Fiscal Cliff Negotiations Stall in the Eleventh Hour

As the American people helplessly watch and wait for word from Washington, fiscal cliff talks in the Senate hit and rebounded from various roadblocks Dec. 30—less than 24 hours from the make-or-break deadline. As all bets were placed on Senate Majority Leader Harry Reid (D-Nev.) and Minority Leader Mitch McConnell (R-Ky.) to reach an 11th-hourcompromise that would prevent $500 billion in tax hikes and $200 billion in spending cuts from taking effect Jan. 1, talks reportedly broke down Sunday morning.

Rather than focusing on preventing middle-class tax cuts, Republican leadership decided to include a recalculation of Social Security benefits into its proposal late Saturday evening—an apparent “bargaining chip” to try and push Democrats to consent to a higher earning threshold for the extension of Bush-era tax cuts. The tactic failed and instead wasted valuable time that Senate leaders could have spent reaching a realistic compromise.

Reid approached the Senate floor Sunday afternoon and announced he had no counter offer to the McConnell’s proposal.

“We’re willing to make difficult concessions as part of a balanced, comprehensive agreement,” he said, “but we’ll not agree to cut Social Security benefits as part of a small or short-term agreement, especially if that agreement gives more handouts to the rich.”

After placing a call to Vice President Joe Biden to try and “jump start negotiations on his side,” McConnell retracted the bid altering the Social Security chained consumer price index. Sen. John McCain (R-Ariz.) told reporters his party did not want to appear as if it was fighting for tax cuts for the wealthy at the expense of Social Security recipients.

“It’s not a winning argument to say benefits for seniors versus tax breaks for rich people,” McCain told reporters. “We cannot win that argument.”

Later in the day, a new bone of contention arose—how to deal with the $109 billion in sequester cuts to defense and other spending included in the fiscal cliff. According to senators and aides, Democrats are now willing to compromise on the earnings threshold for tax cuts and allow the Bush-era tax cuts to remain in place for families earning more than President Obama’s proposed $250,000 per year.

“That is gone. The president already said $400,000,” Sen. Kay Bailey Hutchison (R-Texas) told reporters.

Republicans have even showed willingness to compromise on the estate tax, allowing an exemption to apply to $5.2 million.

“It can’t go to a million,” Hutchison said.

But the parties have been unable to agree on the sequester. Democrats want any deal to eliminate two years of automatic spending cuts, not just those in 2013, and allow the new tax revenue from expiring Bush-era tax cuts on the rich to offset the cost. Republicans, however, want additional spending cuts—if not from Social Security then from some alternative proposed by Democrats.

“If you have a two-year moratorium, you are not really getting the heart of the problem, which is spending,” Hutchison said.

Sen. Jon Kyl (R-Ariz.) suggested a bill must address spending cuts to pass the Republican-controlled House. House Speaker John Boehner (R-Ohio) has, in fact, told President Obama that the sequester cannot be eliminated solely through higher revenue.

“You have to look at it from the House perspective,” Kyl said, referring to the sequestration issue. “Do you want a bill to pass the House or not? It would be better if it were done from savings, if you want it to pass the House.”

Although little time remains, negotiations continue. Reid told reporters there will be no vote on Dec. 30, but also told senators they will be spending their New Year’s Eve in the Capitol.

“We’ve all been told not to make plans,” Sen. Claire McCaskill (D-Mo.) told reporters in the Capital on Sunday evening. “We’re all going to be here through tomorrow night, the first, the second, the third and so-on.”

Hopefully for Americans a compromise will be reached in time, but more lawmakers are expressing their doubts. Sen. Joe Lieberman (I-Conn.) said he would be “shocked” if a deal was completed Sunday, and Sen. Barbara Mikulski (D-Md.) said the mood in the Capitol was “grim.” Retiring Sen. Olympia Snowe (R-Maine), who will leave the senate at the end of the week, described the situation as “self-imposed” and a “failure of historic proportions.”

For his part, McConnell hasn’t given up hope, but likes to lay blame on the Democrats.

“There’s no single issue that remains an impossible sticking point,” McConnell said on the Senate floor earlier Sunday. “The sticking point appears to be the willingness and interest or frankly the courage to close the deal. I want everyone to know, I’m willing to get this done, but I need a dance partner.”

Perhaps he should have thought of that before sticking an impossible addendum into his proposal in order to bargain for his wealthy constituents.

As for America, the waiting game continues…