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Fiscal Cliff Negotiations Stall on Capitol Hill

8:13 PM, Dec 30, 2012   |    comments
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By: Susan Davis and David Jackson

WASHINGTON - President Obama said he remains hopeful Congress will reach a deal to avert the "fiscal cliff," but negotiations stalled Sunday afternoon on Capitol Hill where Senate leaders are trying to find a compromise to avert year-end tax hikes and spending cuts that threaten U.S. economic recovery.

"At this stage, we are not able to make a counter-offer," said Senate Majority Leader Harry Reid, D-Nev., in response to the most recent offer made by Senate Minority Leader Mitch McConnell, R-Ky., on Saturday evening. "Perhaps as the day moves on I will be able to."

Reid later adjourned the Senate Sunday evening with no deal in sight.

"There is still significant distance between the two sides, but negotiations continue," Reid said, "There is still time left to reach an agreement, and we intend to continue negotiations."

According to Democrats, negotiations hit a wall when Senate Minority Leader Mitch McConnell, R-Ky., asked to include a provision to change the way cost-of-living adjustments are made for Social Security benefit. Republicans took the request off the table, but a visibly frustrated Reid said he would make no more counteroffers.

Republicans said their issue was a Democratic proposal to use revenues raised through higher rates on the wealthy to pay for the impending spending cuts to protect defense and other programs. It would ease the pain of cuts, but do nothing to reduce the deficit, which is why the cuts were put in place to begin with.

"It's pretty shocking," said Corker of the proposal.

Sen. Kay Bailey Hutchison, R-Texas, said the two leaders appear closer than they are far apart on a deal. She said she believes there is broad bipartisan agreement to allow the threshold for tax rates to rise to the $400-$500,000 range. Democrats have offered to raise the threshold for expiring tax rates to $450,000 and above. President Obama campaigned on allowing rates to rise for $250,000 and above earners. The higher threshold was an effort to get more Republicans on board.

"The hurdles are that you can't use tax increases on anyone to pay for more spending," Hutchison said. "I think where new revenue goes is the bone of contention."

McConnell said he is "concerned about the lack of urgency" because he has yet to receive a counteroffer from Reid. "I want everyone to know I'm willing to get this done, but I need a dance partner."

McConnell made several calls Sunday to Vice President Joe Biden "to see if he could help jumpstart negotiations on his side." McConnell and the vice president have had a strong working relationship in previous fiscal negotiations. Reid said he also spoke Sunday with the president.

Just one day remains before all of the George W. Bush era tax rates expire and the first $100 billion in scheduled $1.2 trillion in across-the-board spending cuts take effect at the start of the new year.

If they fail to reach an agreement, Reid is prepared to bring to the floor Monday a stripped down bill to extend the middle class tax rates and unemployment benefits. If it passes the Democratic controlled Senate, it would be sent to the Republican controlled House, where passage is not guaranteed because of GOP opposition.

"Now the pressure's on Congress to produce," Obama said Sunday on NBC's Meet The Press in his first appearance on the show since 2009.

WEB EXTRA: Click the side player to watch President Obama's interview on NBC's "Meet the Press"

Lawmakers in both parties remained optimistic that Senate leaders could find an agreement that could pass both chambers. House Speaker John Boehner, R-Ohio, has said he will not take up a bill unless the Senate can pass it first. Post-election efforts by Obama and Boehner to reach a broader deal to reduce the deficit have evaporated, and Congress is now only in search of a compromise that addresses immediate fiscal issues.

"There are certainly no breakthroughs yet ... but there's certainly a possibility of a deal," Sen. Charles Schumer, D-N.Y., said on ABC's This Week.

"Responsible people on both sides of the aisle do need to try and come together," said Sen. Jon Kyl, R-Ariz., who appeared with Schumer.

Less public attention has been paid to the impending spending cuts - which were enacted as a backstop after Congress failed to find a deficit reduction agreement on its own - but lawmakers voiced increasing concerns about the impact of the cuts if they occur unaltered.

Sen. Lindsey Graham, R-S.C., told Fox News Sunday that he spoke Saturday evening with Defense Secretary Leon Panetta, who voiced concerns about the impending $54 billion in defense cuts for 2013. "He's worried to death," Graham said.

If Congress is unable to send him a proposal, Obama said he will insist that Congress vote on his own, scaled-back plan to extend tax rates and expiring unemployment insurance benefits affecting 2.1 million Americans. Reid said Friday that if he and McConnell can't come to terms on an agreement, he would bring Obama's proposal to the floor on Monday.

"If we can get that done, that takes a big bite out of the fiscal cliff," Obama said. "It avoids the worst outcomes. And we're then going to have some tough negotiations in terms of how we continue to reduce the deficit, grow the economy, create jobs."

Obama granted the Meet The Press interview in part to pressure Congress - particularly the Republicans - into signing off on a fiscal cliff agreement.

The president said he has put up fair offers to the Republicans in the past - "they have had trouble saying yes" - and made clear he would blame the GOP if taxes rise while the government falls over the cliff.

"If Republicans don't like it, they can vote no," Obama said. "But I actually think that there's a majority support for making sure that middle class families are held harmless."

Managing the fiscal cliff is essential to improving the economy, Obama said. The nation is poised to improve economic growth in 2013, he said, "but what's been holding us back is the dysfunction here in Washington."

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