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Fiscal Cliff

Hours after the U.S. hit the fiscal cliff and a day before a new Congress would’ve had to start over, a late-night House vote averted big tax hikes and spending cuts.

In the 257-167 vote late Tuesday, 172 Democrats and 85 Republicans favored the bill; 16 Democrats and 151 Republicans opposed it.

The approved plan maintains tax cuts for individuals earning less than $400,000 per year and couples earning less than $450,000. It will raise tax rates for those who make more — marking the first time since 1993 that federal income tax rates have gone up for any Americans, according to the Tax Foundation.

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Senate Republicans and Democrats remain far apart in their effort to avert a year-end combination of spending cuts and tax increases that could trigger a new recession, Majority Leader Harry Reid said Sunday.

“There’s still significant distance between the two sides, but negotiations continue,” Reid said as Congress held a rare Sunday session in a bid to avoid the so-called fiscal cliff. “There’s still time left to reach an agreement, and we intend to continue negotiations.”

No votes will be held Sunday, but Reid said there may be further announcements when the Senate reconvenes Monday morning: “I certainly hope so.”

With barely a day left to avert what economists predict will be a one-two punch to the U.S. economy, talks hit what a Democratic source called a “major setback” when Republicans insisted that changes to how Social Security benefits are adjusted for inflation be included. Republicans have dropped that demand, but “they never should have been on the table to begin with,” said Reid, D-Nevada.

Using what’s known as “chained CPI” would change the way Social Security benefits are adjusted for inflation, meaning that future Social Security recipients would receive less money over time. Democrats consider this prospect a “poison pill,” the source said, and GOP senators said later it wouldn’t be included.

“If that is a show-stopper for the majority leader, we will take that off the table,” New Hampshire Sen. Kelly Ayotte told reporters after coming out of a Republican caucus meeting Sunday afternoon.

With the clock running down, Senate Minority Leader Mitch McConnell appealed to Vice President Joe Biden to help “jump-start” negotiations after complaining that he had received no response to an offer he put on the table Saturday night.

“I want everyone to know I’m willing to get this done, but I need a dance partner,” said McConnell, R-Kentucky. McConnell and Biden, who served together in the Senate for more than two decades, were having a “pretty fruitful” conversation Sunday afternoon, said Sen. Bob Corker, R-Tennessee.

Reid said earlier that McConnell has shown “absolutely good faith” in the talks, but “it’s just that we are apart on some pretty big issues.”

If nothing gets done before Monday night at midnight, the expiration of the Bush administration’s 2001 and 2003 tax cuts will increase tax rates, while $110 billion in automatic cuts to domestic and military spending — the result of the 2011 standoff over raising the federal debt ceiling — will start to kick in. The nonpartisan Congressional Budget Office predicts the combined effect could dampen economic growth by 0.5%, possibly tipping the U.S. economy back into a recession and driving unemployment back over 9%.

In an interview aired Sunday on NBC’s “Meet the Press,” President Barack Obama blamed Republicans for the stalemate that brought lawmakers back to Capitol Hill on a weekend. Obama urged the GOP to drop its opposition to tax increases on top earners and cut a last-minute deal.

“They say that the biggest priority is making sure that we deal with the deficit in a serious way. But the way they’re behaving is that their only priority is making sure that tax breaks for the wealthiest Americans are protected,” he said. “That seems to be their only overriding, unifying theme.”

Obama told NBC that could cost the average middle-class family about $2,000. He said the Senate should go ahead and vote on legislation to make sure middle-class taxes are not raised and that 2 million people don’t lose unemployment benefits.

“If we can get that done, that takes a big bite out of the fiscal cliff,” he said. “It avoids the worst outcomes.”

During the interview, Obama said he was willing to consider using chained CPI to adjust Social Security — even though it was “highly unpopular among Democrats” and opposed by the AARP, the powerful lobby for seniors.

“In pursuit of strengthening Social Security for the long term, I’m willing to make those decisions,” Obama said. “What I’m not willing to do is to have the entire burden of deficit reduction rest on the shoulders of seniors, making students pay higher student loan rates, ruining our capacity to invest in things like basic research that help our economy grow. Those are the things that I’m not willing to do.”

