WASHINGTON — Talk of compromise on a broad budget deal greeted returning lawmakers Monday, but agreement still seemed distant as the White House and congressional Republicans ceded little ground on a key sticking point: whether to raise revenue through higher tax rates or by limiting tax breaks and deductions.
House Speaker John Boehner, R-Ohio, pressed his case for revenue derived from reducing tax loopholes rather than raising tax rates on wealthy taxpayers, as President Barack Obama insists.
Boehner, voicing the Republican stance, said: "The American people support an approach that involves both major spending cuts and additional revenue via tax reform with lower tax rates."
At the White House, Obama spokesman Jay Carney reiterated the president's pledge not to sign legislation that extends current tax rates to the top 2 percent of income earners — households with incomes over $250,000. "That is a firm position," he said.
Congress and Obama have until the end of the year to avoid across-the-board tax increases that would do away with rates set during the administration of President George W. Bush.
In addition to looming tax hikes, the new year could result in steep spending cuts in defense and domestic programs. Lawmakers and the White House fear that such a combined "fiscal cliff" would undercut the military and set back an economic recovery.
Looking to buttress their case on taxes, White House economists warned Monday that the uncertainty of a potential hike in taxes next year for middle-class taxpayers could hurt consumer confidence during the crucial holiday shopping season.
In a new report, President Barack Obama's National Economic Council and his Council of Economic Advisers said that if lawmakers don't halt the automatic increase in taxes for households earning less than $250,000, consumers might even curtail their shopping during the current holiday season.
"As we approach the holiday season, which accounts for close to one-fifth of industry sales, retailers can't afford the threat of tax increases on middle-class families," the report said.