Bernanke: 'Fiscal cliff' taking toll

• Tweet

WASHINGTON, Dec. 12 (UPI) -- U.S. Federal Reserve Chairman Ben Bernanke Wednesday warned the threat of going over the "fiscal cliff" already is having an impact on the economy.

As Republicans and the White House continued to wrangle over legislation to keep tax increases and $500 billion in spending cuts from kicking in Jan. 1, Bernanke warned allowing the economy to go over the "fiscal cliff" would wreak havoc, The Hill reported.

"Why are markets volatile? Why is business investment among its weakest levels during the recovery?" Bernanke asked reporters. "All of these things, at least to some extent, can be traced to the anticipation and concern over the fiscal cliff."

Bernanke said lawmakers need to craft a framework for dealing with the deficit/debt problem and not just kick the can down the road.

Earlier, House Republican leaders warned members they may have to return after Christmas to settle the issue.

With negotiations over avoiding the "fiscal cliff" the highest priority of the House, Majority Leader Eric Cantor, R-Va., told reporters after a closed-door meeting with House members Wednesday: "The president seems to be walking us ever so slowly towards the cliff. We're going to stay here right up until Christmas Eve and throughout the time period before the new year because we want to make sure we resolve this in an acceptable way for the American people."

House Speaker John Boehner, R-Ohio, said after Tuesday's exchange of ideas with President Obama, "I remain the most optimistic person in this town but we've got some serious differences."

"Indications are we'll be here after Christmas," House Appropriations Committee chairman Hal Rogers, R-Ky., added.

Party leaders delivered the same message at the meeting, the Washington newspaper The Hill reported Wednesday.

Obama telephoned the Ohio Republican Tuesday night after receiving the speaker's latest proposal for a deal on taxes and spending to avoid the cliff's automatic tax hikes and $500 billion in across-the-board spending cuts due to take effect in 20 days, The Washington Post said.

The offer was virtually identical to the document Obama summarily rejected last week, Republican aides told the newspaper. The Wall Street Journal said an official familiar with the talks characterized Boehner's offer as not "dramatically" different from last week's.

Obama chief negotiator Rob Nabors later rushed to the Capitol to meet with Boehner's top aides, the Post said.

Obama told the ABC news magazine "20/20" Tuesday night if Republicans relent on their resistance to tax rates going up on the wealthy, "then we are prepared to do some tough things on the spending side."

"Taxes are going to go up one way or another," he said, "and I think the key is that taxes go up on high-end individuals."

White House officials said they were still waiting for Republicans to produce an offer that includes higher tax rates on incomes above $250,000.

As part of the talks, the White House told Republicans it would include an overhaul of the corporate-tax code as part of any deal to reduce the deficit, the Journal said.

The corporate-tax suggestion wasn't specific, other than committing to overhauling the corporate tax code next year, officials familiar with the offer told the newspaper.

White House officials, in making the suggestion, cited a corporate-tax plan the administration unveiled in February but said they weren't wedded to its details.