Senate leaders seen 'still very far apart' on cliff talks
WASHINGTON - Congressional negotiators burrowed into their offices on Saturday to see whether they could stop the U.S. economy from falling off of a "fiscal cliff'' in just three days when the biggest tax increases ever to hit Americans in one shot are scheduled to begin.
Aides to Senate Majority Leader Harry Reid, a Democrat, and Senate Republican Leader Mitch McConnell worked through the day on a possible compromise that would set aside $600 billion in tax increases and across-the-board government spending cuts that are set to kick in next week.
A variety of lower taxes are scheduled to expire at the end of Monday, the last day of the year. If allowed to rise, the approximately $500 billion value of the revenue increases would represent a historic hike when taken together.
The combined punch of the tax increases and spending cuts could push the U.S. economy back into recession.
"We're now at the point where, in just a couple days, the law says that every American's tax rates are going up. Every American's paycheck will get a lot smaller. And that would be the wrong thing to do for our economy,'' President Barack Obama said in his weekly radio and Internet address, which was broadcast on Saturday.
McConnell left the U.S. Capitol after spending seven hours in his office. "We've been trading paper all day, and talks continue into the evening,'' he told reporters on his way out.
A source with knowledge of the talks, speaking on condition of anonymity, said: "We are still very far apart with almost no time left on the clock.''
One congressional aide close to the talks said that most of what was being discussed late on Saturday would provide temporary patches to the fiscal cliff dilemma. The negotiations, the aide said, likely could extend into today.
"They continue to go round and round,'' the aide said of the negotiations, with ideas constantly in flux.
The aide, who asked not to be identified, said negotiators were discussing the possibility of putting off for a few months the $109 billion in automatic spending cuts due to start on Wednesday. Those cuts would be divided equally between military and non-military programs. It is feared that they could cause severe disruptions inside federal agencies if allowed to occur.
Earlier last week, talk of a temporary delay in the spending cuts was met with derision by some congressional aides.
The extension of the low income tax rates first put in place under Republican former President George W. Bush would also be on a temporary basis, probably one year, the aide said.
No deal had been reached on the most contentious issue: Democrats' demand that upper-income earners - families making more than $250,000 a year - see their tax rates go up.
Republicans had been opposed to any rate increase, but lately have signaled a willingness to go along with a higher threshold, and a $400,000 figure has been floating around for days.
Under proposals being discussed, top earners could see their income tax rate rise to 39.6 percent, from the current 35 percent, in order to help tame budget deficits.
The aide added that Republicans still had not agreed to Obama's call for extending long-term unemployment benefits, but they were demanding some spending cuts to be included in a stop-gap deal.
Disagreements over what to do about low estate taxes that are expiring also had not been worked out, the aide said.
Unless Congress acts, the tax is set to jump on Tuesday - the first day of 2013 - to 55 percent, with the first $1 million exempted for individuals. Currently, there is a 35 percent tax and a $5 million exemption.