POLITICS
12/31/2012 09:46 am ET | Updated Dec 31, 2012

Fiscal Cliff Talks Go Through Night With Deal Still Uncertain

WASHINGTON -- Vice President Joe Biden and Senate Minority Leader Mitch McConnell talked deep into Sunday night, but New Year's Eve dawned with the edge of the "fiscal cliff" that much closer and no certain resolution in sight.

The so-called cliff starts just after the new year, when across-the-board cuts mandated by Congress start to take effect and the Bush-era tax cuts expire. Also involved are other tax measures that would largely hit the middle class, and emergency unemployment insurance, which just expired for some 2 million people.

Biden and McConnell began talking after the GOP Senate caucus leader and Majority Leader Harry Reid (D-Nev.) got stuck in negotiations Sunday.

"The leader and the vice president continued their discussion late into the evening and will continue to work toward a solution," a spokesman for McConnell (R-Ky.) said. "More information as it becomes available."

A House Republican aide close to the talks signaled Monday that a deal was very close to getting struck. One GOP Senate source said that while a deal might not get passed before the deadline, the outlines of one would emerge, certainly by Jan. 2, before the stock market opens.

"It might not pass in time, but there will be a deal," the source said.

Discussions faltered over the weekend after Republicans sought to include some cuts to Social Security through a changed measure of inflation. They withdrew that demand under Democratic pressure, and the focus shifted back to tax rates.

Republicans on Sunday said they were looking for a deal that preserved tax cuts for incomes below $400,000 to $500,000, as well as keeping estate taxes at Bush-era levels.

Reports emerged Monday morning that Democrats might be willing to embrace a freeze of rates below $400,000 for individuals and $450,000 for couples.

Some Democrats, such as Sen.-elect Tim Kaine (D-Va.), had campaigned on a $500,000 level, and President Barack Obama had offered a $400,000 cut-off at one point in the talks. But he had also dangled the Social Security inflation change, only to have Democrats yank it back over the weekend.

According to a top Democratic source, the party was pushing for a $360,000 threshold late Sunday for individuals, and a $450,000 threshold for joint filers. Republicans wanted those numbers to be $450,000 and $550,000, respectively.

Democrats also wanted to extend unemployment insurance for a year. Republicans were willing to extend the program for some time, but far less than 12 months. Each side had agreed on keeping the estate tax at 2012 levels. Democrats wanted a permanent patch for the alternative minimum tax while Republicans were willing to sign off on a one-year extension. Some 30 million more Americans would be hit by the AMT, which was originally meant just to tax the wealthy, but was not indexed to inflation.

A major sticking point was whether to raise the country's debt ceiling -- which it will hit soon -- and what to do about the $1 trillion, 10-year budget-cut plan mandated by Congress in the last debt ceiling deal. Democrats were pushing for a year-long extension of the borrowing limit and a two-year delay of the cuts. Republicans didn't want an extension at all and were demanding some concessions, seeing the debt ceiling as their best bargaining chip.

Even if a deal emerges, it would be difficult at this point to get it through the legislative process in time.

The House of Representatives met Sunday, as well the Senate, and after the GOP caucused there, lawmakers left saying it was all in the Senate's hands. But if the Senate, which opens at 11:00 a.m. Monday, manages to pass something, there is no guarantee the House will follow suit.

House Speaker John Boehner (R-Ohio) attempted to pass a tax cut extension for incomes below $1 million earlier this month, and his party balked at even that high level. Boehner would likely have to ignore the sentiments of his party in order to bring a Senate measure up for a vote, and count on Democrats to support it.

That becomes much easier after the first of the year, however, because all taxes will have been raised, and any new rates count only as tax cuts, instead of hikes.

UPDATE: 11:30 a.m. -- Reid opened the remarkable New Year's Eve Senate session offering little in the way of cheer.

"There are a number of issues on which the two sides are still apart. But negotiations are continuing as I speak,” Reid said. “We really are running out of time. Americans are threatened with a tax hike in just a few hours. I hope we can keep in mind our single most important goal is to protect middle-class families.

“Whether or not we reach agreement in the short time we have left, we'll need agreement from both sides [to prevent] taxes going up tomorrow for every family in America,” Reid added. “There are still some issues that need to be resolved before we can bring legislation to the floor.“

Below, a live blog of the latest updates on the fiscal cliff:

01/02/2013 1:11 AM EST

Rep. Tim Huelskamp: Fiscal Cliff Vote Demonstrated 'Significant Divisions' Among Boehner, Cantor

Throughout the day, rumors of a rift between House Speaker John Boehner (R-Ohio) and Majority Leader Eric Cantor (R-Va.) and how it might impact the fate of the Senate-passed fiscal cliff bill dominated reports on Capitol Hill.

