Nov. 12 (Bloomberg) -- Senior lawmakers in both political parties predicted an end to a standoff on the U.S. fiscal cliff that threatens to yield $607 billion in tax increases and automatic spending cuts in January, while saying the details of a debt-cutting deal may come later. 
 
 Senate Budget Committee Chairman Kent Conrad, a North Dakota Democrat, said he thinks lawmakers can reach a “framework agreement” directing tax and spending panels in Congress to craft a broad deal next year that cuts soaring budget deficits. At the same time, he said, they could agree now to a smaller package of spending cuts and some tax-code changes before the year is over. 
 
 If the legislative panels don’t act, all sides would have to agree to a fallback plan that would be more acceptable than the automatic approach that is sparking economic uncertainty, Conrad said yesterday on “Fox News Sunday.” 
 
 “I absolutely believe there is room for agreement,” Conrad said. 
 
 Senator Bob Corker, a Tennessee Republican, said he agrees there is little chance of the automatic policies occurring, and said Republicans are open to some tax increases if Democrats would be willing to embrace a broad reform of the Medicare to yield big cost savings. Short of a broad, long-term deal, he said lawmakers must at least move away from the approach of extending current policies by a few months and then revisiting the entire debate. 
 
 “I hope we’ll at least go substantially down the road toward solving the problem,” said Corker, who also appeared on the “Fox News Sunday” show. 
 
 “Fiscal Cliff” 
 
 Without new legislation, the $607 billion in tax increases and spending cuts -- evenly divided between military and domestic spending -- will take effect starting in January. The tax increases stem from expiration of the tax cuts put in place under President George W. Bush, while the automatic spending cuts were included in legislation last year to try to force both sides to agree on an alternative approach to curbing outlays. 
 
 With just weeks before the year’s end, it’s very unlikely Congress will be able to agree to the type of long-term “grand bargain” that has been elusive for well over a year, said Robert Bixby, executive director of the deficit-cutting Concord Coalition in Washington. At the same time, he said, it’s unlikely both sides will allow a post-election collapse of budget policy. 
 
 “They can’t enact the detailed legislation they need on entitlement and tax reform in the next couple of weeks,” Bixby said. “The real meaning of it won’t come together until next year.” 
 
 President Barack Obama and House Speaker John Boehner both spoke after the Nov. 6 elections about the need to avert the policy shifts in January, each expressing a willingness to compromise while also reiterating their previous positions. 
 
 Tax Cut Extension 
 
 Obama, claiming a mandate from voters after his Nov. 6 re- election, called for an immediate tax-cut extension for people earning less than $250,000 and insisted that top earners pay more. Boehner cited public support for the re-elected House Republican majority and said tax rates must not go up. They will meet at the White House Nov. 16, along with other top congressional leaders in both parties. 
 
 In his remarks last week, Boehner pointed to the possibility of closing tax loopholes to help generate more revenue and signaled his willingness to compromise to reach a resolution. 
 
 Encouraging Comments 
 
 David Axelrod, a senior adviser to Obama’s re-election bid, said yesterday that Boehner’s comments were “encouraging.” 
 
 Boehner “said he wasn’t going to get into details about what he would or wouldn’t accept,” Axelrod said on the CBS “Face the Nation” program. “He didn’t want to foreclose discussions and that was a positive sign.” Axelrod added that the House speaker’s “rhetoric has been encouraging.” 
 
 Asked whether the debt problem can be solved by simply closing loopholes, Axelrod said he wouldn’t “pre-judge” the negotiations. He also said exit polls taken the day of Obama’s re-election support the president’s position on taxes. Axelrod said eliminating loopholes could be a part of a debt deal. 
 
 “I think that the Speaker’s comments have been encouraging and obviously there’s money to be gained by closing some of these loopholes and applying them to deficit reduction so I think there are a lot of ways to skin this cat so long as everybody comes with a positive, constructive attitude toward the task,” Axelrod said. 
 
 Tax Increases 
 
 Democratic Senator Patty Murray said Republicans should accept some tax increases, and that Obama has a mandate to make the tax-code changes he advocates. She also reiterated earlier threats to let the nation go off the fiscal cliff if Republicans won’t budge. 
 
 “We just had an election where President Obama ran on that,” Murray, of Washington, said on ABC’s “This Week” program. “We increased our majority in the Senate with Democratic candidates who said that to solve this problem the wealthiest Americans have to pay their fair share, too. 
 
 “So if the Republicans will not agree with that, we will reach a point at the end of this year where all the tax cuts expire and we’ll start over next year,” she said. 
 
 Automatic Spending Cuts 
 
 The automatic spending cuts, known as “sequestration,” total $1.2 trillion over 10 years from planned spending, including more than $500 billion from defense. They were part of the legislation last year that raised the federal debt ceiling, and were put in place in the event that a congressional “super committee” couldn’t agree on a specific debt-cutting plan. The efforts of that temporary panel collapsed late in 2011. 
 
