Budget Dispute Shows Sign of Thaw

President and House Speaker's office moderate the tone of their comments.

Lawmakers return to Washington today amid a potential thaw in the U.S. fiscal policy dispute, as President Barack Obama and House Speaker John Boehner attempt to make a deal to prevent spending cuts and tax increases from taking effect.

Obama sounded conciliatory notes at a Daimler AG plant in Michigan yesterday. In his first comments since meeting with Boehner Dec. 9 at the White House, the president didn’t repeat frequent complaints about Republicans holding tax cuts for most Americans “hostage” because they oppose higher rates for wealthiest, and said he was ready to come to an agreement. Since Boehner complained Dec. 7 that Obama had wasted a week, statements from the speaker’s office have been milder, too.

Recession Concern

If nothing changes, the stalemate probably would lead to a recession in the first half of 2013, according to the Congressional Budget Office. Obama and Boehner are trying to replace the immediate deficit reduction in the so-called fiscal cliff with more gradual tax and spending changes.

Debt Ceiling

Democrats also insist that a broad agreement on spending cuts must address the $16.4 trillion debt ceiling. Congress will need to act as early as mid-February to prevent the U.S. from defaulting, according to the Congressional Budget Office. After political bickering stalled negotiations over raising the debt limit last year, Standard & Poor’s lowered the U.S.’s credit rating to AA+ from AAA on Aug. 5, 2011.

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