WASHINGTON (AP) — One day after a bruising election, President Barack Obama and Republican House Speaker John Boehner both pledged Wednesday to seek a compromise to avert looming spending cuts and tax increases — the “fiscal cliff” that threatens to plunge the economy back into recession.
Senate Majority Leader Harry Reid, D-Nev., added: “Of course” an agreement is possible.
While all three men spoke in general terms, Boehner stressed that Republicans would be willing to accept higher tax revenue under the right conditions as part of a more sweeping attempt to reduce deficits, restore the economy to full health and put the nation's finances in order.
The Ohio Republican said raising revenues would be accomplished through economic growth, lower tax rates, fewer tax loopholes and by making the tax code simpler and fairer.
Boehner, speaking a day after the president's re-election victory, said House Republicans are asking Obama “to make good on a balanced approach” that also would include spending cuts and address upwardly spiraling government benefit programs.
“Mr. President, this is your moment,” Boehner said at a press conference where he congratulated Obama on winning a second term. “We want you to lead. Let's find the common ground that has eluded us.”
The speaker noted that during one-on-one budget talks with the president in the summer of 2011, Obama had “endorsed the idea of tax reform and lower rates, including a top rate of lower than 35 percent,” the present top rate.
“We're closer than we think to the critical mass needed legislatively to get tax reform done,” Boehner said.
He did not specify what loopholes House Republicans might consider trimming. Nor did he take questions.
His comments were generally along the lines of proposals by Republican presidential nominee Mitt Romney that also were vague on specifics.
Still, the speaker's comments signaled a willingness to enter into talks. He suggested that Congress could use its upcoming lame-duck session to get the ball moving on such a compromise.
“We can't solve the problem of our fiscal imbalance overnight,” Boehner said. “This is going to take time.”
Reid said the voting results showed that “the vast majority of American people, rich, poor, everybody agrees: That the rich, the richest of the rich, have to help a little.”
He offered to work with Republicans to reach consensus, saying he had a “pleasant conversation” with Boehner on Wednesday. Reid said he won't “draw any lines in the sand.”
“I am not for kicking the can down the road,” he said. “I think we've done that far too much.”
The economy has been showing signs of life lately — more jobs, a better housing market and a pickup in spending by consumers.
As business leaders, investors and economists shift their focus away from politics to fundamentals after Obama's re-election, fears are growing that more of the same gridlock in Washington over fiscal policy will slow the economy to a stall in the next few quarters, perhaps even tipping it into recession.
Those worries, as well as more gloom about Europe, conspired to send stocks sharply lower Wednesday.
Traders were still unnerved Wednesday by the continuation of a divided government in Washington and little prospect for compromise. Some economists warned that another downgrade of the country's credit rating had grown more likely.
“While we have clarity on the players now, we don't have any more clarity on what will happen in terms of the fiscal cliff,” said Dean Maki, chief U.S. economist at Barclays.
Going over the fiscal cliff outright would deal a $650 billion blow to the economy, Maki estimated, the equivalent of roughly 4 percent of the nation's output.
He envisions a partial compromise, with $200 billion in tax increases and spending cuts.
Just a few hours after Obama's victory speech in Chicago and Romney's concession in Boston, Fitch Ratings warned there would be “no fiscal honeymoon for President Obama.”
While Fitch still has an AAA rating on U.S. government debt, it lowered its outlook to negative in November 2011. It said Wednesday that failure to avert the fiscal cliff and also raise the country's debt ceiling “would likely trigger a rating downgrade” next year.
The maneuvering on the economy — the dominant issue by far in the campaign — began even before Obama boarded Air Force One to return to the White House from his hometown of Chicago.
After securing a second term, the president is committed to bipartisan solutions “to reduce our deficit in a balanced way, cut taxes for middle class families and small businesses and create jobs,” and he told congressional leaders as much in phone calls, the White House said.
Boehner said: “The question we should be asking is not, 'Which taxes should I raise to get more revenue,' but rather, 'Which reforms can we agree on that will get our economy moving again?'”
While both the president and Boehner sent signals of bipartisanship, there remain wide differences between the two on specifics. At the same time, each man has something of a postelection mandate, given Obama's re-election and the GOP's successful defense of its House majority.
Boehner made reference to a balanced approach to deficit reduction that reflected Obama's campaign-long call for higher taxes on incomes after an initial $200,000 for individuals and $250,000 for couples.
That was something Boehner made plain he opposes.
Reid said that any solution should include higher taxes on “the richest of the rich.”
Barring legislation to avoid the “fiscal cliff” by year's end, taxes are on course to rise by more than $500 billion in 2013, with the scheduled expiration of the Bush-era tax cuts, and spending is to be cut by an additional $130 billion or so, totals that would increase over a decade.
The blend is designed to rein in the federal debt, but leaders of both parties warn that it poses a grave threat to an economic recovery that has been halting at best.
Obama and congressional leaders in both parties say they want an alternative, but serious compromise talks were nonexistent during the fierce campaign season.
This article includes material from the New York Times and Bloomberg News.