 Concern that the global recovery will be slowed by a political deadlock over the fiscal changes, and about Greece’s ability to meet debt payments, contributed to declines in stocks last week, though U.S. indexes rose on Nov. 9 on a stronger- than-forecast consumer sentiment reading. 
 
 Last week, U.S. stocks had their biggest weekly decline since June as Obama’s re-election on Tuesday set up a budget showdown with the Republican-controlled House of Representatives. 
 
 All 10 groups in the Standard & Poor’s 500 Index dropped during the week. Utilities and phone companies fell the most amid concern the dividend tax may rise. Bank of America Corp. led financial shares down 3.1 percent and coal companies including Peabody Energy Corp. slid on bets Obama’s re-election will mean more regulation. Hospitals such as HCA Holdings Inc. rallied while insurers fell on speculation Obama will preserve the health-care overhaul he championed. 
 
 The S&P 500 dropped 2.4 percent to 1,379.85 for the week. The Dow Jones Industrial Average slipped 277.77 points, or 2.1 percent, to 12,815.39. While both gauges capped their worst week since June 1, they’re still up 9.7 percent and 4.9 percent, respectively, for the year. 
 
 --With assistance from Richard Rubin, Julianna Goldman and Carter Dougherty in Washington and Lu Wang in New York. Editors: Ann Hughey, Carlos Torres 
 
 To contact the reporter on this story: Laura Litvan in Washington at llitvan@bloomberg.net 
 
 To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net ||||| WASHINGTON — President Obama , emboldened by his decisive re-election and lessons learned over four years in office, is looking to the renewal of budget talks with Republicans this week as a second chance to take command of the nation’s policy debates and finally fulfill his promise to end gridlock in Washington, associates say. 
 
 As he prepares to meet with Congressional leaders at the White House on Friday, aides say, Mr. Obama will not simply hunker down there for weeks of closed-door negotiations as he did in mid-2011, when partisan brinkmanship over raising the nation’s debt limit damaged the economy and his political standing. He will travel beyond the Beltway at times to rally public support for a deficit-cutting accord that mixes tax increases on the wealthy with spending cuts. 
 
 On Wednesday, Mr. Obama will meet with corporate executives at the White House as he uses the nation’s fiscal problems to start rebuilding relations with business leaders. Though many of them backed Mitt Romney, scores have formed a coalition to push for a budget compromise similar to the one the president seeks. He hopes to enlist them to persuade Republicans in Congress to accept higher taxes on the assurance that he can deliver Democrats’ votes for future reductions in fast-growing entitlement programs like Medicare and Medicaid. 
 
 “Every president learns lessons from their successes and failures, and President Obama is no different,” said Dan Pfeiffer, his communications director. “There is no question that lessons were learned in the summer of 2011 that will impact his approach to the presidency for the next four years.” 
 
 And with the election campaign over, the campaign for the Obama legacy begins: Mr. Obama will keep his grass-roots organization in place to “have the president’s back,” as its members like to say, on the budget negotiations and other issues in the second term. Democrats concede that the network has not been a particularly effective legislative lobby to date. But they argue that when it was activated to pass payroll tax cuts and low-interest student loans, the pressure made a difference. 
 
 Ultimately, however, success or failure will depend on Mr. Obama, starting with his attempts to steer negotiations during the lame-duck Congress, which starts Tuesday, to a successful two-part conclusion. 
 
 First, that means averting the “fiscal cliff” created by the coincidental combination of expiring tax cuts and unemployment benefits with across-the-board cuts in military and domestic programs that are set to take effect after Jan. 1. Both parties seek agreement on alternative savings that would be less damaging to the economy than up to $700 billion in immediate tax increases and spending cuts. 
 
 Second, for the long term, success means consensus on a framework to overhaul the tax code and benefit programs in 2013 to control the mounting federal debt. 
 
 Whether Mr. Obama succeeds will reveal much about what kind of president he intends to be in his second term. Beyond the specifics of any accord, perhaps the bigger question hanging over the negotiations is whether Mr. Obama will go to his second inaugural in January with an achievement that starts to rewrite the unflattering leadership narrative that, fairly or not, came to define his first term for many people. 
 
 That story line, stoked by Republicans but shared by some Democrats, holds that Mr. Obama is too passive and deferential to Congress, a legislative naïf who does little to nurture personal relationships with potential allies — in short, not a particularly strong leader. Even as voters re-elected Mr. Obama, those who said in surveys afterward that strong leadership was the most important quality for a president overwhelmingly chose Mr. Romney. 
 
 George C. Edwards III, a leading scholar of the presidency at Texas A & M University who is currently teaching at Oxford University, dismissed such criticisms as shallow and generally wrong. Yet Mr. Edwards, whose book on Mr. Obama’s presidency is titled “Overreach,” said, “He didn’t understand the limits of what he could do.” 
 