But the Democratic source, who did not want to be identified because of the closed nature of the talks, said members understand Obama proposed using chained CPI as an element of a larger deal that also would change how the federal debt ceiling is adjusted — an element no longer included in the plans.

Most Democrats oppose chained CPI, but many were wiling to go along with it as part of a larger deal, the source said.

On taxes, meanwhile, Democrats are arguing that taxes should go up for those making $250,000 or more, though some discussions have involved the possibility of raising that figure to a $400,000 threshold.

Many Republicans have opposed any increase in tax rates. House Speaker John Boehner, R-Ohio, suffered a political setback by offering a compromise — a $1 million threshold for the higher rates to kick in — that his GOP House colleagues refused to support.

After Obama’s NBC interview, Boehner said the president needs to stand up to his own party and insisted it was the president “who has never been able to get to ‘yes.’”

“I am pleased Senators from both parties are currently working to find a bipartisan solution that can finally pass that chamber,” Boehner said in a statement issued by his office. “That is the type of leadership America needs, not what they saw from the president this morning.”

Sen. Chuck Schumer, D-New York, told ABC’s “This Week” he thought the chances of a short-term, last-minute deal brokered by Senate leaders were better than 50-50.

“I’ve been a legislator for 37 years, and I’ve watched how these things work on these big, big agreements,” Schumer said. “They almost always happen at the last minute.”

And Sen. Lindsey Graham, R-South Carolina, said the chances are “exceedingly good” that some type of deal will be reached by Monday night.

“I think, whatever we accomplish, political victory to the president, hats off to the president. He stood his ground. He’s going to get tax rate increases, maybe not $250,000, but upper-income Americans,” Graham said on “Fox News Sunday.”

“And the sad news for the country is that we have accomplished little in terms of not becoming Greece or getting out of debt.”

Other Republicans argued Sunday that Obama’s plan hasn’t done enough to limit spending.

“The president is doing nothing about the addiction that his administration has to spending. He’s the spender in chief,” Sen. John Barrasso of Wyoming said on CNN’s “State of the Union.”

But Obama told NBC that he has cut more than $1 trillion in spending and offered another $1 trillion-plus in additional cuts “so that we would have $2 of spending cuts for every $1 of increased revenue.” He said the majority of Americans have made clear they support his calls for “a balanced approach” that would increase taxes on the wealthy.

Former Democratic Party chairman and 2004 presidential contender Howard Dean told ABC that heading over the cliff would not be so bad, calling it a “fiscal curb” instead.

“You go back to the Clinton tax rates, and you make some significant cuts. And you cut the Defense Department, which hasn’t been cut in 30 years,” said Dean, a former Vermont governor. Meanwhile, going over the cliff gives Obama more leverage, “because then all of sudden, middle-class people’s taxes are going to rise, and that’s going to be bad for every politician in Washington.”

“Maybe they’ll actually get something done,” he said. “But I think, at this point, at this late hour, I think almost any deal they come up with is worse than going over the cliff.”

But Sen. Olympia Snowe, R-Maine, told CNN’s “State of the Union” that she expects Congress will vote to extend tax cuts for incomes below $250,000 — perhaps below $400,000 — before midnight Monday. A Senate agreement “would build momentum” for the move in the House, she said.

“I think it would be horrific for the country if at this time, the final days of this legislative session that already has reached historic proportions of failure, that we would now culminate in failure to extend these tax cuts,” said Snowe, who is on her way out of office.

-CNN reporting

The fiscal cliff negotiations are going down to the final days.

State treasurer discusses fiscal cliff

Christmas break is a mere memory now as Republicans are ordered back to Washington by Sunday night, hours before we fall off the “fiscal cliff.”  When the automatic spending cuts and tax hikes take effect, every American family will feel it in their pocket books: Rich, poor, or in the middle.

President Barack Obama and congressional leaders will discuss the looming fiscal cliff impasse Friday at the White House, aiming for a last-minute deal to stave off automatic tax increases and spending cuts.

