Progress seen in last-minute 'fiscal cliff' talks

Working against a midnight deadline, negotiators for the White House and congressional Republicans narrowed their differences Monday on legislation to avert across-the-board tax increases.
Associated Press
Dec 31, 2012

Congressional officials familiar with talks between Vice President Joe Biden and Senate Republican leader Mitch McConnell said one major remaining sticking point was whether to postpone spending cuts that are scheduled to begin on Jan 1.

Republicans want to replace across-the-board reductions with targeted cuts elsewhere in the budget, and the White House and Democrats were resisting.

At the same time, Democrats said the two sides were closing in on an agreement over taxes. They said the White House had proposed blocking an increase for most Americans, while letting rates rise for individuals with incomes of $400,000 a year and $450,000 for couples, a concession from President Barack Obama's campaign call to set the levels at $200,000 and $250,000.

Any overall deal was also likely to include a provision to prevent a spike in milk prices with the new year, extend unemployment benefits due to expire and protect doctors who treat Medicare patients from a 27 percent cut in fees.

Both the House and Senate were on track to meet on the final day of the year, although there was no expectation that a compromise could be approved by both houses by midnight, even if one were agreed to.

Instead, the hope of the White House and lawmakers was to seal an agreement, enact it and send it to Obama for his signature before taxpayers felt the impact of higher income taxes or federal agencies began issuing furloughs or taking other steps required by spending cuts.

Regardless of the fate of the negotiations, it appeared all workers would experience a cut in their-home pay with the expiration of a two-year cut in payroll taxes.

Officials who described the negotiations did so on condition of anonymity, citing the confidential nature of the discussions.

A spokesman for McConnell, Don Stewart, said the Kentucky lawmaker and Biden "continued their discussion late into the evening and will continue to work toward a solution." Underscoring the flurry of activity, another GOP aide said the two men had conversations at 12:45 a.m. and 6:30 a.m. Monday.

Unless an agreement is reached and approved by Congress by the start of New Year's Day, more than $500 billion in 2013 tax increases will begin to take effect and $109 billion will be carved from defense and domestic programs

Though the tax hikes and budget cuts would be felt gradually, economists warn that if allowed to fully take hold, their combined impact — the so-called fiscal cliff — would rekindle a recession.

"This whole thing is a national embarrassment," Sen. Bob Corker, R-Tenn., said Monday on MSNBC, adding that any solution Congress would swallow at this late stage would be inconsequential. "We still haven't moved any closer to solving our nation's problems."

In a move that was sure to irritate Republicans, Reid was planning — absent a deal — to force a Senate vote Monday on Obama's campaign-season proposal to continue expiring tax cuts for all but those with income exceeding $200,000 for individuals and $250,000 for couples.

In one sign of movement on Sunday, Republicans dropped a demand to slow the growth of Social Security and other benefits by changing how those payments are increased each year to allow for inflation.

Obama had offered to include that change, despite opposition by many Democrats, as part of earlier, failed bargaining with House Speaker John Boehner, R-Ohio, over a larger deficit reduction agreement. But Democrats said they would never include the new inflation formula in the smaller deal now being sought to forestall wide-ranging tax boosts and budget cuts, and Republicans relented.

"It's just acknowledging the reality," Sen. Susan Collins, R-Maine, said of the GOP decision to drop the idea.

There was still no final agreement on the income level above which decade-old income tax cuts would be allowed to expire. While Obama has long insisted on letting the top 35 percent tax rate rise to 39.6 percent on earnings over $250,000, he'd agreed to boost that level to $400,000 in his talks with Boehner. GOP senators said they wanted the figure hoisted to at least that level.

Senators said disagreements remained over taxing large inherited estates. Republicans want the tax left at its current 35 percent, with the first $5.1 million excluded, while Democrats want the rate increased to 45 percent with a smaller exclusion.

The two sides were also apart on how to keep the alternative minimum tax from raising the tax bills of nearly 30 million middle-income families and how to extend tax breaks for research by business and other activities.

