Senate deal forged in flurry of final negotiations

By Julie Pace

Associated Press

Published: Tuesday, Jan. 1 2013 7:33 p.m. MST

President Barack Obama hosts a meeting of the bipartisan, bicameral leadership of Congress to discuss the deficit and economy.

Carolyn Kaster, Associated Press

Enlarge photo»

WASHINGTON — They had 80 hours to finish or fail.

Stuck in a "fiscal cliff" stalemate, trust nearing tatters, President Barack Obama and Senate Republicans changed the game after Christmas. It took the rekindling of an old friendship between Vice President Joe Biden and GOP Sen. Mitch McConnell, an extraordinary flurry of secret offers, a pre-dawn Senate vote on New Year's Day and the legislative muscling that defines Washington on deadline.

The House, of course, still had to weigh in. Although Republicans were resisting giving their approval, the House planned to vote on the Senate measure Tuesday night.

How the final days of private negotiations pulled the country — maybe only temporarily — back from the precipice of the fiscal cliff marked a rare moment of bipartisanship for a divided government. Several officials familiar with talks requested anonymity to discuss them because they were not authorized to discuss the private details publicly.

Obama, having cut short his Christmas vacation in Hawaii, huddled with congressional leaders Friday afternoon at the White House. Talks between the president and House Speaker John Boehner had failed, so Obama put the fate of the fiscal cliff in the hands of McConnell and Senate Majority Leader Harry Reid.

McConnell made the first move. The Kentucky Republican proposed a plan late Friday night that would extend tax cuts expiring Jan. 1 on family income up to $750,000 a year, according to officials. He also wanted to keep tax rates on wealthy estates at 35 percent, slow the growth of Social Security cost-of-living increases, and pay for an offset of the sequester — Congress's term for across-the-board spending cuts __ by means-testing Medicare. His offer did not include the extension of unemployment benefits Obama had demanded.

Democrats balked and began preparing a counteroffer. It called for extending tax cuts for family income up to $350,000, a concession from Obama's campaign pledge to cap the threshold at $250,000. The Democratic leader also insisted that any deal include a way to deal with the sequester, plus an extension of the jobless benefits for 2 million Americans.

The negotiating teams traded ideas back and forth on a wintry Saturday. Shortly before 7 p.m., McConnell presented another offer. He dropped the tax cut threshold to $550,000, put the sequester on the table, and offered a one-year extension of the jobless benefits as long as they were paid for through Social Security savings.

Rather than make a counteroffer, the Senate Democratic negotiating team said it was going home for the night. They reconvened Sunday morning — less than two days before the combination of tax hikes and spending cuts were due to kick in — but still had nothing new to present to McConnell.

Reid's inaction, officials said, was due in part to McConnell's insistence on keeping the tax cut threshold above $500,000, a level Obama refused to agree to.

A frustrated McConnell felt he had one last option. He called Biden, his longtime Senate colleague and frequent negotiating partner, and implored him to step in. Seeking to up the pressure on the White House, McConnell publicly announced that he was reaching out to Biden during remarks from the Senate floor during the rare Sunday session.

Until this late stage, Biden had played a secondary role in the "fiscal cliff" talks. He spent Saturday at his home in Wilmington, Del., and was planning to travel to the Caribbean island of St. Croix with his family for the New Year's holiday.

Obama and Reid both agreed that Biden, a 36-year veteran of the Senate, should take the lead. And once he did, negotiations with McConnell rapidly accelerated.

Around 8 p.m. Sunday, Obama, Biden and staffers met in the Oval Office to discuss what the vice president would deliver to McConnell as the administration's final offer.

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