The 3 p.m. meeting — which will include Obama, Vice President Joe Biden, House Speaker John Boeher, House Minority Leader Nancy Pelosi, Senate Majority Leader Harry Reid and Senate Minority Leader Mitch McConnell — will come days before the deadline to reach a deal, and after another day of Republicans and Democrats blaming each other for the stalemate.

White House spokeswoman Amy Brundage confirmed the meeting, but did not elaborate. Boehner spokesman Brendan Buck and McConnell spokesman Don Stewart both tried to put the onus on their rival political party — in the former case urging the Democratic-led Senate to pass a bill approved by the GOP majority in the House, and in the latter asking for a detailed proposal from Obama.

Earlier Thursday, McConnell said his side won’t “write a blank check for anything Senate Democrats put forward just because we find ourselves at the edge of the cliff.”

While a Senate Democratic leadership member said such details would be forthcoming, two White House officials said Obama will not send a fiscal cliff measure to Congress.

Reid, the Nevada Democrat, argued that Republicans undermined a potentially major agreement over the past two years by refusing to compromise on their opposition to higher tax rates for the wealthy. Hours before Friday’s meeting was announced, he was doubtful there would be a deal by January 1.

“I don’t know, time-wise, how it can happen now,” Reid said.

Democrats, GOP challenge each other to act first

The Consumer Confidence Index sank Thursday amid growing fears the sides won’t come together. If they don’t, economists have warned it could cause another recession.

At the least, hopes for an imminent so-called grand bargain that would address chronic federal deficits and debt appeared dashed right now, leaving it to the White House and legislators to work out a less ambitious agreement.

The principal dispute continues to be over taxes, specifically the demand by Obama and Democrats to extend most of the tax cuts passed under President George W. Bush while allowing higher rates of the 1990s to return on top income brackets.

Obama campaigned for re-election on keeping the current lower tax rates on family income up to $250,000, which he argues would protect 98% of Americans and 97% of small businesses from rates that increase on income above that level.

Republicans oppose any kind of increase in tax rates, and Boehner suffered the political indignity last week of offering a compromise — a $1 million threshold for the higher rates to kick in — that his GOP colleagues refused to support because it raised taxes and had no chance of passing the Senate.

Last Friday, the president proposed the scaled-back agreement that included his call for extending tax cuts on households with incomes under $250,000, as well as an extension of unemployment insurance.

McConnell told Obama in a telephone conversation Wednesday that he must see details of a proposal before he can figure out how to proceed on a Senate vote.

However, a senior Democratic Senate source said Thursday that McConnell must first work things out with House Speaker John Boehner before Democrats divulge more.

Such squabbling has left many doubtful there will be a deal before the fiscal cliff takes effect. Reid criticized Boehner’s insistence the Senate act on House measures, saying Democrats and Republicans have to agree on something together.

“We are in the same situation we’ve been in for a long time,” Reid said. “We can’t negotiate with ourselves.”

Both sides play the ‘blame game’

Reid said Boehner wants to wait until after the new House re-elects him as speaker early next month before proceeding with a compromise — one that will need support from both Democrats and Republicans to pass.

Boehner is “more concerned about his speakership than putting the country on firm financial footing,” Reid claimed.

In response, Boehner spokesman Michael Steel said Reid should stop talking and instead take up legislation passed by the House to avert the fiscal cliff. This comes a day after Boehner’s leadership team issued a statement saying the Senate must go first — either by passing or amending the House-passed proposal — and only then will they act, an assertion Buck repeated Thursday evening.

Reid and Democrats reject the GOP proposals, which would extend all tax cuts passed under former President George W. Bush and revamp the spending cuts of the fiscal cliff. They’ve called them insufficient, shifting too much deficit reduction burden on the middle class.

Instead, Reid called on Boehner to allow a vote on a Senate-passed measure to implement Obama’s plan to extend tax cuts to the $250,000 threshold.

However, McConnell rejected that possibility Thursday, as he sought to focus the debate on revising House-passed measures.

One possibility is the fiscal cliff takes effect and taxes go up in January, then Congress steps in to bring tax rates back down for at least some people — allowing them to say they’re lowering taxes, even if taxes for some wealthy people are higher in 2013 than they were in 2012. But retiring Republican Rep. Steve LaTourette of Ohio calls that scenario little more than a political game.

