House Speaker John Boehner offered a “framework” including newrevenue to reduce the U.S. budget deficit during talks withPresident Barack Obama and Congress leaders on averting a year-endfiscal crisis.

Boehner joined White House Press Secretary Jay Carney indescribing today's meeting, the first in a series, as“constructive.” The session featured the same actors, includingHouse Minority Leader Nancy Pelosi and Senate Majority Leader HarryReid, both Democrats, who failed to reach a $4 trillion debtcompromise in mid-2011.

Democrats and Republicans agreed the meeting was more symbolicthan substantive. It was “a photo op for the president, so be it,”said Georgia Republican Tom Price.

“I wouldn't expect a lot of movement,” Peter Orszag, Obama'sformer director of the Office of Management and Budget, said todayon Bloomberg Television. “That'll come after Thanksgiving.”

While both sides expressed optimism about prospects for a deal,there's no evidence they narrowed their differences.

“We're prepared to put revenue on the table, provided we fix thereal problems,” including entitlement costs, said Senate Republicanleader Mitch McConnell of Kentucky.

Obama is insisting on higher taxes for top earners andRepublicans are refusing to raise rates, leaving negotiators witharithmetically complex and politically fraught choices. Followingthe talks, a House Republican aide said Boehner's framework didn'tinclude increases in marginal tax rates for any group of taxpayers.Obama leaves for Asia tomorrow and Congress is departing Washingtonuntil Nov. 26, for its Thanksgiving recess.

The $607 billion fiscal cliff is a combination of tax increasesand spending cuts that will take effect in January if Congressdoesn't act. Lawmakers of both parties want to avoid a short-termshock to the economy while making progress on long- term deficitreduction.

Reid, of Nevada, said leaders will meet again with Obama theweek after Thanksgiving. “This isn't something that we're going towait until the last minute” to get done, he said.

Standard & Poor's

As the White House talks wrapped up today, U.S. stocks rose. TheStandard & Poor's 500 Index rose as much as 1 percent afterleaders emerged from the meeting. The index was up less than 1percent to 1,355 at 2:46 p.m. in New York after closing yesterdayat its lowest level since July 25. The S&P 500 had lost almost6 percent since the election.

Treasuries rose, reflecting strong demand for U.S. debtworldwide, with 10-year note yields touching a 10-week low. Thebenchmark 10-year yield fell three basis points, or 0.03 percentagepoint, to 1.56 percent at 2:24 p.m. New York time, according toBloomberg Bond Trader prices.

While tax questions will be central in the fiscal talks, the twosides also will consider a down payment on replacing automaticspending cuts should discussions on a broader plan fail, accordingto congressional aides.

Also in the meeting on the so-called fiscal cliff were VicePresident Joe Biden, Treasury Secretary Timothy F. Geithner andWhite House Chief of Staff Jack Lew.

The president supports higher taxes for top earners mixed withsome spending cuts. Republicans want to extend expiring tax cutsfor all income levels and are demanding an overhaul in 2013 ofentitlement programs and the tax code.

“My hope is that this is going to be the beginning of a fruitfulprocess where we're able to come to an agreement,” Obama said inhis opening remarks today.

While insisting on higher taxes, Obama has shown openness inrecent days. He and Geithner said rates must increase withoutspecifying that the top rate must return to the 39.6 percent levelin effect when President Bill Clinton left office.

Democrats and some Republicans are beginning to talk publiclyabout a more modest increase in upper-income tax rates.

One idea would be to raise Obama's $250,000 income threshold fora tax increase to $500,000 or $1 million and increase the current35 percent top rate to 37 percent.

“Will John Boehner really blow up a deal for a 1 percent pointincrease above $1 million?” Orszag said. “The administration hasmade it clear there has to be at least some increase in marginaltax rates.”

39.6 Percent

Yesterday Representative Steve King, an Iowa Republican, saidBoehner, an Ohio Republican, could probably get a revenue packagethrough the House that curbs deductions and credits for the highestearners and slightly raises rates above the current 35 percentlevel, as long as it remains short of the 39.6 percent that Obamawants.

“It may not have to be the 39-and-a-half percent number, itcould be something less than that,” King said. “If he can squeeze alittle more money out of it by closing loopholes I think he'll makethat deal,” he said, referring to the president.

While it “will be tough” to get through the House, King said,“there might be enough pressure could come on John Boehner thatmore votes come from Democrats than Republicans.”

Several congressional aides have suggested that in the eventtalks fail, both parties in Congress are discussing fallback plansfor $60 billion to $100 billion in deficit reduction to replaceautomatic spending cuts set to take effect in January.

On taxes, the White House has signaled it is prepared to let allof the George W. Bush-era income tax cuts expire at the end of theyear if Republicans refuse to limit a tax-cut extension to incomebelow $25,000 a year for married couples.

“We have to ensure that taxes do not go up on middle-classfamilies,” Obama said today. “That is an agenda that Democrats andRepublicans and independents, people all across the country, canshare.”

Unlike in mid-2011, when talks between Obama and Boehnercollapsed, outside market and political forces are bearing down onlawmakers.

Credit ratings agencies including Moody's Investors Service havesaid an additional credit downgrade could occur if talks fail. Thenonpartisan Congressional Budget Office has warned of a recessionin 2013, and Federal Reserve Chairman Ben Bernanke has said he hasfew options in his tool box should the U.S. suffer an economicshock.

Well Positioned

Following a mid-2011 agreement to lift the nation's borrowinglimit that contained $1.2 trillion in Republican-driven spendingcuts, and an election where Democrats picked up seats in the Houseand Senate, the party says it's well positioned to secure adebt-reduction package weighted mostly toward revenue.

As they try to find a solution both sides can accept, some movesthat ease the math complicate the politics.

Republicans oppose higher rates while the limits on tax breaksthey prefer generate opposition from interest groups that rely onthem, including nonprofit organizations, the home- buildingindustry and residents of high-tax states.

“To get serious revenue, you have to go after the stuff that'sbig,” said Alan Viard, resident scholar at the American EnterpriseInstitute, which favors limited government. “By definition, thestuff that's really big are the things that people are reallyusing.”

Obama wants $1.6 trillion in higher taxes for top earners overthe next decade, achieved through a combination of limits on breaksand higher tax rates on ordinary income, capital gains, dividendsand estates.

The biggest question is how many votes of his Republicanrank-and-file Boehner could lose to produce a revenue compromise inthe House, where he oversees an “unstable majority” that's rejectedspending bills and last year's debt ceiling increase, said VirginiaRepresentative Gerry Connolly, a Democrat.

Bloomberg News