Both sides scramble for leverage as clock ticks on U.S. "fiscal cliff"

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By Thomas Ferraro and Richard Cowan | December 7, 2012 6:49 AM EST

With the clock ticking toward an end-of-year deadline, the "fiscal cliff" showdown focused on Thursday on a renewed fight over raising the U.S. debt ceiling as both sides manoeuvred for political and public relations advantage.

A largely partisan procedural scuffle broke out in the U.S. Senate when Republicans tried to provoke a vote related to the debt ceiling, in an apparent effort to reframe the debate on more favourable terms and gain some leverage.

Republicans have worried publicly and privately all week that they were losing the war of appearances in the battle over the cliff, the combination of tax hikes and budget cuts set for the beginning of next year unless Congress passes a law stopping it.

On Thursday, another poll was released showing that Republicans may indeed have reason to worry. The Quinnipiac University survey showed that respondents trust President Barack Obama and Democrats more than Republicans on the cliff talks by a wide margin - 53 percent to 36 percent.

Obama, meanwhile, was playing to his strengths with another in a series of public events of the sort he has used against Republicans in the fiscal cliff fight: meetings with concerned officials followed by a visit with a family in the Virginia suburbs of Washington to illustrate how Republican tax proposals would hurt the middle class.

As for progress in negotiations between Republicans and Democrats, none was immediately visible.

The White House confirmed that there had been a phone call on the subject between Obama and Republican House of Representatives Speaker John Boehner on Wednesday.

But neither side would characterize the conversation or suggest that it was opening up any new area of compromise.

Obama and Democrats in Congress want the tax cuts set to expire at the end of the year to be extended for taxpayers with income below $250,000 (155,744 pounds) a year but not for the wealthiest 2 percent of Americans.

In exchange, the president has said he is willing to consider significant spending cuts wanted by Republicans to "entitlement" programs such as Medicare, the government health insurance plan for seniors.

Republicans are holding out for an extension of all the tax cuts, but they have become increasingly divided over the past two weeks about whether they can prevail in the face of Obama's firm stance and Republican control of only the House but not the U.S. Senate.

TANGLING OVER DEBT LIMIT

The debt ceiling issue - the same one that provoked a showdown in 2011 that led to a downgrading of the U.S. credit rating - has become intertwined with the fiscal cliff debate over the past three weeks, thanks in part to Obama's insistence that Congress give him enhanced power to raise the debt limit, which needs to be raised again in the spring.

"It ought to be done without delay and without drama," White House spokesman Jay Carney said on Thursday of raising the debt ceiling.

Senate Minority Leader Mitch McConnell has said in response that not even Democrats would support giving Obama greater flexibility, and the Republican has been pushing for a vote in the Senate to prove it.

When Senate Majority Leader Harry Reid went ahead and scheduled a vote on Thursday, confident that he had enough support to win on a straight majority vote, the Republicans then backed down, with McConnell demanding that 60 votes be required for passage, more than the Democrats can muster.

No new vote was scheduled. While the measure could come up again, it was dead for the moment.

"We've seen what happened here," Democratic Senator Charles Schumer of New York said on the floor with a smile. "The minority leader filibustered his own bill."

The exchange may be a taste of things to come as Congress moves toward the fiscal cliff deadline.

(Writing by John Whitesides; Editing by Fred Barbash and Eric Beech)

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