By Sam Goldfarb, CQ Staff

A comment by former President Bill Clinton has prompted leaders of both parties to clarify and cement their positions on looming fiscal issues, with Republicans rallying around a short-term extension of current tax rates and the White House insisting there will be no renewal of upper-income tax cuts.

Republicans touted Clinton’s comment in a CNBC interview on June 4 as a sign that even some Democrats believe the party’s leaders in Congress are unreasonable in rejecting calls to extend the Bush-era cuts. “It’s pretty obvious that the economy needs the certainty of the extension of the current tax rates for at least a year,” Senate Minority Leader Mitch McConnell of Kentucky said in an unusual appearance June 5 at a House GOP leadership news conference.

“That would also give us the time to begin to grapple with something we all agree we need to do on a bipartisan basis, which is to reform the whole tax code,” he said.

In the CNBC interview, Clinton suggested Congress should temporarily extend all of the 2001 and 2003 tax cuts (PL 107-16, PL 108-27) that are set to expire Jan. 1, in order to avoid a sudden shock to the economy at the end of the year as Congress considers a broader agreement on taxes and spending. Although Republicans seized on Clinton’s statements as evidence of potential common ground with some Democrats, the administration moved quickly to redraw distinctions by emphasizing its support for ending tax cuts for the wealthy.

Setting Different Bars

Using stronger language than he has previously, White House spokesman Jay Carney said the president is staunchly opposed to even a temporary deal that maintains tax rates for upper-income earners. “President Obama has been clear about his position and it has not changed,” Carney said. “We should not extend and he will not extend the tax cuts, the Bush-era tax cuts, for the wealthiest 2 percent of the American people.”

Absent congressional action by Jan. 1, the vast majority of taxpayers will see their paychecks shrink and their tax withholding increase significantly in 2013 as a variety of tax cuts with time limitations run their course.

Long in favor of a permanent extension of current income tax rates, some House Republicans have recently indicated a preference for a yearlong extension. They argue that could give lawmakers time to overhaul the tax system more broadly by scaling tax breaks and further lowering rates for individuals and businesses — a strategy that McConnell seemed to endorse on Tuesday.

Republicans have been moving in that direction in recent weeks, and Rep. Dave Camp, R-Mich., said this week he is writing legislation that would extend for at least a year the tax and spending issues that are due to kick in around the start of next year.

Along with expiring tax cuts, lawmakers also face the prospect that nearly $100 billion in automatic spending cuts could be triggered in 2013 thanks to Congress’ failure to reach a deficit agreement in 2011.

Democrats appear to be somewhat behind Republicans in unifying behind a single plan for dealing with the fiscal policy questions that are on the horizon. Taking a hard line, Senate Majority Leader Harry Reid, D-Nev., has said he will not support Republican plans to halt automatic cuts to defense programs unless lawmakers agree to a “balanced” deficit reduction deal that includes revenue increases. But Reid has not said what spending cuts he could support in such a deal, and Democrats are showing divisions over the best way to raise revenue.

Although Obama would happily allow tax rates to increase on incomes above $250,000, many Democrats, including House Minority Leader Nancy Pelosi, D-Calif., have set a higher bar, saying they would like to preserve current tax rates for households earning less than $1 million.

Despite Carney’s assurances, there are also lingering doubts over the commitment of Democrats to end the tax cuts. In 2010, Democrats grudgingly accepted a two-year extension of all 2001 and 2003 tax cuts, citing concerns about the fragile state of the economy.