'Fiscal cliff' road trip: Obama talks Scrooge as GOP stews

President Obama’s speech Friday at a toy factory in suburban Philadelphia – an electoral battleground area – had all the hallmarks of a campaign event. An American flag was prominently displayed. About 350 people packed the room, eager to see the president. An audience member yelled out, “We love you.” Mr. Obama replied, as always, “I love you back.”

But on this last day of November, 3-1/2 weeks after Election Day, the focus was not on whether the president would keep his job. It was, to paraphrase Obama, “now that I have been reelected, let’s do what I campaigned on”: allow the middle class to keep its Bush-era tax cuts – $2,200 a year for a typical family of four – while tax cuts for the wealthiest 2 percent should be allowed to expire at the end of the year.

“It’s not acceptable to me, and I don’t think it’s acceptable to you, for just a handful of Republicans in Congress to hold middle-class tax cuts hostage simply because they don’t want tax rates on upper-income folks to go up,” Obama said at the Rodon factory in Hatfield, Pa., where toys such as K’NEX and Tinkertoys are produced.

The toy factory was selected for obvious reasons: It’s the holidays, and if middle-class taxpayers know their taxes won’t go up at the end of the year, they can feel more comfortable spending money on gifts. But if Congress does nothing, and everyone’s taxes go up, “That’s a Scrooge Christmas,” Obama said.

The president came out with other holiday quips.  “Now, of course, Santa delivers everywhere,” Obama said. “I’ve been keeping my own naughty-and-nice list for Washington. So you should keep your eye on who gets some K’NEX this year. There are going to be some members of Congress who get them, and some who don't."

Back in Washington, though, congressional Republicans were in no mood to laugh, as the prospects for a deal with the White House looked bleak. At a press conference, Republican House Speaker John Boehner said the negotiations were at a “stalemate.”

Representative Boehner added that for the past three weeks, he had been “very guarded” in his comments, because he didn’t want to make it harder to find common ground.

“When I came out the day after the election and made it clear that Republicans will put revenue on the table, I took a great risk,” Boehner said.

But when the White House put out a plan Thursday calling for $1.6 trillion in new taxes over 10 years – double what Boehner was willing to consider in July 2011 – in addition to less than $400 billion in cuts, Boehner called it “not a serious proposal.”

“So right now we're almost nowhere,” the speaker said.

Separately, the House majority leader, Rep. Eric Cantor (R) of Virginia, made clear that the Republicans have leverage, since they still control the House.

“The speaker put new revenues on the table just after the election and said: ‘We get it. The president won his reelection; we won our reelection. We have to now come together,’ ” Representative Cantor said.

Obama has been saying all along he’s willing to compromise on fiscal matters, but his opening bid didn’t reflect that. And that, analysts say, is a demonstration of how Obama has evolved as president. Early in his presidency, he had a tendency to start a major negotiation with what he considered a compromise position – for example, putting Republican-pleasing tax cuts in the stimulus package of early 2009 and not pushing for a “public option” in health-care reform.

“He’s stopped negotiating with himself,” says James Thurber, an expert on presidential-congressional relations at American University in Washington. “It helps to have an election under your belt and somewhat of a mandate to do what he wants to do with fiscal-cliff issues – for example, raising [tax] rates for those making more than $250,000 a year.”

Now, Obama is holding tight to cards he might play later as the clock ticks down to Dec. 31, when a package of spending cuts and tax increases automatically kicks in – the “fiscal cliff” – if Congress doesn’t act.

At his daily briefing Thursday, White House spokesman Jay Carney made clear that some areas are nonnegotiable for the president.

“He will not sign under any circumstances legislation that would keep rates where they are for the wealthiest Americans,” Mr. Carney said.

But he indicated some wiggle room on exactly where the new rate will land. “You can speak hypothetically about 39.5 versus 39.6 [percent],” he said.

Under President Clinton, the highest marginal tax rate was 39.6 percent – the rate that top earners would return to if the Bush-era tax cuts expire at the end of the year. Under the Bush tax cuts, the top marginal rate went down to 35 percent.

For Obama, it was clear that Friday’s campaign-style trip was a respite from the tension back in Washington.

“Obviously, I couldn’t be more honored to be back in the White House,” he said. “But I’m already missing the time that I spent on the campaign visiting towns like this and talking to folks like you.”

• Staff writer David Grant contributed to this report.