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Senate leaders scramble for last-minute fiscal deal

By David Espo and Jim Kuhnhenn

Associated Press

LAST UPDATED: 11:57 a.m. HST, Dec 29, 2012

WASHINGTON » Senate leaders groped for a last-minute compromise today to avoid middle-class tax increases and possibly prevent deep spending cuts at the dawn of the new year as President Barack Obama warned that failure could mean a "self-inflicted wound to the economy."

Obama chastised lawmakers in his weekly radio and Internet address for waiting until the last minute to try and avoid a "fiscal cliff," yet said there was still time for an agreement. "We cannot let Washington politics get in the way of America's progress," he said as the hurry-up negotiations unfolded.

Senate Republicans said they were ready to compromise. "Divided government is a good time to solve hard problems_and in the next few days, leaders in Washington have an important responsibility to work together and do just that," said Sen. Roy Blunt of Missouri, delivering his party's weekly address.

Even so, there was no guarantee of success.

In a blunt challenge to Republicans, Obama said that barring a bipartisan agreement, he expected both houses to vote on his own proposal to block tax increases on all but the wealthy and simultaneously preserve expiring unemployment benefits.

Political calculations mattered as much as deep-seated differences over the issues, as divided government struggled with its first big challenge since the November elections.

Speaker John Boehner remained at arms-length, juggling a desire to avoid the fiscal cliff with his goal of winning another new term as speaker when a new Congress convenes next Thursday. Any compromise legislation is certain to include higher tax rates on the wealthy, and the House GOP rank and file rejected the idea when Boehner presented it as part of a final attempt to strike a more sweeping agreement with Obama.

Yet lawmakers have until the new Congress convenes to pass any compromise, and even the calendar mattered. 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.

Nor was any taxpayer likely to feel any adverse impact if legislation is signed and passed into law in the first two or three days of 2013 instead of the final hours of 2012.

Gone was the talk of a grand bargain of spending cuts and additional tax revenue in which the two parties would agree to slash deficits by trillions of dollars over a decade.

Now negotiators had a more cramped goal of preventing additional damage to the economy in the form of higher taxes across the board — with some families facing increases measured in the thousands of dollars — as well as cuts aimed at the Pentagon and hundreds of domestic programs.

Republicans said they were willing to bow to Obama's call for higher taxes on the wealthy as part of a deal to prevent them from rising on those less well-off.

Democrats said Obama was sticking to his campaign call for tax increases above $250,000 in annual income, even though he said in recent negotiations he said he could accept $400,000.

There were indications from Republicans that estate taxes might hold more significance for them than the possibility of higher rates on income.

One senior Republican, Sen. Jon Kyl of Arizona, said late Friday he was "totally dead set" against Obama's estate tax proposal, and as if to reinforce the point, Blunt mentioned the issue before any other in his broadcast remarks. "Small businesses and farm families don't know how to deal with the unfair death tax_a tax that the president and congressional leaders have threatened to expand to include even more family farms and even more small businesses," he said.

Officials said any compromise was likely to ease the impact of the alternative minimum tax, originally designed to make sure that millionaires did not escape taxation. If left unchanged, it could hit an estimated 28 million households for the first time in 2013, with an average increase of more than $3,000.

Taxes on dividends and capital gains are also involved in the talks, as well as a series of breaks for businesses and others due to expire at the first of the year.

Obama and congressional Democrats are insisting on an extension of long-term unemployment benefits that are expiring for about 2 million jobless individuals.

Leaders in both parties also hope to prevent a 27 percent fee cut from taking effect on Jan. 1 for doctors who treat Medicare patients.

There was also discussion of a short-term extension of expiring farm programs, in part to prevent a spike in milk prices at the first of the year. It wasn't clear if that was a parallel effort to the cliff talks or had become wrapped into them.

Across-the-board spending cuts that comprise part of the cliff were a different matter.

Republicans say Boehner will insist that they will begin to take effect unless negotiators agreed to offset them with specified savings elsewhere.

That would set the stage for the next round of brinkmanship — a struggle over Republican calls for savings from Medicare, Medicaid and other federal benefit programs.

The Treasury's ability to borrow is expected to expire in late winter or early spring, and without an increase in the $16.4 trillion limit, the government would face its first-ever default. Republicans have said they will use administration requests for an extension as leverage to win cuts in spending.

Ironically, it was just such a maneuver more than a year ago that set the stage for the current crisis talks over the fiscal cliff.

