No Sign Of Fiscal Cliff Deal
With the countdown to the Fiscal Cliff now inside of two days, initial reports from Capitol Hill today don’t seem to hold out much hope for a deal:
Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell still haven’t struck a deal to prevent taxes from rising on wage earners in the new year, sources say, as eleventh-hour negotiations to avert historic tax hikes approach a make-or-break moment Sunday.
Sources close to the discussions say the two men have traded a series of offers but failed to cinch an agreement. And it’s far from clear whether they can by Sunday afternoon, when both men are slated to brief their respective caucuses on the status of negotiations.
Reid (D-Nev.) and McConnell (R-Ky.) have focused on a smaller-scale deal to prevent most income taxes from rising, stop the Alternative Minimum Tax from hitting millions of middle-income earners and head off steep cuts in Medicare payments to doctors. Democrats are also pushing hard to extend jobless benefits for some two million people, while McConnell wants to block a significant expansion of the estate tax.
Gone are hopes for a sweeping deal: The proposals under consideration would do little to control the skyrocketing deficit. And it’s exceedingly unlikely that a proposal would roll back the $109 billion in domestic and defense spending cuts set to take effect in 2013. Defense Secretary Leon Panetta has told senators he expects the defense cuts — which he has long warned would devastate the military — will begin to take effect in the new year..
That leaves the Bush-era tax cuts. Backed by President Barack Obama, Reid has insisted that the lower rates should be allowed to lapse for taxpayers earning more than $250,000 a year, though the president has floated a $400,000 cutoff as a compromise. McConnell has signaled he’d cut a deal that includes some tax hikes, but he almost certainly won’t be party to a deal that would be rejected by the Republican-controlled House.
If there’s no deal, Reid is prepared to push for a Monday vote to extend tax rates for those who earn less than $250,000 — as well as the handful of other expiring provisions, including jobless benefits. The question will be whether Senate Republicans would allow that plan to advance with 51 votes, or if they’ll demand a 60-vote threshold. And even if such a fallback plan cleared the Senate, it’s far from certain it would survive in the GOP House.
At this point, I think it’s fair to say that, despite the optimistic tone we heard from several Senators today on the morning shows, the odds of a deal getting done at this point, even one as unambitious as the one Reid and McConnell are talking about, is pretty low.