Senate leaders dour on cliff deal; compromise is elusive as fiscal deadline looms

By Andrew Taylor and Alan Fram

Associated Press

Published: Sunday, Dec. 30 2012 11:39 p.m. MST

The estate tax issue was particularly tricky since several Democrats, including veterans like Max Baucus of Montana, disagree with Obama's proposal to increase the top estate tax rate from 35 percent to 45 percent.

Republicans said Democrats pressed to turn off more than $200 billion in the across-the-board spending cuts over the coming two years. This so-called sequester is the punishment for last year's deficit "supercommittee" failure to strike a deal.

Hopes for blocking across-the-board spending cuts were fading and Obama's proposal to renew the 2-percentage-point payroll tax cut wasn't even part of the discussion.

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.

Gone is the talk of a grand deal that would tackle broad spending and revenue demands and set the nation on a course to lower deficits. Obama and Boehner were once a couple hundred billion dollars apart on a deal that would have reduced the deficit by more than $2 trillion over 10 years.

Republicans have complained that Obama has demanded too much in tax revenue and hasn't proposed sufficient cuts or savings in the nation's massive health care programs.

Obama upped the pressure on Republicans to negotiate a fiscal deal, arguing that GOP leaders have rejected his past attempts to strike a bigger and more comprehensive bargain.

"The offers that I've made to them have been so fair that a lot of Democrats get mad at me," Obama said.

Boehner disagreed, saying Sunday that the president had been unwilling to agree to anything "that would require him to stand up to his own party."

The trimmed ambitions of today are a far cry from the upbeat bipartisan rhetoric of just six weeks ago, when the leadership of Congress went to the White House to set the stage for negotiations to come.

But the deal under discussion Sunday appeared unlikely to settle other outstanding issues, including the sequester, which would total more than $1 trillion in cuts over 10 years, divided equally between the Pentagon and other government agencies. And off the table completely is an extension of the nation's borrowing limit, which the government is on track to reach any day but which the Treasury can put off through accounting measures for about two months.

That means Obama and the Congress are already on a new collision path. Republicans say they intend to use the debt ceiling as leverage to extract more spending cuts from the president. Obama has been adamant that unlike 2011, when the country came close to defaulting on its debts, he will not yield to those Republican demands.

Meanwhile, a senior defense official said if the sequester were triggered, the Pentagon would soon begin notifying its 800,000 civilian employees that they should expect some furloughs — mandatory unpaid leave, not layoffs. It would then take some time for the furloughs to begin being implemented, said the official, who requested anonymity because the official was not authorized to discuss the internal preparations.

Lawmakers have until the new Congress convenes to pass any compromise, and even the calendar matters. Democrats said they had been told House Republicans might reject a deal until after Jan. 1, to avoid a vote to raise taxes before they had technically gone up, and then vote to cut taxes after they had risen.

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