The Clinton Herald, Clinton, Iowa

AP story section

December 31, 2012

‘Fiscal cliff’ disputes remain as deadline nears

WASHINGTON, D.C. —  The White House and Senate Republicans sorted through stubborn disputes over taxing the wealthy and cutting the budget to pay for Democratic spending proposals as today’s midnight deadline for an accord avoiding the “fiscal cliff” drew to within hours.

Senate Minority Leader Mitch McConnell, R-Ky., spoke repeatedly Sunday to Vice President Joe Biden, a former Senate colleague, in hopes of settling remaining differences and clinching a breakthrough that has evaded the two sides since President Barack Obama’s November re-election. In one indication of the eleventh-hour activity, aides said the president, Biden and top administration bargainer Rob Nabors were all working late at the White House, and McConnell was making late-night phone calls as well.

Unless an agreement is reached and approved by Congress by the start of New Year’s Day, more than $500 billion in 2013 tax increases will begin to take effect and $109 billion will be carved from defense and domestic programs. Though the tax hikes and budget cuts would be felt gradually, economists warn that if allowed to fully take hold, their combined impact — the so-called fiscal cliff — would rekindle a recession.

“There is still significant distance between the two sides, but negotiations continue,” Senate Majority Leader Harry Reid, D-Nev., said shortly before the Senate ended an unusual Sunday session. “There is still time to reach an agreement, and we intend to continue negotiations.”

The House and Senate planned to meet today, a rarity for New Year’s Eve, in hopes of having a tentative agreement to consider. Yet despite the flurry of activity, there was still no final pact.

And in a move that was sure to irritate Republicans, Reid was planning — absent a deal — to force a Senate vote today on Obama’s campaign-season proposal to continue expiring tax cuts for all but those with income exceeding $200,000 for individuals and $250,000 for couples.

Attached to the measure — which the GOP seemed likely to block — would be an extension of jobless benefits for around 2 million long-term unemployed people. The plan was described by Sen. Richard Durbin of Illinois, the chamber’s No. 2 Democrat.

The House and Senate met Sunday ready to debate an agreement or at least show voters they were trying. But the day produced alternating bursts of progress and pitfalls, despite Senate chaplain Barry Black’s opening prayer in which he asked the heavens, “Look with favor on our nation and save us from self-inflicted wounds.”

In one sign of movement, Republicans dropped a demand to slow the growth of Social Security and other benefits by changing how those payments are increased each year to allow for inflation.

Obama had offered to include that change, despite opposition by many Democrats, as part of earlier, failed bargaining with House Speaker John Boehner, R-Ohio, over a larger deficit reduction agreement. But Democrats said they would never include the new inflation formula in the smaller deal now being sought to forestall wide-ranging tax boosts and budget cuts, and Republicans relented.

“It’s just acknowledging the reality,” Sen. Susan Collins, R-Maine, said of the GOP decision to drop the idea.

There was still no final agreement on the income level above which decade-old income tax cuts would be allowed to expire. While Obama has long insisted on letting the top 35 percent tax rate rise to 39.6 percent on earnings over $250,000, he’d agreed to boost that level to $400,000 in his talks with Boehner. GOP senators said they wanted the figure hoisted to at least that level.

Senators said disagreements remained over taxing large inherited estates. Republicans want the tax left at its current 35 percent, with the first $5.1 million excluded, while Democrats want the rate increased to 45 percent with a smaller exclusion.

The two sides were also apart on how to keep the alternative minimum tax from raising the tax bills of nearly 30 million middle-income families and how to extend tax breaks for research by business and other activities.

Republicans were insisting that budget cuts be found to pay for some of the spending proposals Democrats were pushing.

 

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