Ultimately, the Speaker cast his vote for the bill, which passed the House by an overwhelming vote of 257 to 167. But both Cantor and House Majority Whip Kevin McCarthy (R-Calif.) voted against the bill -- confirming earlier speculation that GOP leadership was far apart with respect to a pathway forward. Despite attempts by Cantor's office to downplay rumors of infighting, some House Republicans said the disagreement was there for all to see.

"I think there's some significant divisions within leadership as demonstrated on this vote," Tim Huelskamp (R-Kan.) told The Huffington Post after the vote.

"I noted that in that first conference around noon where Cantor said he was a no [and] Boehner kind of left it up in the air," he adding, noting that it was during the second caucus meeting on Tuesday evening that Boehner admitted he would vote for the Senate bill without any amendment when members of his caucus pressed him on the issue.

"I think there's a tremendous dissatisfaction within the caucus over what's occurred in the last two years -- so many missed opportunities," Huelskemp continued. "And now at the end of the day, after 25 years, we're going to abandon a clear Republican principled position against tax increases? You can spin it however you want to, but at the end of the day it's a tax increase."

Earlier in the day, Rep. John Fleming (R-La.) also spoke of the discord among the Speaker and Majority Leader.

"The only thing I know is the Leader said that he personally did not support the Speaker [on the fiscal cliff deal]," Fleming said.

Meanwhile, Cantor spokesman Rory Cooper once again tried to quell the rumors following the vote, telling reporters that the Leader was "very proud" of Boehner and the entire Republican conference for "fighting the good fight." But when asked why Cantor couldn't show his support for the Speaker by voting with him on the bill, Cooper conceded Cantor was displeased with the outcome.

"The Majority Leader was not happy with the bill that was passed in the Senate this morning," Cooper said. "He worked all day today to try to craft an alternative today as did the rest of leadership and many members of our conference. [But] it was clear that Harry Reid was not going to allow an amendment to cut spending even though that was sorely needed."

--Sabrina Siddiqui

01/02/2013 12:29 AM EST

House Minority Leader Nancy Pelosi's Role In Fiscal Cliff Deal

Following Tuesday night's passage of the fiscal cliff deal in the House, a Senior Democratic aide shared a glimpse into House Minority Leader Nancy Pelosi's involvement in coming to an agreement over the last 72 hours. Part of that included a review of the final language with President Barack Obama stemming from negotiations between Vice President Joe Biden and Senate Minority Leader Mitch McConnell (R-Ky.) and keeping chained CPI off the table for a scaled-down package.

Read excerpts from the aide's account below:

As the deal came together over December 30 and 31, Leader Pelosi was in continual contact with the President, Vice President and Senator Reid. After her Caucus met early evening on December 30, Pelosi spoke with the Vice President twice and also with the President. Pelosi had a lengthy conversation with the President on New Year’s Eve reviewing the final language from the negotiations and then released a statement late that evening saying that she would present the package to the House Democratic Caucus once the Senate acted.

Following the lengthy Caucus Meeting with the Vice President on January 1, Pelosi consulted with Hoyer and decided she would publicly show her hand to increase pressure on Speaker Boehner. In her tweet, Pelosi stated she had a “strong majority” among House Democrats for the bill and echoed her call earlier in the day for Speaker Boehner to allow and up or down vote.

Following the White House meeting on Friday, December 28, Pelosi spoke by telephone with the President, Vice President, Senators Reid and McConnell separately, and Speaker Boehner. In those conversations, Pelosi stressed that a straight extension of Kyl-Lincoln would not garner the requisite House Democratic votes needed for a final package. Pelosi pushed and successfully secured the 40 percent rate increase to Kyl-Lincoln, which is an additional revenue gain of $19 billion over ten years from high end taxpayers.

In the closing hours of the negotiations, Pelosi continually pushed for additional revenue from the wealthy. She successfully pushed for the Personal Exemption Phaseout (PEP) and the itemized deduction limitation (Pease) to be set at $250k/$300k. These two concessions Pelosi and her Caucus fought for will raise $152 billion over 10 years from high end taxpayers.

Throughout the negotiations, Pelosi made it clear that an increase in the Medicare eligibility age was unacceptable and went public with her views early in the negotiations. As Speaker Boehner and Republicans walked away from another “grand bargain”-sized package, she ensured chained CPI was not a part of this package. Lastly, the final Senate-passed tax agreement includes no cuts to the Affordable Care Act.

--Sabrina Siddiqui

01/01/2013 11:05 PM EST

Just In The Nick Of Time...

@ markknoller :

Bill passes with 37 hours remaining in the 112th Congress.