“Nobody is willing to pull the trigger (because) everybody wants to play the blame game,” LaTourette said. “This blame game is about to put us over the edge.”

Polls show most back Obama

Obama and Democrats have leverage, based on the president’s re-election last month and Democratic gains in the House and Senate in the new Congress. In addition, polls consistently show majority support for Obama’s position on taxes.

The Gallup daily tracking poll released Wednesday showed 54% of respondents support Obama’s handling of the fiscal cliff talks, compared with 26% who approve of Boehner’s performance.

“We believe very strongly a reasonable package can get majorities in both (chambers),” a senior White House official said. “The only thing that would prevent it is if Sen. McConnell and Speaker Boehner don’t cooperate.”

Anti-tax crusader Grover Norquist has vowed to back primary challenges against Republicans who violate his widely signed pledge not to raise taxes. Even if a deal is reached, he predicts budget showdowns will continue — every time the government needs more money to operate.

“There the Republicans have a lot of clout because they can say we’ll let you run the government for the next month, but you’ve got to make these reforms,” he said this week.

On Wednesday, Treasury Secretary Timothy Geithner told Congress the government would reach its borrowing limit at year’s end, but could take steps to create what he called “headroom” for two months or so.

However, Geithner said uncertainty about the fiscal cliff and deficit negotiations make it hard to predict precisely how long government measures to address the situation will last.

Crisis two years in the making

The possibility of a fiscal cliff was set in motion over the past two years as a way to force action on mounting government debt.

Now, legislators risk looking politically cynical by seeking to weaken the measures enacted to try to force them to confront tough questions regarding deficit reduction, such as changes to government programs like Social Security, Medicare and Medicaid.

The two sides seemingly had made progress early last week on forging a $2 trillion deficit reduction deal that included new revenue sought by Obama and spending cuts and entitlement changes desired by Boehner.

Obama’s latest offer set $400,000 as the income threshold for a tax rate increase, up from his original plan of $250,000. It also had a new formula for the consumer price index — called chained CPI — that wraps in new assumptions on consumer habits in response to rising prices, such as seeking cheaper alternatives, and would result in smaller benefit increases.

Statistics supplied by opponents say the change would mean Social Security recipients would get $6,000 less in benefits over the first 15 years of chained CPI. Liberal groups have openly challenged the plan, calling it a betrayal of senior citizens who contributed all their lives for their benefits.

Boehner appeared to move on increased tax revenue, including higher rates on top income brackets and eliminating deductions and loopholes. But his inability to rally all House Republicans behind his plan last week raised questions about his role and what comes next.

Reid and other Senate Democrats say House Republicans must accept that an agreement will require support from legislators in both parties, rather than the GOP majority in the House pushing through a measure on its own.

Some House Republicans have said they would join Democrats and support the president’s plan in hopes of moving past the volatile issue to focus on spending cuts and entitlement reforms they seek.

- CNN contributes to this report.

President Obama is expected to send to Congress on Thursday a proposal for a scaled-back agreement to avoid some of the so-called “fiscal cliff.”

The president returned to the White House from a vacation in Hawaii on Thursday morning. He got back with just a few days left to reach a budget deal. If he and lawmakers don’t reach an agreement by the end of the year, sharp tax hikes and deep spending cuts will automatically kick into effect.

The president wants to raise taxes on families that earn $250,000 or more a year, but Republicans say any increases will hurt the economy.

The Democratic-controlled U.S. Senate reconvened on Thursday, but the Republican-controlled House remains on Christmas break. Members were warned they could be called back on 48 hours notice.

The president talked by phone on Wednesday night to the top Republican and Democratic leaders in the House and Senate. Democratic Majority Leader Harry Reid says it looks like our country will go over the “cliff.”



President Barack Obama spoke separately Friday with Speaker John Boehner and the top Senate Democrat to try to salvage a fiscal cliff deal by the end of year, after Republican disarray in the U.S. House put the negotiations in limbo.

In a previously unscheduled statement to reporters, Obama outlined a possible agreement that he said would include protecting middle-class Americans from a tax hike, extending unemployment benefits and setting a framework for future deficit reduction steps.