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serious wrote:
When I was in HS, if any two boys got into a verbal argument and the Coach found out about it he would order the two boys to the gym after classes--yes, I done did it--and he'd put on boxing gloves as big as a football and the other kids would form a ring--we'd swing and swing until totally exhausted--shake hands and forget about it. These people we elect to represent us should put on the gloves--I detest these verbal lashings--and the President is not helping. He won, but it's not a mandate when you get elected by the people on the federal dole. If you ever bought a car or a home, you negotiate--neither side is going to get 100% satisfaction. Personally, I think the Pres should stay out of the battle and let the professional politicians haggle it out. There is supposed to be three levels of government and he is trying to be two of those three--doesn't and hasn't worked.
on December 29,2012 | 09:04AM
Bumby wrote:
Why do we the people of the United States have to pay interest to a third party for money the government prints? People ever wondered what's going on. If we did not have to pay interest to this 3rd party imagine how much money the government will be able to use for its people. Our debt is getting larger and larger which makes interest payments more and more. There will be a day that the interest payment on this debt will be close to our GDP. We are a Greece waiting to happen.
on December 29,2012 | 09:55AM
mcc wrote:
Greece is the future of Capitalism.
on December 29,2012 | 10:30AM
serious wrote:
Well, we voted HIM in TWICE----check his business and economic credentials!!!
on December 29,2012 | 10:44AM
serious wrote:
As an aside I met a European from Italy and asked what they thought of our President and they were happy--but they said HE's telling the EU that THEY have to cut spending and get their house in order. He said Obama should look in the mirror.
on December 29,2012 | 11:47AM
AdmrVT wrote:
Serious: They aren't haggling over the price of a car they are trying to buy -- just how much more in taxes and reductions in benefits they are going to hit you with. The Republicans are playing games -- at everyone's expense. Article says -- "Yet lawmakers have until the new Congress convenes to pass any compromise, and even the calendar mattered. 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." Everyone should refuse to pay any taxes -- they can't jail 50 million people can they? It'll probably take Congress 10 years before they can negotiate legislation to solve the problem. These are our best elected representatives? They don't represent us but their parties and agendas.
on December 29,2012 | 11:10AM
serious wrote:
AdmirVT--I got carried away. You are right, none on them --neither party represents us, it's the influence companies and groups and their own party afficilation. As an aside, look at the senatorial pick from the Gov--now I know nothing about him--but it seems he was picked for his age 40 years old--he can represent now HI for another 40-50 years, become the senior senator and send all the $$ to HI. What a heck of a resume--I'm younger than the other picks!!! But on the article, let's look at the source--AS?? They can pick and choose statements and "analysts" that fit their point of view--Democratic state?
on December 29,2012 | 12:21PM
entrkn wrote:
time to get rid of the fascist republican party
on December 29,2012 | 01:07PM
Changalang wrote:
Exactly, time for American gov't to start functioning again.
on December 29,2012 | 04:59PM
Pacej001 wrote:
Uh, did you miss the last four years? No national budgets produced. Tens of thousands of earmarks in first appropriations bill. Unlimited waste on "green energy" project (green meaning the massive waste of greenbacks). Casual anti-constitutional interference with religious institutions. An abysmal energy policy. ---------- The time for good governance to begin was four years ago, but it hasn't happened yet
on December 29,2012 | 10:10PM
false wrote:
thats what the NDAA and the Drones are for.
on December 29,2012 | 06:28PM
Pacej001 wrote:
So what or you thinking? Purge? Gulag? Gas chambers?
on December 29,2012 | 10:10PM
Anonymous wrote:
Yup. We need to make the Republicans an endangered species. Maybe then they'll get the message.
on December 29,2012 | 10:44PM
64hoo wrote:
eveybodys fault just go over the cliff. then when voting comes around, america get rid of every politician and vote them all out. all 100 senators and every 400 or so people in the house. vote all new people in. and of coarse a better president in 4 years.
on December 29,2012 | 03:48PM
Changalang wrote:
Obama has the GOP Speaker in a kill sack. A bilateral Senate package will cross-over to the House. Reid will take a vote on a bare bones package up or done and the Minority Leader dare not filibuster. Minority Leader McConell will send it over and do the Pontius Pilate. The GOP House Speaker can shelve it, take an up or down vote which will pass on Pelosi Democrat vote strength, OR delay the vote until after the cliff so Repunks don't have to technically vote for tax increases because the Bush tax cuts would've expired. Basically, all will prove lethal to his career. Mess with the Best, go down like the Rest. LOL.
on December 29,2012 | 04:58PM
kainalu wrote:
And as it has been for several months now, the polls continue to show an increasing number of Americans are holding the Republicans responsible: http://www.businessinsider.com/fiscal-cliff-polls-explained-tax-rates-obama-taxes-republicans-boehner-cuts-medicare-2012-12
on December 29,2012 | 05:21PM
Changalang wrote:
Obama will probably get a Super Majority back for his last 2 years. Despite House redistricting, Hoyer has been able to recruit strong Blue Dogs in swing districts to address the stacked deck provided by the GOP. Moving Forward. :)
on December 29,2012 | 05:33PM
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