 “They thought they could continuously create opportunities and they would succeed, and then there would be more success and more success, and we’d build this advancing-tide theory of legislation,” Mr. Edwards said. “And that was very naïve, very silly. Well, they’ve learned a lot, I think.” 
 
 “Effective leaders,” he added, “exploit opportunities rather than create them.” 
 
 The budget showdown is an opportunity. But like many, it holds risks as well as potential rewards. 
 
 “This election is the second chance to be what he promised in 2008, and that is to break the gridlock in Washington,” said Kenneth M. Duberstein, a Reagan White House chief of staff, who voted for Mr. Obama in 2008 and later expressed disappointment. “But it seems like this is a replay of 2009 and 2010, when he had huge majorities in the House and Senate, rather than recognizing that ‘we’ve got to figure out ways to work together and it’s not just what I want.’ ” ||||| President Barack Obama and congressional Republican leaders are finally prepared to open negotiations this week on the fiscal cliff — an all-important legislative riddle with no easy answers. 
 
 Democrats want to increase tax rates; Republicans say no way. Republicans seek major changes to entitlement programs; Democrats are divided. Republicans want to nullify a package of automatic spending cuts; Democrats won’t go for it without major concessions. 
 
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 reset Murray on fiscal cliff scenario Obama on economy, taxes Boehner: Your move, Obama 
 
 The policy differences are endless, but the scenarios for how it could play out are fairly limited. Here are five ways Congress may navigate the labyrinth: 
 
 1. Go over the cliff 
 
 In gridlocked Washington, this outcome is not only possible, it’s the preference of some in both parties. 
 
 Consider the reasons, from the practical to the political. 
 
 There just isn’t a lot of time before Jan. 1. Congress returns this week but then leaves town for Thanksgiving. After returning from that break, lawmakers will have only four weeks to strike a compromise on issues that have confounded the parties for years. 
 
 Congress usually delivers only when it’s up against a deadline, but if lawmakers do so now they could be viewed as jamming a complex bill into law without much scrutiny. 
 
 House Speaker John Boehner (R-Ohio) has said he doesn’t want retiring and defeated lawmakers to vote on major legislation during the lame-duck session. He would rather temporarily extend all of the tax rates to allow more time next year to overhaul the Tax Code. But Democrats don’t want to renew the rates for the top earners, even for a few months. 
 
 Even if the two sides can come to an agreement on how to handle income tax rates, they’ll have to develop a framework for comprehensive tax reform — and there’s almost no agreement on what that should look like. 
 
 While this debate is raging, Congress also has to deal with other items that aren’t getting a lot of attention but could cause big problems. The pricey alternative minimum tax, which will hit millions of upper-middle-class families, needs to be patched. House Republican leaders want to extend the nation’s farm policy. Corporate tax breaks are about to expire. There’s also the debt ceiling, which will need to be raised in early 2013. And don’t forget the automatic spending cuts to the Pentagon and domestic programs — known as the sequester — which both parties want to avoid but need to find a way to pay for. 
 
 Top Democrats see a strategic advantage in letting the rates lapse. The logic is that, once taxes rise Jan. 1, lawmakers would then be able to say they voted to cut taxes. This could make it easier to attract Republicans who may otherwise feel locked into Grover Norquist’s no-tax-hike pledge. 
 
 Another incentive for Senate Democrats is that they are expected to pick up two seats in the next Congress, giving them a slightly larger majority to negotiate a more favorable deal. 
 
 The economy could drop into a recession by the end of next year if nothing is done. The impact would be significant in the short term — because taxes would rise on every single American — but not catastrophic, some analysts say, as long as Congress reaches agreement within a few weeks and reverses the damage.
– President Obama learned some hard lessons during last year's debt ceiling talks, and he's heading into the new round to avoid the fiscal cliff determined to take his case to the people. Rather than "hunkering down" with congressional leaders behind closed doors for weeks—a strategy that damaged him in 2011—aides tell the New York Times that Obama will travel outside of DC in an effort to ramp up public support for his plan, which combines spending cuts with higher taxes on the rich, with the ultimate goal of breaking through DC's partisan gridlock. (John Boehner seems like he might be agreeable to that.) Talks are scheduled to begin Friday, but Obama will meet with corporate executives on Wednesday in an effort to regain support in the business world, and will take his case to the public sometime after Thanksgiving. Many business leaders are looking for a budget compromise similar to what Obama favors, and the president thinks he can use them to convince congressional Republicans to see things his way. Both the Times and Bloomberg note that on yesterday's talk shows, Republican lawmakers voiced a newfound openness to working with Obama, even including the possibility of raising taxes without actually increasing tax rates for the wealthy. Indeed, Bloomberg reports, leaders from both parties see an end to the standoff on the horizon. (For more, Politico has five possible fiscal cliff scenarios.)