Talks to con­tinue Satur­day

Cliff

Austin American-Statesman - - THE SECOND FRONT - Con­tin­ued from A

es­sen­tially ceded fi­nal con­trol to the Se­nate and said the House would act on what­ever the Se­nate could pro­duce.

“The hour for im­me­di­ate ac­tion is here. It is now,” Obama said in the White House brief­ing room af­ter an hour­long meet­ing with the two Se­nate lead­ers, Boehner and Rep. Nancy Pelosi, the House Demo­cratic leader.

He added, “The Amer­i­can peo­ple are not go­ing to have any pa­tience for a po­lit­i­cally self-in­flicted wound to our econ­omy, not right now.”

Se­nate Democrats want McCon­nell to pro­pose an alternative to Obama’s fi­nal of­fer and present it to them in time for a com­pro­mise bill to reach the Se­nate floor Mon­day and be sent to the House.

Ab­sent a bi­par­ti­san deal, Reid said Fri­day night that he would ac­cede to the pres­i­dent’s re­quest to put to a vote on Mon­day Obama’s plan to ex­tend tax cuts for all in­come be­low $250,000 a year and to re­new ex­pir­ing un­em­ploy­ment com­pen­sa­tion for as many as 2 mil­lion peo­ple, es­sen­tially dar­ing Repub­li­cans to block it and al­low taxes to rise for most Amer­i­cans.

Bi­par­ti­san agree­ment still hinged on the Se­nate lead­ers find­ing an in­come level above which taxes will rise on Jan. 1, most likely higher than Obama’s level of $250,000. Quiet ne­go­ti­a­tions be­tween Se­nate and White House of­fi­cials were al­ready drift­ing up to­ward around the $400,000 in­come level be­fore Fri­day’s White House meet­ing. The two sides were also apart on where to set taxes on in­her­ited es­tates.

Sen­a­tors broke from talks on the Se­nate floor with McCon­nell on Fri­day night to say they were more op­ti­mistic a deal was within reach. McCon­nell, White House aides and Reid were to con­tinue talks Satur­day, aim­ing for a break­through as soon as Sun­day.

“We’re work­ing with the White House, and hopefully we’ll come up with some­thing we can rec­om­mend to our re­spec­tive cau­cuses,” said McCon­nell, who has played a cen­tral role in cut­ting sim­i­lar bi­par­ti­san deals in the past.

The emerg­ing path to a pos­si­ble res­o­lu­tion, at least on Fri­day, ap­peared to mir­ror the pro­tracted stale­mate over the pay­roll tax last year.

In that con­flict, House Repub­li­cans re­fused to go along with a short­term ex­ten­sion of the cut, but McCon­nell reached an agree­ment that per­mit­ted such a mea­sure to get through the Se­nate, and the House speaker es­sen­tially forced mem­bers to ac­cept it from afar, af­ter they had left for Christ­mas re­cess.

This time, the con­se­quences are more sig­nif­i­cant, with more than a half-tril­lion dol­lars in tax hikes and across­the-board spend­ing cuts just days from go­ing into force, an event most econ­o­mists warn would send the econ­omy back into re­ces­sion if not quickly mit­i­gated.

With the House set to re­turn to the Capi­tol on Sun­day night, Boehner has said he would place any Se­nate bill be­fore his cham­ber and let the vote pro­ceed. The House could also change the leg­is­la­tion and re­turn it to the Se­nate.

If the Se­nate is able to pro­duce a bill that is largely bi­par­ti­san, there is a strong be­lief among House Repub­li­cans that the same mea­sure would eas­ily pass the House, with a large num­ber of Repub­li­cans. While Boehner was un­able to muster enough votes for his bill that would have pro­tected tax cuts for in­come un­der $1 mil­lion, that was be­cause the mea­sure lacked the sup­port of few if any Democrats, and was a few dozen votes shy of pas­sage with Repub­li­cans alone.

“I’ve got a pos­i­tive feel­ing now,” said Sen. Kay Bai­ley Hutchi­son, RTexas, who said a burst of deal-mak­ing talk broke out as soon as the lead­ers re­turned to the Capi­tol.

De­spite the new op­ti­mism, it was clear that any deal in the next three days would only al­le­vi­ate the worst as­pects of the “fis­cal cliff” while leav­ing big de­ci­sions on taxes and spend­ing to the next show­down, likely by Fe­bru­ary when Congress must raise the government’s debt limit.

A Repub­li­can aide briefed on the meet­ing said the speaker told the other ne­go­tia­tors that House Repub­li­cans would not turn off $100 bil­lion in au­to­matic mil­i­tary and domestic spend­ing cuts in 2013 with­out equiv­a­lent cuts else­where. Also likely to be left out of a deal is any agree­ment to raise the debt limit.

But Boehner ap­peared to rec­og­nize that he was no longer dic­tat­ing the terms. Ac­cord­ing to the aide, the speaker said re­peat­edly, “Let us know what you come up with, and we’ll con­sider it — ac­cept it or amend it.”

Even be­fore the meet­ing, Sen. Max Bau­cus of Mon­tana, chair­man of the Fi­nance Com­mit­tee, said “things are start­ing to gel” around a deal. Aides said the plan, in its early stages, would ex­tend all the ex­pir­ing Bush in­come tax cuts for in­comes up to $400,000.

Some spend­ing cuts would pay for a pro­vi­sion putting off a sud­den re­duc­tion in pay­ments to med­i­cal providers treat­ing Medi­care pa­tients. The deal would also pre­vent an ex­pan­sion of the alternative min­i­mum tax to keep it from hit­ting more of the mid­dle class. It would ex­tend a raft of al­ready ex­pired busi­ness tax cuts, and would re­new tax cuts for the work­ing poor and the mid­dle class in­cluded in the 2009 stim­u­lus law.

Hop­ing to stave off the ex­pi­ra­tion of dozens of farm pro­grams and the im­ple­men­ta­tion of a 1949 farm law that could dou­ble the price of milk, Se­nate and House lead­ers were also work­ing on leg­is­la­tion to ex­tend the cur­rent farm bill.

PETE MAROVICH / BLOOMBERG

Pres­i­dent Barack Obama, in the White House brief­ing room af­ter meet­ing with lead­ers Fri­day, said: ‘The hour for im­me­di­ate ac­tion is here. It is now.’

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