WRAPUP 3-US 'fiscal cliff' talks turn sour, Obama threatens veto

* Obama says Republicans have a personal grudge

* President would veto Republican's "Plan B"

* Senate Republican says deal still possible this week

WASHINGTON, Dec 19 (Reuters) - Talks to avoid a U.S. fiscal

crisis appeared to stall on Wednesday as President Barack Obama

accused Republicans of digging in their heels due to a personal

grudge against him, while a top Republican called the president

"irrational."

As the clock ticks toward a year-end deadline, Obama and

House of Representatives Speaker John Boehner, the top

Republican in Congress, are trying to reach a deal to avert

harsh tax hikes and spending cuts that could trigger a

recession.

Obama said he was puzzled over what was holding up the talks

and told Republicans to stop worrying about scoring "a point

against the president" or forcing him into concessions "just for

the heck of it."

"It is very hard for them to say yes to me," he told a news

conference in the White House. "At some point, you know, they've

got to take me out of it."

The rise in tensions threatens to unravel significant

progress made over the last week in the so-called fiscal cliff

talks.

Boehner and Obama have each offered substantial concessions

that have made a deal look within reach. Obama has agreed to

cuts in benefits for seniors, while Boehner has conceded to

Obama's demand that taxes rise for the richest Americans.

However, the climate of goodwill has evaporated since

Republicans announced plans on Tuesday to put an alternative tax

plan to a vote in the House this week that would largely

disregard th e progress made so far in negotiations.

Obama threatened to veto the Republican measure, known as

"Plan B," if Congress approved it.

Boehner's office slammed Obama for opposing their plan,

which would raise taxes on households making more than $1

million a year and is a concession from longstanding Republican

opposition to increasing any tax rates.

"The White House's opposition to a backup plan ... is

growing more bizarre and irrational by the day," Boehner said

through his spokesman, Brendan Buck.

Boehner expressed confidence the House would pass the

legislation, known as "Plan B," on Thursday. He urged Obama to

"get serious" about a balanced deficit reduction plan.

Global investors are on edge over the talks, and U.S. stocks

fell on Wednesday following Boehner's comments.

An acrimonious presidential campaign that culminated in

Obama's re-election on Nov. 6 has added to the bad blood in

Washington between Obama and congressional Republicans.

The two sides also clashed bitterly last year over the

government's limit on borrowing - known as the debt ceiling - an

episode that nearly led the nation to default on its debt.

On Wednesday, Obama said the fiscal cliff must not get

bogged down with negotiations over the debt ceiling, an issue

that must be dealt with again early next year.

LITMUS TEST

Voting on Plan B will be a litmus test for Republicans on

Boehner's concession to raise tax rates. In a sign conservatives

are coming around to Boehner's position, anti-tax activist

Grover Norquist gave his blessing to the bill.

Obama and Boehner appear to have bridged their biggest

ideological difference but remain hung up on the mix of tax

hikes and spending cuts meant to narrow t h e budget gap.

"What separates us is probably a few hundred billion

dollars," Obama said.

The White House wants taxes to rise on incomes above

$400,000 a year, a concession from Obama's opening proposal for

a $250,000 income threshold.

If a deal is not reached soon, some $600 billion in tax

hikes and spending cuts are set to begin next month.

Senior administration officials described negotiations as at

a standstill and Obama warned he would ask everyone involved in

the talks, "what it is that's holding it up?"

Still, the top Republican in the Senate said resolution

could come by the end of the week.

"There's still enough time for us to finish all of our work

before this weekend, if we're all willing to stay late and work

hard," said Senate Republican leader Mitch McConnell.

Any deal by Obama and the Republican leadership would need

the support of their parties' rank and file.

Many Democrats dislike the president's offer to reduce

benefits to seniors, although some political allies of Obama

have given signs they feel they could swallow this concession.

"I don't like these particular changes," said Democratic

Representative Chris Van Hollen, a member of the House

leadership from Maryland. But he added: "What people are seeing

is the president willing to compromise in order to get things

done."

Most Popular in Business