OVERNIGHT MONEY: Fiscal cliff dominating talks on Capitol Hill

By Vicki Needham - 11/14/12 07:50 PM ET

THURSDAY'S BIG STORY:

All aboard the fiscal-cliff negotiating train: Leaders in Washington are standing out on the edge of the "fiscal cliff," staring into the abyss, rubbing their chins and trying to figure out how to build, at least, a temporary bridge to a grand bargain on taxes and spending.

President Obama has met with labor leaders and the nation's top business executives so for this week and will wrap up meetings on Friday with congressional leaders.

As discussions ramp up, the Obama administration, lawmakers and businesses groups are ticking off what they want to see in a deficit-reduction package, which is expected to extend most tax breaks and halt spending cuts that some argue will hurt the economic recovery.

In this first press conference since the election, Obama challenged Republicans on Wednesday to immediately extend tax cuts for the middle class, which would go toward "actually removing half the fiscal cliff."

He called the fiscal cliff "solvable" and said he is open to ideas that can achieve the needed components of raising revenue, boosting the economy, ensuring the middle class is protected and decreasing the deficit.

"What I'm not going to do is to extend Bush tax cuts for the wealthiest 2 percent that we can't afford and according to economists will have the least positive impact on the economy," he said.

Sen. Dick Durbin (D-Ill.) suggested on Wednesday that capping tax deductions for the nation's top earners is one idea being discussed on Capitol Hill, although he is not sure of the White House stance on the idea.

House Speaker John Boehner (Ohio) and Senate Republican leader Mitch McConnell (Ky.) have expressed a willingness to forge a compromise but are opposed to letting taxes rise for anyone.

Boehner has put together a fiscal cliff team with Rep. Paul Ryan (R-Wis.) and Reps. Fred Upton (R-Mich.) and Dave Camp (R-Mich.) to prepare for the upcoming intense negotiations.

The president also is pressing Republicans to go along with a plan that calls for $1.6 trillion in new tax revenue over the next 10 years — more than double what was sought in last year's deficit deal to raise the debt ceiling.

Obama boiled down the solution to the fiscal cliff in a two-pronged process that includes the quick extension of middle-class tax cuts followed by a grand bargain next year that would overhaul the tax code and entitlement programs.

The National Retail Federation made a similar but broader plea on Wednesday, calling on Congress to hammer away at building that bridge before leaving town for the Thanksgiving holiday.

“Rather than setting New Year’s Eve as its deadline, Washington needs to act quickly to set in place a framework for resolving this situation, preferably before Thanksgiving,” NRF President and CEO Matthew Shay said in a letter to Congress and the White House. “Demonstrating the ability to work in a bipartisan manner will ease consumers’ worries and avoid severe economic consequences during the single most crucial spending season of the entire year.”

Meanwhile, Senate Democrats want any agreement negotiated in the coming weeks to include some stimulus, such as the extension of the payroll tax holiday, an idea that has been batted around in the House, as well.

“We need to do something on stimulus as part of the overall fiscal cliff,” said Sen. Charles Schumer (D-N.Y.). “We have to do something because the economy is not growing fast enough in the first year or two.”

The fiscal cliff is a more than $600 billion combination of automatic spending cuts and tax increases scheduled to take effect in January.

Without action, most tax rates will increase, including those for capital gains and individual taxes.

The top rate would rise to 39.6 percent from 35 percent.

The Congressional Budget Office has said that the spending cuts could push the economy into another recession.

WHAT ELSE TO WATCH FOR

Inching closer: The House will take up a rule on Thursday to consider a trade bill to normalize trade relations with Russia. Lawmakers are expected to wrap up work on the bill on Friday, sending the long-delayed measure to the Senate.

ECONOMIC INDICATORS

Initial Claims: The Labor Department releases its weekly filings for jobless benefits, which dropped steeply last week and could provide more insight into the trajectory of the job market a day before the monthly figures are announced.

Mortgage Rates: Freddie Mac is releasing weekly data on fixed-rate mortgages, which have hit historic lows.

WHAT YOU MIGHT HAVE MISSED

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— Fed eyeing more bond buys as 'Operation Twist' nears expiration
— Poll: Small business OK with tax-rate hikes
— Boehner supportive of Superstorm Sandy bill
— Report: Corzine to blame for MF Global's collapse
— Report: Lower corporate tax rate would boost retail jobs
— Business groups: Washington must get serious about entitlements
— Retail sales fall for first time in four months