Republicans were insisting that budget cuts be found to pay for some of the spending proposals Democrats were pushing.

These included proposals to erase scheduled defense and domestic cuts exceeding $200 billion over the next two years and to extend unemployment benefits. Republicans complained that in effect, Democrats would pay for that spending with the tax boosts on the wealthy.

"We can't use tax increases on anyone to pay for more spending," said Sen. Kay Bailey Hutchison, R-Texas.

Both parties also want to block an immediate 27 percent cut in reimbursements to doctors who treat Medicare patients. Republicans wanted to find savings from Obama's health care bill as well as from Medicare providers, while Democrats want to protect the health care law from cuts.

 

Comments

Unassumer

Minimum wage is going up but then they're takin' it back and then some.

jon491

State -YES .......Federal -No

Really are you ...

I'll bet it will be a last minute "EUREKA" we have agreed on something thing.

Fromthe419

1970 was the last time minimum wage was relevant, when Nixon took us off the gold standard and broke the Bretton Woods Pact we have seen the erosion of the dollar. Prior to that, a person could work for minimum wage and be able support him/her self. There is no way a person can work a minimum wage job and be able to provide for their own needs yet alone a family. Lets face it folks, the dollar ain't what it used to be. I graduated from HS in 1986, I feel I had more purchasing power working for 3.35 per hour than I do now and I'm making 55k. Every year, it seems my dollar busy less and less

Fromthe419

buys* sorry for the typo

Contango

@ Fromthe419:

A great article with graphs to help prove your point:

http://seekingalpha.com/article/...

When the value of the USD is worth increasingly less, raising wages does little to help because it becomes a wage-price spiral - wages go up, prices go up.

Recession: 2013 or 2014 at the latest.

Fromthe419

Thanks for the link Contango, I blame this on Nixon and the Fed. They keep the printing presses running and our dollar is in a race to zero. We need to get the dollar backed by some kind of commodity...gold, silver, heck make it linked to lumber or something. The era of printing money out of thin air is wrecking the entire world's economy. I'm sorry to say that I see things continuing to get worse, I don't want to say hyperinflation, but it may happen.

Kimo

20 years ago wages were 50% of GDP
2011 wages were 40% of GDP
The non wage people are getting richer, the "wage people" are working for less and getting poorer.
The Bush years saw the biggest shift of wealth thanks to the tax cuts for the wealthy.
It is what it is........

Contango

@ Kimo:

Just have Pres. Obama call up "The Bernank" and tell 'im to print $1M for every adult citizen and then we can all spend our way to prosperity!

Actually, the only age group which has seen a rise in income levels has been the seniors - congratulations Millionaire-next-door!

For decades, thanks to wrongheaded liberal Ponzi schemes, income redistribution has been flowing from younger to older.

The Big Dog's back

Wrong headed Liberal Ponzi schemes? Oh yeah, Vulture Capitalism, the big Ponzi scheme.

OMG.LOL.WT_

The redistribution has been flowing from the poor to the rich!

donutshopguy

I hear a can being kicked as I post.

Contango

At present, the Dow's up 66 pts. "Somebody" knows "something."

mikel

after listening to prezo's speech i would tell him to "hold on" if i were the gop'ers in charge. nothing like placing this whole thing on their shoulders.

shucks

Moderators have removed this comment because it contained Personal attacks (including: name calling, presumption of guilt or guilt by association, insensitivity, or picking fights).

mikel

You?

richrs

I just read on Twitter there will be no vote today.

Dr. Information

Congress gettin raises next year thanks to Obie. The man w no clue.

KURTje

Honestly, kinda like to see em hit SSI. The majority there knew such a better America. They can also cut pay for ALL elected officials. 419 you know.

Fromthe419

Well, it looks as though the can gets kicked down the road until the Debt Ceiling debate. Raising taxes on some with the promise to look at spending at a date to be determined later. Last time I looked at the Debt Clock unfunded liabilities were 123T. Folks, we are a nation in decline...reminiscent of the Roman empire