Senate negotiators labored late into Saturday over a last-ditch plan to avert the “fiscal cliff,” struggling to resolve key differences over how many wealthy households should face higher income taxes in the new year and how to tax inherited estates.
As the clock ticked toward a Tuesday deadline, the halls of the Capitol were dark and silent. The House and the Senate are shuttered until this afternoon, in part to avoid distractions as the talks over averting sharp tax increases for most American taxpayers entered their final hours.
Proposals back and forth
While Senate Majority Leader Harry Reid monitored developments by telephone, Minority Leader Mitch McConnell arrived at the Capitol shortly after noon. As nightfall approached, top Democratic and Republican aides continued shuttling paperwork with the latest proposals back and forth between the two leaders’ offices, about 60 steps apart.
Under negotiation is a deal that would extend George W. Bush-era tax cuts for nearly all taxpayers but increase rates on top earners. It also would extend unemployment benefits set to expire in January for 2 million people and prevent about 30 million Americans from having to pay the alternative minimum tax for the first time.
Few details before today
McConnell left the Capitol shortly before 7 p.m, revealing few details. “We’ve been in discussions all day, and they continue,” he said. He added, “We’ve been trading paper all day and talks continue into the evening.”
Negotiations were focused on the estate tax and whether the Bush tax cuts should be permitted to lapse on income over $250,000 a year, as Obama vowed during his campaign, or on income over $400,000, a threshold that would affect only the top tax bracket and many fewer households. Senate Republicans have signaled support in recent days for the higher threshold.
Reid and McConnell have set a deadline of about 3 p.m. today for securing a deal. That’s when they’re planning to convene caucus meetings of their respective members in separate rooms just off the Senate floor. At that point, the leaders will brief their rank and file on whether there has been significant progress and will determine whether there is enough support to press ahead with a proposal.
“They both know the clock ends Sunday,” said Sen. Mark Begich, D-Alaska.
If all goes according to plan, the leaders would roll out the legislation tonight and hold a vote by at least midday Monday, giving the House the rest of New Year’s Eve to consider the measure.
In the House, Speaker John Boehner huddled Saturday with his senior staff for two hours but remained on the periphery of the negotiations. Passage in the unpredictable chamber is anything but certain. Boehner told President Obama and congressional leaders Friday he could commit only to considering a Senate-passed bill and suggested that the House may amend that bill and send it back to the Senate.
House consideration of the measure could become another white-knuckle moment. Boehner would like the eventual deal to be passed by a bipartisan coalition that is roughly equally divided between Republicans and Democrats, GOP aides said. Republicans have not supported tax increases since 1990, and conservative activists were already criticizing any deal to raise taxes on the wealthy.
“There is no agreement worthy of the American people to be found in the current Washington charade. Better if everyone went home immediately,” former House speaker Newt Gingrich said Saturday in a statement.
Obama said Saturday that he believed Congress could still head off the automatic tax increases set to kick in on Jan. 1 if lawmakers acted fast.
“Leaders in Congress are working on a way to prevent this tax hike on the middle class, and I believe we may be able to reach an agreement that can pass both houses in time,” the president said in his weekly radio address. He urged Congress to at least pass a short-term measure that would avert major tax increases for most Americans while continuing to press for a comprehensive deal to avoid the imminent fiscal cliff of severe budget cuts and tax increases.
Obama, meanwhile, taped an interview that will air today on “Meet the Press” aimed at keeping pressure on Congress to act. His appearance on the NBC News show is just his second as president; the first came in 2009 at the height of the debate over Obama’s initiative to expand health coverage for the uninsured.
The next deal
The fiscal cliff measure under construction in the Senate, compared with the health law, is much more modest, designed to fix none of the nation’s biggest problems.
If an agreement is reached, taxes would go up a bit for the very wealthy. But there would be no changes to entitlement programs, such as Medicare and Social Security, and no grand strategy to raise more cash through a simpler tax code. Instead of a fresh start for the new Congress and Obama’s second term, Washington is likely to be mired in the battle over the budget for months.
Next up is a debate over the federal debt limit, which is $16.4 trillion. With the debt set to hit the limit Monday, Treasury Secretary Timothy Geithner has signaled that he can juggle the books for about two months before the nation runs out of cash to pay its bills. Republicans have vowed to use the debt limit fight, as they did in the summer of 2011, to demand deep federal budget cuts, this time focused on Medicare and Medicaid, the federal health programs whose costs are soaring as the population ages. But with the fiscal cliff talks likely to produce less than half the new tax revenue Obama is seeking, Democrats are likely to demand additional tax increases as well.
The next few days
Turning the newfound optimism for a deal into an actual deal will take a few dozen hours of deft political and procedural maneuvering through many of the same traps that have so far prevented an agreement.
Whatever party leaders come up with must still go through the Democratic Senate and the Republican House.
Here is a countdown to the deadlines, with key happenings at approximate hours, in D.C. time:
8 a.m. (Pacific time): President Barack Obama will appear on NBC’s “Meet the Press.”
1 p.m.: Senate reconvenes.
2 p.m.: House reopens to debate bills related to veterans rights, education policy and other issues.
3 p.m.: Senate breaks for party caucus meetings to discuss passage of a deal. It could later begin considering a bill to avert parts of the fiscal cliff.
6:30 p.m.: House will vote on unrelated legislation.
TONIGHT OR MONDAY
The Senate expected to vote on a deal, followed later by debate and vote in the House.
If no deal is reached, Bush-era tax cuts and the payroll tax cut expire. Some economists worry the financial markets might swoon.
If no deal is reached, about $100 billion in cuts begin to hit agency budgets.
Noon: A new Congress is sworn in.
Sources: The Washington Post, The Associated Press