He called on Congress to pass the agreement after a Christmas break so he can sign it before the end of the year, when the fiscal cliff arrives in the form of automatic tax increases and deep spending cuts.

“Laws can only pass with support from Democrats and Republicans,” Obama said in urging both sides to compromise.

The president planned to fly with his family to Hawaii on Friday night for the holiday and return to Washington after Christmas, while House and Senate members also headed home with plans to return on December 27 if needed.

Boehner’s spokesman said the speaker will be “ready to find a solution that can pass both houses of Congress” when he returns to Washington.

While congressional leaders continued to bicker Friday over the next step, the president’s phone discussion with Boehner and a White House meeting with Senate Majority Leader Harry Reid signaled an attempt to provide the nation and investors with hope that an agreement can be reached.

An aide to Reid said the short-term proposal to avoid the fiscal cliff should include extending tax cuts for middle-class families and unemployment insurance while delaying the automatic spending cuts set to take effect in the new year.

Obama acknowledged what had become obvious: the broader deficit reduction deal he seeks will likely come in stages, rather than in the so-called grand bargain he and Boehner have been negotiating.

The main issue of disagreement continued to be taxes, specifically whether rates should go up on top income brackets for the wealthiest Americans as part of an agreement to reduce the nation’s chronic federal deficits and debt.

Without a deal, the fiscal cliff could trigger a recession, economists warn. Stocks closed down sharply on Friday over the latest impasse in the deficit talks, a sign of investor fears of a slowdown as the nation slowly continued to emerge from recession.

Earlier Friday, Reid called for House Republicans to quickly approve a Senate plan championed by Obama that would extend tax cuts for family income up to $250,000 while allowing rates to return to higher levels of the 1990s above that threshold.

His Republican counterpart, Sen. Mitch McConnell of Kentucky, responded that the Senate should instead take up a House Republican measure extending the tax cuts for everyone as a temporary move before negotiations next year on broader tax reform.

The GOP revulsion over any kind of tax rate increase has stymied deficit negotiations for two years and led to unusual political drama, such as McConnell recently filibustering his own proposal and Thursday night’s rebuff by House Republicans of an alternative tax plan pushed by Boehner, their leader.

Boehner said at a news conference Friday that his Republican colleagues refused to back his plan, which would have extended all tax cuts except for income over $1 million, because of fears of being blamed for a tax increase.

“They weren’t taking it out on me,” he said. “They were dealing with the perception that somebody might accuse them of raising taxes.”

The lack of backing by his own caucus was a political blow to Boehner and raised more questions than answers about what happens next in the tough negotiations with Obama on either a broad deficit reduction agreement or a smaller step to avoid the fiscal cliff.

A senior Democratic Senate source said scenarios under consideration by the party include trying to work out short-term or comprehensive agreements now, or going into next year — and over the fiscal cliff — without a deal to quickly pass a compromise plan in the new Congress that convenes on January 3.

Waiting until next year would make the vote a tax cut from the automatic higher rates that will take effect under the fiscal cliff, instead of the current situation of extending some cuts and having top rates go up, the source noted.

In addition, Democrats will have two more seats in the new Senate and a stronger House minority, as well as increased pressure on Republicans to keep taxes low on middle class Americans, according to the source.

Trying to hammer out a deal now means working with limited time and stronger Republican contingents in both chambers, the source said.

Boehner made clear Friday that the negotiations with Obama on a broad deficit reduction agreement hit an impasse this week when both sides offered their “bottom line” positions that included major concessions — but remained a few hundred billion dollars apart.

With his alternative plan torpedoed by his own party, Boehner said it now is time for Obama and Senate Democrats to come up with a solution.

Boehner also denied a reporter’s suggestion that he is walking away from further talks, but he offered no timetable or mechanism for resuming discussions.

In the Senate, Reid said all House measures on the fiscal cliff so far have failed to meet the minimum demands of Obama, such as wealthy Americans paying more to prevent an increased burden on middle-class families.

“I like John Boehner, but gee whiz, this is a pretty big political battering that he has taken,” Reid said, calling on the speaker to allow a vote on the Senate-passed Obama plan. “It will pass. Democrats will vote for it. Some Republicans will vote for it. That is what we are supposed to do.”

