RPT-WRAPUP 2-Both sides hint at renewed talks on U.S. 'fiscal cliff'

Thomas Ferraro and Richard Cowan
Reuters Middle East

* Both sides say lines of communication are open

* Debt ceiling becomes focus as both sides seek advantage

* Obama visits Virginia family to highlight tax plan

WASHINGTON, Dec 6 (Reuters) - With little to show after a

month of posturing, the White House and Republicans in Congress

dropped hints on Thursday that they had resumed low-level

private talks on breaking the stalemate over the "fiscal cliff"

but refused to divulge details.

A day after a phone conversation between President Barack

Obama and John Boehner, the Republican speaker of the House of

Representatives, appeared to kick-start communications, both

sides used similar language to describe the state of

negotiations but imposed a media blackout on developments.

"Lines of communication remain open," White House spokesman

Jay Carney told reporters when pressed on whether staff talks

were taking place to avoid the steep tax hikes and budget cuts

set for the first of next year unless the parties agree on a way

to stop them.

Asked the same question, Boehner spokesman Michael Steel

also said "lines of communication are open."

The acknowledgement, even without signs of anything

approaching a breakthrough, passed for encouraging news after a

week of public maneuvering on the fiscal cliff by both sides to

gain the maximum political and public relations advantage.

Republicans have worried publicly and privately that they

are losing the war of appearances in the battle over the cliff.

On Thursday, another poll showed Republicans may have reason

to worry about public perception. A Quinnipiac University survey

found respondents trust Obama and Democrats more than

Republicans on the cliff talks by a wide margin - 53 percent to

36 percent.

In both public statements and private encounters, Obama has

tried to encourage Republicans wavering from the position of the

party leadership.

Republican Representative Tom Cole, who last week broke

ranks with his party and agreed to accept higher tax rates on

the richest Americans, said Obama took him aside at a White

House Christmas party on Monday and joked about the criticism

Cole had received from Republicans.

"The president pulled me over and he said, 'Cole, come

closer, I want to see the bruises,'" Cole told Reuters. "He

said, 'Seriously, I will go further on this thing than you guys

think. I know we can get something done.'"

While other Republicans have questioned Obama's commitment,

Cole said, "I take him at his word," adding: "The best is to get

to that discussion as quickly as we can."


Obama, meanwhile, played to his strengths with the latest in

a series of the sort of public events he has used against

Republicans in the fiscal cliff fight: a visit with a family in

the Virginia suburbs of Washington to illustrate how Republican

tax proposals would hurt the middle class.

"The message that I think we all want to send to members of

Congress is: this is a solvable problem," Obama said while

visiting the home of a couple in Falls Church, Virginia. "We are

in the midst of the Christmas season and I think the American

people are counting on this getting solved."

Neither side in the showdown would characterize Wednesday's

conversation between Boehner and Obama or suggest it opened up

new area of compromise.

Obama and Democrats in Congress want the tax cuts set to

expire at the end of the year to be extended for taxpayers with

incomes below $250,000 a year but not for the wealthiest 2

percent of Americans.

In exchange, the president has said he is willing to

consider significant spending cuts wanted by Republicans to

"entitlement" programs such as Medicare, the government health

insurance plan for seniors.

Republicans have held out for an extension of all the tax

cuts, but they have become increasingly divided about whether

they can prevail in the face of Obama's firm stance and

Republican control of only the House but not the U.S. Senate.


The debt ceiling issue - the same one that provoked a

showdown in 2011 that led to a downgrading of the U.S. credit

rating - has become a centerpiece of the fiscal cliff debate,

thanks in part to Obama's insistence that Congress give him

enhanced power to increase the debt limit, which needs to be

raised again in the next few months.

"It ought to be done without delay and without drama,"

Carney, the White House spokesman, said of raising the debt


That issue produced a largely partisan procedural scuffle on

Thursday in the Senate when Republicans tried to provoke a vote

on giving Obama the power to raise the debt ceiling on his own.

Senate Republican leader Mitch McConnell, who had argued

that not even Democrats would support giving Obama greater

flexibility, tried to prove it by pushing for a vote.

When Senate Democratic leader Harry Reid went ahead and

scheduled it, confident he had enough support to win on a

straight majority vote, the Republicans backed down, with

McConnell demanding that 60 votes be required for passage, more

than the Democrats can muster.

No new vote was scheduled. While the measure could come up

again, it was dead for the moment.

"Senator McConnell took obstruction to new heights by

filibustering his own bill," Reid said in a statement.

Democratic Senator Charles Schumer of New York told

reporters that Republicans were losing the argument on raising

top tax rates and "are trying to pivot away to other parts of

the fiscal cliff in a desperate attempt to assert leverage and

change the subject."

The exchange may be a taste of things to come as Congress

moves toward the fiscal cliff deadline.

Economists have warned a plunge over the cliff could drive

the economy back into a recession. Mark Zandi, chief economist

at Moody's Analytics, told the congressional Joint Economic

Committee that failure to strike a deal could have serious

economic consequences relatively quickly.

"By mid-February you would be doing a lot of damage," Zandi


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