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If cut, fiscal deal will pale against expectations

By Andrew Taylor

Associated Press

Published: Sunday, Dec. 30 2012 12:00 a.m. MST

WASHINGTON — The top Senate negotiators on the effort to prevent the government from going over the "fiscal cliff" offered a pessimistic assessment Sunday barely 24 hours before a deadline to avert tax hikes on virtually every worker.

Senate Republican leader Mitch McConnell said he's yet to receive a response to an offer he made on Saturday evening to Majority Leader Harry Reid, D-Nev., the top Democratic negotiator. The Kentucky Republican said he's reached out to Vice President Joe Biden in hopes of breaking the impasse.

Despite indications of progress in the negotiations, Democrats said Republicans were proposing to slow future cost of living increases for Social Security recipients as part of a compromise to avoid the cliff. Democrats rejected the idea. Republicans declined to confirm the assertion — and one GOP official disputed it — but noted that President Barack Obama said in a television interview broadcast earlier in the day he had advanced such a proposal in earlier talks with Republicans.

"I'm concerned with the lack of urgency here. There's far too much at stake," McConnell said. "There is no single issue that remains an impossible sticking point — the sticking point appears to be a willingness, an interest or courage to close the deal."

Reid said he has been trying to come up with a counteroffer but has been unable to do so. He said he's been in frequent contact with Obama, who in the interview blamed Republicans for putting the nation's shaky economy at risk.

The pessimistic turn came as the House and Senate returned to the Capitol for a rare Sunday session. The fate of the negotiations remained in doubt, two days before the beginning of a new year that would trigger across-the-board tax increases and spending cuts that leaders in both parties have said they want to avoid.

Reid said he remains "cautiously optimistic" but reiterated that any agreement would not include the less generous inflation adjustment for Social Security.

"We have been talking to the Republicans ever since the election was over," Obama said in the interview on NBC's "Meet the Press" that aired Sunday. "They have had trouble saying yes to a number of repeated offers."

McConnell and Reid were hoping for a deal that would prevent higher taxes for most Americans while letting rates rise at higher income levels, although the precise point at which that would occur was a major sticking point.

Also at issue were the estate tax, taxes on investment income and dividends, continued benefits for the long-term unemployed and a pending 27.5 percent cut in payment levels for doctors who treat Medicare patients.

Obama, in the NBC interview, said that while he had been "modestly optimistic" late last week, "we don't yet see an agreement."

As the Senate opened a rare Sunday session, Chaplain Barry Black offered a timely prayer for lawmakers.

"Lord show them the right thing to do and give them the courage to do it," Black said. "Look with favor on our nation and save us from self-inflicted wounds."

Senate negotiators were haggling over what threshold of income to set as the demarcation between current tax rates and higher tax rates. They were negotiating over estate limits and tax levels, how to extend unemployment benefits, how to prevent cuts in Medicare payments to doctors and how to keep a minimum income tax payment designed for the rich from hitting about 28 million middle class taxpayers.

Obama pressed lawmakers to start where both sides say they agree — sparing middle-class families from looming tax hikes.

"If we can get that done, that takes a big bite out of the fiscal cliff. 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 said in the NBC interview.

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