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Cliff deal reached in Senate

Middle-class taxes to stay; Obama remarks rile GOP

– Racing against the clock, the White House reached agreement with congressional Republicans late Monday on a deal to prevent across-the-board tax increases and spending cuts to government programs from taking effect at midnight, according to administration and Senate Democratic officials.

These officials said a New Year’s Eve vote in the Senate to ratify the deal was possible later in the evening, barring opposition from majority Democrats. Vice President Biden headed for the Capitol to brief the Democratic rank and file.

The officials who described the developments did so on condition of anonymity, saying they were not authorized to discuss details. There was no immediate confirmation from aides to the top Republicans in Congress, Sen. Mitch McConnell and House Speaker John Boehner.

The activity at both ends of historic Pennsylvania Avenue was remarkable as the White House and Congress struggled over legislation to prevent a fiscal cliff of tax increases and spending cuts.

Democrats complained that Obama had given away too much in agreeing to limit tax increases to incomes over $450,000, far above the $250,000 level he campaigned on. Yet some Republicans recoiled at the prospect of raising taxes at all.

A late dispute over the estate tax produced allegations of bad faith from all sides – but no swift compromise.

Senate Republican leader Mitch McConnell – shepherding final talks with Biden – agreed with Obama that an overall deal was near. In remarks on the Senate floor, he suggested Congress move quickly to pass tax legislation and “continue to work on finding smarter ways to cut spending” next year.

The White House and Democrats initially declined the offer, preferring to prevent the cuts from kicking in at the Pentagon and domestic agencies alike. Officials said they might yet reconsider, although there was also talk of a short-term delay in the reductions.

While the deadline to prevent tax increases and spending cuts was technically midnight, passage of legislation by the time a new Congress takes office at noon Thursday – the likely timetable – would eliminate or minimize any inconvenience for taxpayers.

For now, more than the embarrassment of a gridlocked Congress working through New Year’s Eve in the Capitol was at stake.

Economists in and out of government have warned that a combination of tax hikes and spending cuts could trigger a new recession, and the White House and Congress have spent the seven seeks since the Nov. 6 elections struggling for a compromise to protect the economy.

Biden, a veteran dealmaker who served in the Senate for 36 years, entered the talks Sunday at McConnell’s request after the Republican leader said he had grown “frustrated” by the pace of negotiations with Reid.

Personal relations between the two Senate leaders have deteriorated after two years of draining battles over the budget. On Sunday, their antagonism produced a confusing day when talks seemed to be collapsing even as the two sides were moving closer to agreement on several fundamental issues.

In the House, Republicans met Monday evening with little information and no idea what to expect in the coming hours. Speaker John Boehner, R-Ohio, convened his party conference together, but little was discussed regarding fiscal matters.

Rep. Steve LaTourette, R-Ohio, a key Boehner ally, derided the emerging agreement as “small-ball” and said “everybody involved should be embarrassed.”

Obama’s bombshell

In his remarks Monday afternoon in the South Court Auditorium of the White House with a contingent of middle-class Americans standing behind him, Obama highlighted progress in the fiscal cliff talks by noting that “just last month, Republicans in Congress said they would never agree to raise tax rates on the wealthiest Americans.”

He continued: “Obviously, the agreement that’s currently discussed would raise those rates, and raise them permanently.”

But he warned that “we still have deficits that have to be dealt with,” and he stressed that tax hikes represent only one part of the fiscal cliff.

“I want to make clear that any agreement we have to deal with these automatic spending cuts that are being threatened for next month, those also have to be balanced,” Obama said.

“And that means the revenues have to be part of the equation in turning off the sequester and eliminating these automatic spending cuts.”

He added: “Now, if Republicans think that I will finish the job of deficit reduction through spending cuts alone ... that will hurt seniors, or hurt students, or hurt middle-class families without asking also equivalent sacrifice from millionaires or companies with a lot of lobbyists, et cetera, if they think that’s going to be the formula for how we solve this thing, then they’ve another think coming.

“That’s not how it’s going to work. We’ve got to do this in a balanced and responsible way. And if we’re serious about deficit reduction and debt reduction, then it’s going to have to be a matter of shared sacrifice.”

Americans “need us to all stay focused on them,” Obama said. “Not on politics. Not on, you know, special interests.”

Minutes after Obama spoke, Sen. Bob Corker, R-Tenn., took to the Senate floor to denounce Obama’s suggestion that Congress consider new tax dollars as an acceptable offset to delaying the sequester spending cuts.

“I know the president has fun heckling Congress,” he said of Obama’s speech. “It’s unfortunate that he doesn’t spend as much time working on solving problems as he does with campaigns and pep rallies.”

A top aide to House Majority Leader Eric Cantor, R-Va., tweeted that Obama was making a deal harder with his speech, in which he observed that he would be president for the next four years and that Republicans have already caved on accepting higher taxes for the wealthy. Both comments drew hearty campaign-style applause from his audience.

“If Obama’s goal was to harm the process and make going over the cliff more likely, he’s succeeding,” tweeted Doug Heye.

Josh Holmes, McConnell’s chief of staff, charged that Obama had changed the terms of negotiations in his speech, writing that the president “just moved the goalpost again. Significantly.”

Sen. John McCain, R-Ariz., delivered a blistering critique, denouncing the speech as “a cheerleading, ridiculing of Republicans exercise.”

“So, what did the president of the United States just do?” McCain asked in a floor speech. “Well, he made a couple of jokes, laughed about how people are going to be here for New Year’s, sent a message of confrontation to the Republicans....

“I guess I have to wonder – and I think the American people have to wonder – whether the president really wants this issue resolved, or is it to his short-term political benefit for us to go over the cliff?”

The Washington Post contributed to this report.

Details of the deal

•Officials in both parties said agreement had been reached to prevent tax increases on most Americans, while letting rates rise on individual income over $400,000 and household earnings over $450,000 to a maximum of 39.6 percent from the current 35 percent.
•Any agreement would also raise taxes on the value of estates exceeding $5 million to 40 percent, as well as extend expiring jobless benefits for 2 million unemployed, and prevent a 27 percent cut in fees for doctors who treat Medicare patients.
•In addition to preventing higher rates for most, any agreement would retain existing breaks for families with children, for low-earning taxpayers and for those with a child in college.
•In addition, the two sides agreed to prevent the Alternative Minimum Tax from expanding to affect an estimated 28 million households for the first time in 2013, with an average increase of more than $3,000. The law was originally designed to make sure millionaires did not escape taxes, but inflation has gradually exposed more and more households with lower earnings to its impact.
•To help businesses, the two sides also agreed to extend an existing research and development tax credit as well as other breaks designed to boost renewable energy production. Details on those provisions were sketchy.
– Associated Press

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