01/01/2013 11:02 PM EST

No Comment From Boehner

@ rebeccagberg :

Speaker Boehner just left the House chamber. I asked him why he decided to vote in favor of the deal: He did not respond.

01/01/2013 10:59 PM EST

House Passes Deal

@ SabrinaSiddiqui :

The fiscal cliff bill has officially passed the House.

01/01/2013 8:28 PM EST

Senate Bill Includes Help For Troubled Homeowners

The Senate version of the legislation to avert the so-called fiscal cliff is littered with favors for select corporations. But it also includes a prime provision for troubled homeowners who receive mortgage relief from their banks.

Without the special clause, the limited foreclosure relief efforts that are currently in the works would be extinguished. Banks have been extremely reluctant to grant families debt relief on mortgages facing foreclosure. But tax policy is poised to poison any debt relief that borrowers could receive from banks -- unless Congress acts.

Millions of homes are worth far less today than what buyers paid for them during the housing bubble. Banks can often save money for themselves and investors by writing down the value of a troubled mortgage to the current value of the house -- thus averting costly foreclosure expenses. At midnight on January 1, 2013, the tax policy for this relief changed. Any debt that banks forgave would be counted as ordinary, taxable income for the borrower. If a $300,000 mortgage is written down to a $200,000 current home value, the homeowner is suddenly burdened with a tax bill for $100,000 in income.

As a result, a homeowner struggling to pay the bills would be faced with tens of thousands of dollars in taxes. That would destroy any hope of establishing future mortgage debt relief for troubled homeowners, as any bank leniency would result in heavy tax trauma for borrowers.

But the Senate version of the fiscal cliff bill would delay this tax policy change for a year. If the deal passes the House, the few mortgage modifications that are currently in the works will be able to proceed.

-- Zach Carter

01/01/2013 8:09 PM EST

ACU Responds

American Conservative Union Chairman Al Cardenas released the following statement on the latest fiscal cliff proposal:

"The American Conservative Union simply cannot accept or support the Senate Bill as passed this morning, which does nothing to reign in out of control spending. Given the dire financial situation our country faces, ACU would have supported, albeit reluctantly, the Bush era tax cut extensions for those with incomes under $400,000 to $450,000 and supported the Death Tax provisions that maintain the current exemptions and are indexed for inflation. This is vital for our family farms and family-owned businesses. Our nation has a spending problem, not a revenue problem. Rather than do the essential work of cutting spending, the current bill actually adds even more deficit spending. Congress needs to make the hard decisions now for the future of our children and grandchildren. Therefore, ACU recommends that the House take the non-tax provisions out of the Senate Bill and pass it. They should then go back to the drawing board and put together a comprehensive plan to responsibly deal with unemployment insurance, the Farm Bill, special interest tax subsidies and replacing the sequester with targeted spending cuts in a way that would be in line with our conservative values."

01/01/2013 8:06 PM EST

GOP 'Not Batshit Crazy'

@ OKnox :

Dem. Rep. Hastings tells reporters GOP going w. clean up/down vote on Senate deal. "They're crazy but they're not that batshit crazy"

01/01/2013 7:49 PM EST

Confused House GOP Republicans Shifting Back To Senate Deal

After their second conference meeting of the day on the fiscal cliff deal, House Republicans seemed subdued and were beginning to back away from a fresh showdown with the Democratic-led Senate.

Rep. Richard Nugent (R-Fla.) told reporters that House Speaker John Boehner explained to the caucus that Boehner would vote for the Senate bill, if that were the choice.

"I think he showed he's trying to listen to the conference in regards to giving everybody an equal shot at moving something forward," said Nugent. "But you also have to be pragmatic about what's going to pass."

"When you have a bill passed with so many Republicans in the Senate, it probably would get a similar result [in the House]," said Rep. John Fleming (R-La.), comparing the situation to the 2011 end-of-year battle over the payroll tax cuts, which the House balked at then ultimately passed after 89 senators had voted for them -- the same as voted early Tuesday for the fiscal cliff deal.

Republicans seemed to be looking forward to future chances to extract cuts. "We still have more opportunities. We've got the debt ceiling coming, sequestration," Fleming said. "So we're going to get taxes off the table. The president can't say, 'We've go to raise taxes first before we get to spending cuts.' We will have already done that.Now the topic will be spending cuts, from this point out."

It remained undecided whether there would be a vote on the Senate bill or an amended Senate, and whether it would be voted on tonight or Wednesday.

-- Michael McAuliff

01/01/2013 7:41 PM EST

House To Vote On Senate Bill

@ DanaBashCNN :

About to report w/ @AliVelshi : sentiment emerging among house repubs that the house will just vote up or down on senate bill no amendment

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