Local News

Clock ticks to fiscal cliff

Posted December 30, 2012 9:53 p.m. EST
Updated December 30, 2012 11:16 p.m. EST

— With the clock ticking down to the so-called "fiscal cliff" at midnight Monday, negotiations continued into Sunday night, and rank-and-file Congressional members hoped to have a measure to vote on when they reconvene in the morning.

Senate Republican leader Mitch McConnell and Vice President Joe Biden, who is the Senate president, continued negotiating by phone overnight on a raft of tax hikes and across-the-board spending cuts that economists fear could push the fragile economy into recession.

"It's going to be a partial deal. It's going to be an imperfect deal. It's better than just throwing up our hands and giving up," said Rep. David Price, who represents parts of Chatham, Durham, Orange and Wake counties.

 Sen. Dick Durbin, D-Ill., said the two sides remained at odds over the income threshold for higher tax rates and tax levels on large estates. Republicans said that Democratic demands for new money to prevent a cut in Medicare payments to doctors and renew jobless benefits for the long-term unemployed should be financed with cuts elsewhere in the budget. Republicans also balked at a Democratic proposal to use new tax revenues to shut off the across-the-board spending cuts, known as a sequester in Washington-speak.

"The sticking point is simple—Republicans refuse to support a plan that uses new revenue from increased taxes for new, expanded government spending," Sen. Richard Burr, R-N.C., said in a statement. "Raising taxes on the American people so the government can spend more money is unconscionable, and it is not something I will support."

Representatives of the two political parties disagreed over who was to blame for the last-minute negotiations.

"The government by crisis has gone way too far already," Price said. "The tea party leadership brought it to the House of Representatives for the last two years now. We've had a shutdown crisis, a default crisis on the national debt. Now we have the mother of all crises."

"At this point, I think it is clear that the president is not serious about reaching a deal to avoid the fiscal cliff and is using our economy and the livelihood of American families and businesses for what he sees as political gain," Burr said. "Jepoardizing our economic recovery and and being content to let our economy go over the cliff is a clear indication of where the president's priorities lie."

One sign of progress came Sunday as Republicans withdrew a long-discussed proposal to slow future cost-of-living increases for Social Security recipients as part of a compromise to avoid the cliff. Democrats said earlier Sunday that proposal had put a damper on the talks, and Republican senators emerging from a closed-door GOP meeting said it is no longer part of the equation.

In the rare Sunday session, Senate Majority Leader Harry Reid and McConnell had hoped to present a deal that would prevent higher taxes for most Americans while letting rates rise at higher income levels, but the precise point at which that would occur was a sticking point.

Obama had wanted to raise the top tax rate on individuals making more than $200,000 a year and families making more than $250,000 from 35 percent to 39.6 percent. In talks with Republican House Speaker John Boehner, he offered to raise that threshold to $400,000.

The estate tax issue was also particularly tricky since several Democrats, including veteran 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.

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. Obama's proposal to renew the 2-percentage-point payroll tax cut wasn't even part of the discussion.

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.

Lawmakers have until the new Congress convenes to pass any compromise.