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Capitol Hill leaders to huddle with Obama as clock ticks on fiscal cliff

Post-election comity will meet its first test Friday as President Barack Obama welcomes congressional leaders from both parties to the White House for initial discussions as to how they might avert the looming “fiscal cliff.”

Related: Obama leaves some wiggle room on fiscal cliff

Capitol Hill’s top Democrats and Republicans will huddle with the president to see whether they can make progress toward a deal on taxes and spending, an accomplishment which eluded them for much of the past two years.

Gathered at the White House will be the same cast of characters who were unable to reach a fiscal deal during the last Congress. House Speaker John Boehner, R-Ohio, and Minority Leader Nancy Pelosi, D-Calif., retain their roles, and senators kept Majority Leader Harry Reid, D-Nev., and Minority Leader Mitch McConnell, R-Ky., in theirs as well.

Their talks with Obama, though, assume a new urgency due to the ticking clock that is set to run out in just a few weeks – at the end of this calendar year, when the automatic tax hikes and spending cuts that constitute the fiscal cliff are set to take effect. 

Economists warn that the impact of the automatic spending cuts established in the 2011 debt ceiling deal – which fall harshly upon the defense budget – combined with the expiration of the 2001 Bush-era income tax cuts would threaten to plunge the U.S. into recession.

The president enters these conversations, though, having just won re-election after campaigning on the promise of increasing the tax burden for the wealthiest of Americans.

At a press conference Wednesday at the White House, Obama insisted that any deal with Republicans be “balanced” – his shorthand for increasing taxes on those households earning more than $250,000 per year.

“It is simply unacceptable to go back to policies that failed that stuck the middle class with the bill in order to give very expensive tax cuts to the wealthiest in our country. We can't afford it,” White House press secretary Jay Carney told reporters traveling Thursday with Obama. “And the president will not sign under any circumstances an extension of tax cuts for the top 2 percent of American earners.”

But any final deal will have to pass through a Republican-held House, where conservatives have rejected any proposal that even smacks of a tax hike.

Related: Bipartisan hopes dampened by angry rhetoric on Hill

In the days since the election, Boehner has led the GOP in offering a more conciliatory tone toward Obama. Boehner has said that Republicans are open to the idea of raising revenue through tax reform, as long as that deal is linked with major reforms to shore up the solvency of entitlements like Medicare and Social Security.

The question of whether and how to allow taxes to rise, though, scuttled an overarching deal between Boehner and Obama in 2011, and could again trip up these negotiations.

This time, the stakes are higher.

“We had the same cast of characters before the election, but we have to have a different ending,” said Douglas Holtz-Eakin, a Republican economist and former Congressional Budget Office director. “The capacity of people to look at a deal and not make one is pretty large.”

The immediate challenge facing lawmakers on Friday, he said, involves avoiding the shock to the economy by the sudden onset of the fiscal cliff. That would involve a short-term deal allowing lawmakers time and space to negotiate a full agreement.

Related: CEOs offer Obama support to avoid fiscal cliff

Obama met earlier in the week with leaders in organized labor and business communities to soothe concerns about the coming negotiations, though he faces pressure from progressives to resist the kind of deep budget cuts preferred by Republicans.

“Simply bending revenue and expenditure trajectories closer together should not be the main goal of economic policy,” the left-leaning Economic Policy Institute said in a memo Thursday ahead of the meeting. “Instead, policymakers must seek to boost economic growth and ensure that equitable shares of this growth reach low- and moderate-income households.”

Holtz-Eakin offered some advice, too, as to how to read the tea leaves once the meeting concludes.

“I think the thing to look for is, when they come out, what are they talking about? If they're talking about the big deal and not the cliff, I, personally, think they're a danger to America,” he said, meaning to suggest lawmakers and the president should focus on the more immediate challenge of the fiscal cliff. “If they're talking about replacing the sequester, that's more encouraging.”