Encouraging signs of conciliation

The first signs that Republicans may be willing to compromise with re-elected United States President Barack Obama emerged early this week, an encouraging sign after two years of an acrimonious deadlock of policy showdowns.

House of Representatives Republican Speaker John A. Boehner dished out some bitter medicine to his fellow House Republicans following their electoral battering last week. Reports this week suggested that members were chastened by the result in which the Republican Party went backwards in support across even its own grass roots supporters.

The party which pinned so much on regaining the presidency, and spent so much on television advertising attacking Mr Obama personally and electorally, got caned in the final polls. Mr Obama squeaked home in Florida but the complex electoral system meant that he gained all of the Electoral College votes from that state. He won in states the Republicans were sure were theirs for the taking. The Tea Party candidates, those calling the loudest for a reduction in government, were hit hardest.

Mr Obama was the first to offer an olive branch of conciliation, saying he was willing to make some concessions as long as the final fiscal bargain was properly balanced between new tax revenue and spending cuts: "I'm not wedded to every detail of my plan. I'm open to compromise," he said three days after his re-election.

At the same time, he encouraged Congress - the combination of the House of Representatives and the Senate, which is controlled by Democrats - to quickly pass an extension of the existing lower rates for those making under $US250,000 even while the broader negotiations took place.

Mr Boehner will need to capitalise on the chastened faction of the House Republicans that want to cut a deal to avert sudden tax increases and across-the-board spending cuts that will be automatically triggered on January 1 if no compromise is reached.

There is still a reluctance by Republicans to shift more of the tax burden to wealthy Americans.

While calling for the generation of new federal revenue to offset the deficit, Mr Boehner has been less than specific on what his goal might be for raising new federal tax dollars. Suggestions of closing loopholes and limiting deductions will only go so far when North America's deficit as a percentage of gross domestic product (GDP) is close to 100%.

Any agreement to avert a fiscal crisis in January now revolves around the definition of tax increases. Mr Boehner is holding the line against any increase in tax rates, even for the richest Americans, who currently are in the 33% tax bracket. But he is leaving open the possibility of a tax overhaul that raises more revenue than the existing code.

Mr Obama seems to have an ace up his sleeve in the coming tense negotiations. Treasury Secretary Timothy Geithner long ago said he would depart after one term.

Jacob Lew, Mr Obama's current White House chief of staff and former budget director, is said to be the prime candidate to replace Mr Geithner. For the foreseeable future, the holder of the job as Treasury Secretary is likely to be at the centre of budget negotiations and Mr Lew has experience in such bargaining, dating back to his work as a senior adviser to Congressional Democrats 30 years ago in bipartisan talks with President Ronald Reagan. There is also talk about bringing in Republicans and business executives to help rebuild bridges in both camps.

Some Republicans appear ready to accede, but others see a different message. Republicans representing staunchly conservative districts see no reason to give in, even if the nation as a whole sided with the president on taxes.

A majority of Americans thought it was fine to raise taxes on higher-income people but those staunchly conservative Republicans now say that was an emotional response to personal pain and of wanting someone else to pay for their misery.

Whether the US, as a nation, can avoid the so-called fiscal cliff will depend not only on whether Mr Boehner can find common cause with a newly re-elected, invigorated president, but whether he can deliver his own caucus.



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