement programs Republicans are seeking in exchange for revenue.

He added that he would oppose changes to the way benefit increases are calculated on an annual basis.

Reid said the election showed that the public wanted the highest-earning taxpayers to pay more taxes, and he gave no hint of compromise on that matter, perhaps the central point on which the presidential campaign hinged. He also said that a temporary fix for the fiscal impasse was not a good idea.

“I am not for kicking the can down the road,” he said.“Waiting for a month, six weeks, six months, that is not going to solve the problem.”

Democrats won’t have the 60 Senate votes needed to advance legislation over Republican opposition, meaning they will need Republican support to get anything done.

Democrats increased their Senate majority over Republicans by two seats, from the current 53-47 to 55-45 if a Maine independent caucuses with Democrats as expected.

The president flew back to Washington from Chicago late Wednesday. At the White House, he prepared to shake up his staff to help him tackle daunting economic and international challenges. He will study lists of candidates for various positions that a senior adviser, Pete Rouse, assembled in recent weeks as Obama crisscrossed the country campaigning.

The most prominent members of his Cabinet will leave soon. Secretary of State Hillary Rodham Clinton and Treasury Secretary Timothy Geithner long ago said they would depart after the first term, and Defense Secretary Leon Panetta, previously the head of the CIA, has signaled that he wants to return to California sometime in the coming year. Also expected to depart is David Plouffe, one of the president’s closest confidants.

Obama is expected to reshuffle both his inner circle and his economic team as he accommodates the changes.For example, Jacob Lew, Obama’s current White House chief of staff and former budget director, is said to be a prime candidate to become treasury secretary. For the foreseeable future, the holder of that job is likely to be at the center of budget negotiations, and Lew has experience in such bargaining dating from his work as a senior adviser to congressional Democrats 30 years ago in bipartisan talks with President Ronald Reagan.

There is talk about bringing in Republicans and business executives to help rebuild bridges to both camps. The one Republican in the Cabinet now, Transportation Secretary Ray LaHood, has said he will leave. One possible candidate, advisers say, could be Sen. Olympia Snowe, a Republican moderate from Maine who is retiring.

A front-runner for secretary of state appears to be Sen. John Kerry, D-Mass., and Democrats said worries about losing his Senate seat to the Republicans in a special election had diminished with Tuesday’s victories.

Information for this article was contributed by Jonathan Weisman, Jackie Calmes, John H.

Cushman Jr. and Peter Baker of The New York Times; by Roxana Tiron, Richard Rubin, Kathleen Hunter and Heidi Przybyla of Bloomberg News; and by Matthew Daly, Alan Fram and Donna Cassata of The Associated Press.

Front Section, Pages 1 on 11/08/2012

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