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Washington awakens on New Year’s eve to a daunting reality: If lawmakers and the White House can’t broker a last-minute deal on the fiscal cliff, the country will actually go over it.
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It’s not how Americans want to start 2013: with hefty new tax hikes and spending cuts that could send the stock market plummeting, slash defense spending and interrupt an economic recovery that was just beginning to spark.
But after a weekend in which senators haggled over one obstacle to agreement after another, going over the cliff is a real possibility, if not a probability.
And the House, after failing to vote on legislation to hike taxes on millionaires, says it won’t act until the Senate does. Senate Minority Leader Mitch McConnell (R-Ky.) drafted Vice President Joe Biden into the negotiations Sunday to break the logjam, and the two sides continued to trade a series of offers through the night.
Democrats had proposed raising taxes on individuals who make more than $360,000 annually and families whose income is more than $450,000. And McConnell had countered with a tax hike for individuals above $450,000 and couples who earn more than $550,000 earlier in the evening Sunday.
But Democratic sources close to the talks said McConnell would have to go significantly lower to win support from their party, although that would make it more difficult for the GOP leader to win over fellow Republicans. Estate taxes, a chief concern for McConnell, remained a sticking point as well.
The back-and-forth shows the difficult political calculus both sides were making on the eve of a critical deadline. The drawn out negotiations were frustrating to many in both parties who are eager to see an agreement reached.
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“I’ve been here four years and I cannot believe negotiations have reached this level of gridlock. I am fed up with the stalling,” said Alaska Democratic Sen. Mark Begich.
With no deal at hand, Senate leaders were preparing alternative plans to avoid the cliff’s full impact, including a fall-back option floated by Democrats to force through an extension of current tax rates for families who make less than $250,000, as well as new spending measures to extend jobless benefits for two million unemployed Americans. Republicans were still weighing whether they’d demand 60 votes for passage of even a limited measure, though the prospects for such a bill in the GOP-controlled House remained bleak.
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Such a deal wouldn’t fend off the sequester, billions of dollars in cuts to defense and domestic programs slated to begin on Jan. 2 and roll out over the next nine months.
The House Republican leadership moved Sunday night to give itself expedited authority to bring legislation to the floor in case the Senate actually passes a compromise bill Monday.
House Republicans, who turned against their own leadership last week, rallied around Speaker John Boehner (R-Ohio) on Sunday night, giving him a round of applause for his work in negotiating over the fiscal cliff.
But the more both sides negotiated this weekend, the more they seemed to remain in place.
After loud Democratic protests on Sunday, Republicans agreed to take off the table a controversial provision that would have cut Social Security benefits. But more hurdles soon emerged, including over automatic spending cuts set to take place next year, and the rates for estate taxes that are set to balloon if no deal is reached by the new year.
Key to the stalemate is the growing tension between McConnell and Senate Majority Leader Harry Reid (D-Nev.), the pair who took over the fiscal cliff talks Friday following weeks of fruitless discussion between President Barack Obama and Boehner.
