The task of picking up the pieces of the "fiscal cliff" talks - and reassuring global markets that were shaky Friday - is likely to fall largely to President Barack Obama after the rebuke Thursday to his chief Republican negotiating partner, House Speaker John Boehner.
Obama, facing a stalemate with congressional Republicans on taxes and spending, said he’s urged leaders of both parties to get working on a interim measure to prevent taxes from rising on middle-income Americans even as they work on a more comprehensive package.
Repeating a message he’s delivered since winning re-election, Obama said “all of us agree” that rates shouldn’t go up for 98 percent of taxpayers when the new year starts. He also wants unemployment insurance extended for about 2 million Americans who will lose benefits in January and a commitment to deal with spending cuts next year.
“I am still ready and willing to get a comprehensive package done,” Obama said at the White House less than 24 hours after Boehner failed to deliver enough Republican votes for his own alternative plan, throwing negotiations into turmoil. It can be achieved “whether it happens all at once or whether it happens in several different steps.”
The House and Senate won’t return until Dec. 27 to address the end-of-year deadline to avert more than $US600 billion in automatic tax increases and across-the-board budget cuts. That will give them less than a week to reach a deal.
After Boehner, an Ohio Republican, scrapped his plan to allow higher tax rates on annual income above $US1 million, he said it was up to Obama and the Democratic majority in the Senate to come up with a solution.
Obama met with Senate Majority Leader Harry Reid, a Nevada Democrat, at the White House this afternoon to discuss a strategy to move negotiations ahead.
"They went from Plan B to plan see-you-later," Obama adviser David Axelrod said on MSNBC Friday morning.
Global stock markets weakened on Friday and both the euro and gold slipped as the new setback rattled investors' nerves. Most major stock markets saw widespread selling as investors moved to traditional safe-haven assets.
Democrats, the minority in the House, are now stepping up efforts to gather some Republican votes for a Democratic bill passed by the Senate months ago which would extend the expiring tax cuts to all but the wealthy.
"What we'll have to do is figure out where that line is that gives us those 218 votes" needed to garner a majority of the House behind legislation, Democratic Representative Michael Burgess said on CNBC on Friday.
"I believe we can and must take action before the end of the year to prevent the fiscal cliff," Steny Hoyer, the second ranking Democrat in the House, said in an MSNBC interview. "Democrats are ready to work with Republicans to do so."
Senate Minority Leader Mitch McConnell, who has experience helping to forge deals when House Republicans are in disarray, is likely to play a larger role now in attempting to rescue the situation along with other Senate Republicans, who have been more receptive to compromising.
Sean West, a Eurasia Group analyst, said, "Boehner didn't have a ton of good moves, and has even fewer now."
He said he thought Boehner was "either headed back to the White House for a big deal or he's accepting whatever bipartisan fallback is crafted by Senate leaders. Hard to see him coming back with another partisan gambit."