On Thursday night, the House passed a measure that would reduce the impact of the fiscal cliff’s automatic spending cuts on the military.

However, the chamber then went into recess when it was clear Boehner lacked the votes for his separate tax plan that maintained cut rates on income up to $1 million.

Conservatives opposed to any kind of increase in tax rates refused to sign on, and with Democrats unified in their opposition, the measure had no chance of passing.

“There was a perception created that that vote last night was going to increase taxes. I disagree with that characterization,” Boehner said Friday by way of explanation, adding that “the perception was out there, and a lot of our members did not want to have to deal with it.”

Reid had said the Senate would spurn the Boehner plan if it passed the House, and Obama promised to veto it if it reached his desk. According to Republican sources, the zero chance for Boehner’s Plan B to actually become law influenced some wavering House members to reject it.

Obama campaigned for re-election on extending the tax cuts that date back to his predecessor’s administration on income up to $250,000 for families, but returning to higher rates on amounts above that threshold.

Some House Republicans have said they would join Democrats in supporting the president’s proposal in hopes of moving past the volatile issue to focus on the spending cuts and entitlement reforms they seek.

The Plan B was significant because Republican leaders previously insisted they wouldn’t raise rates on anyone.

Boehner had complained Thursday that in making that concession, he expected but never got significant concessions from Obama.

He elaborated on the negotiations Friday, saying he told Obama that his latest proposal made over the weekend was his bottom line. Boehner said Obama told him the White House counterproposal Monday was the president’s bottom line.

Boehner also repeated his complaint that Obama and Democrats were unwilling to address the spending cuts and entitlement reforms that he considers necessary to properly address the nation’s chronic federal deficits and debt.

“What the president has proposed so far simply won’t do anything to solve our spending problems,” Boehner said, noting that “because of the political divide in the country, because of the divide here in Washington, trying to bridge these differences has been difficult.”

In his statement Friday, Obama said he had compromised at least halfway on major issues, and that both sides have to accept they will not get all they want.

The possibility of a fiscal cliff was set in motion over the past two years as a way to force action on mounting government debt.

Now legislators risk looking politically cynical by seeking to weaken the measures enacted to try to force them to confront tough questions regarding deficit reduction, such as reforms to popular entitlement programs such as Social Security, Medicare and Medicaid.

Polling has consistently shown most Americans back the president, who insists wealthy Americans must pay more, rather than Boehner and his Republican colleagues, who have balked at tax rate hikes and demanded spending cuts and entitlement program reforms.

A new CNN/ORC International survey released Thursday showed that just over half of respondents believe Republicans should give up more in any solution and consider the party’s policies too extreme.

The two sides seemingly had made progress earlier this week on forging a $2 trillion deficit reduction deal that included new revenue sought by Obama and spending cuts and entitlement changes desired by Boehner.

The president’s latest offer set $400,000 as the income threshold for a tax rate increase, up from his original plan of $250,000. It also included a new formula for the consumer price index applied to some entitlement benefits, much to the chagrin of liberals.

Called chained CPI, the new formula includes assumptions on consumer habits in response to rising prices, such as seeking cheaper alternatives, and would result in smaller benefit increases in future years.

Statistics supplied by opponents say the change would mean Social Security recipients would get $6,000 less in benefits over the first 15 years of chained CPI.

Liberal groups sought to mount a pressure campaign against including the chained CPI after news emerged this week that Obama was willing to include it, calling the plan a betrayal of senior citizens who had contributed throughout their lives for their benefits.

TM & © 2012 Cable News Network, Inc., a Time Warner Company. All rights reserved.

obama-boehnerPresident Barack Obama and House Speaker John Boehner met at the White House on Monday after the top Republican negotiator made concessions over the weekend that moved the talks to a new level.

The 45-minute meeting was their third face-to-face discussion in eight days, a sign of acceleration in the negotiations that seek to avert the automatic tax increases and spending cuts of the fiscal cliff set to take effect in the new year.

Sources told CNN over the weekend that Boehner’s latest proposal dropped Republican opposition to two key demands by Obama — higher tax rates on the wealthiest Americans and an automatic extension of the federal debt limit.

