US lawmakers confident of avoiding 'fiscal cliff'

Leading U.S. lawmakers expressed confidence on Sunday that they could reach a deal to avert the "fiscal cliff" even as they laid down markers on taxes and spending that may make any agreement more difficult.

Republicans and Democratic leaders have agreed on a framework to reform the tax code and government benefit programs next year, but first need to prevent across-the-board tax increases and spending cuts due to begin in January that could push the economy back into recession.

That toxic $600 billion combination, known as the fiscal cliff, is the legacy of earlier failed budget deals. Both sides say they see greater willingness to compromise this time.

"What I hear is a perceptible change in rhetoric from the other side," Dick Durbin, the No. 2 Senate Democrat, said on CNN's "State of the Union" program. "And what it is is an invitation for our side to basically sit down and say, 'What can we do for this country?'"

Taxes are the biggest hurdle.

President Barack Obama campaigned on a promise to raise tax rates on the wealthiest 2 percent of households, who have benefited more than the rest of the population over the past several decades as globalization and technology have transformed the U.S. economy. He wants to extend low tax rates for the bottom 98 percent of the population, but said he will not sign a budget deal that keeps low rates for the wealthiest in place.

Nancy Pelosi, the top Democrat in the House of Representatives, echoed this view. Though Republicans control the House, they will probably need Democratic votes to get any deal passed.

"If it's going to bring in revenue, the president has been very clear that the higher-income people have to pay their fair share," she said on ABC's "This Week."

A top Republican, Representative Tom Price, said his colleagues recognize the need to generate more tax revenue even as he said any tax-rate increase on the wealthy would lead to job losses.

Most Republican lawmakers have signed a pledge promising they will not tax rates. Instead, they want to generate more revenue through a rewrite of the code that would eliminate exemptions, lower rates and presumably spur the economy.

They also say tax changes must be paired with spending cuts.

"The two sides have identified the tax revenue that we're willing to discuss, and now it's time to talk about spending reductions," Price, a member of the leadership team who has close ties to rank-and-file conservatives, said on CNN.

Many of Price's fellow Republicans voted against an August 2011 budget deal that included $1 trillion in spending cuts on the grounds that it did not go far enough. That deal narrowly averted a U.S. default, but it rattled consumers and investors and led to a first-ever downgrade of the country's debt.

Opinion polls show that Republicans would shoulder more of the blame if the country goes over the fiscal cliff in January. Price said his side is eager to avert disaster this time.

"Every member of our caucus appreciates that this fiscal crisis, this challenge that we have, is ever closer," he said.

Durbin said he sees an increased willingness on the part of Republicans to reach a deal compared with prior budget standoffs. "You have to be careful. If you talk about taxes they run for the hills, but if you talk about revenue and tax reform they'll sit still for that conversation," Durbin said.