After reports emerged of Boehner’s new offer, his office insisted that no deal had been reached, but didn’t dispute the information from the sources about the concessions.

“The lines of communication remain open, but there is no agreement, nor is one imminent,” said Boehner’s spokesman, Michael Steel.

Congress had been scheduled to end its work last week, but legislators were returning Monday and leaders warned members to be prepared to stay until Christmas and then return after the holiday until the year’s end.

On Monday, multiple sources familiar with the talks told CNN that the negotiations now focus on a $2 trillion framework that would include roughly $1 trillion in revenue from tax hikes and reforms and $1 trillion in savings from entitlement programs and spending cuts.

According to the sources, the framework under discussion is being pushed by Republicans, and it was unclear if the plan could get enough support from Democrats to win congressional approval in the next two weeks.

Obama’s liberal base opposes substantive reforms to entitlement programs such as Social Security, Medicare and Medicaid.

Democratic sources said the $1 trillion in savings under consideration in the deficit talks includes changes to Medicare, including a discussion of raising the current eligibility age of 65.

Boehner’s concessions on some higher tax rates and the debt ceiling sought to put the onus on Obama to bring Democrats closer to the changes sought by the GOP.

Obama has repeatedly said that once Republicans accepted that tax rates on high-income Americans must increase, he would be willing to negotiate on other issues.

The president also has insisted that raising the federal debt ceiling should be separated from the political process of negotiating deficit reduction.

According to one source, who spoke on condition of not being identified further, Boehner proposed allowing tax rates on household income at $1 million and above to return to the higher rates of the 1990s while extending current reduced rates for all income up to that threshold.

The president demands that tax rates increase on incomes over $250,000, a stance that was central to his re-election campaign and is supported by most Americans, according to consistent poll results.

Boehner has been under pressure from the White House, Democrats, the business community and some fellow Republicans to give up a staunch opposition to any increase in tax rates.

Conservatives trying to shrink the federal government generally oppose increasing tax revenue. They are particularly opposed to higher tax rates because history shows that once rates go up, it is difficult to later reduce government revenue by lowering them again.

Obama and Democrats argue that increased revenue, including higher tax rates on the wealthy, must be part of broader deficit reduction to prevent the middle class from getting hit too hard.

In addition to relenting on some higher tax rates, Boehner also proposes closing some loopholes and limiting deductions to bring a total gain of $1 trillion in revenue, source said.

The framework under discussion includes an increase in the federal debt limit next year without further congressional approval, a key demand by Obama. An aide to Boehner said any such increase would have to be offset by spending cuts and reforms in the deal.

Brinksmanship over that issue led to an unprecedented downgrade of the U.S. credit rating last year.

Boehner’s proposal also includes what is called a chained consumer price index, which takes into account changes in quantity and prices of products.

The consumer price index is applied to many entitlement benefits, such as Social Security, to protect participants against rising prices. The chained CPI includes assumptions on consumer habits with regard to rising prices, such as seeking cheaper alternatives, and would result in smaller benefit increases in future years.

Labor unions and advocacy groups for the elderly are expected to oppose it.

Last week, U.S. Rep. Chris Van Hollen, D-Maryland, said a deal would have to be reached by Christmas to allow time for the legislative process to approve the required measure or measures by the end of the year.

Before Monday, Boehner met Thursday afternoon with Obama at the White House in their second face-to-face talks of the week. The two then spoke by phone Friday, according to news reports.



TM & © 2012 Cable News Network, Inc., a Time Warner Company. All rights reserved.

Leading conservatives blasted a controversial new House Republican proposal that breaks with years of GOP orthodoxy by calling for more taxes to be paid by wealthier Americans as part of a broader deal to avoid the so-called fiscal cliff.

But in a sign of how politically treacherous and awkward the offer has become, top Senate Republicans – many of them conservatives – withheld harsh criticism of the plan even as they refused to embrace it.

In fact, despite their general misgivings about approving tax increases, they gently nudged negotiations forward, in apparent recognition that any final agreement would include higher taxes – at least in some form – as President Barack Obama demands.

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