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UPDATE: Partisanship stalls fiscal cliff talks

Boehner And House GOP Leadership Address The Press After Conference Meetings

Alex Wong/Getty Images

U.S. Speaker of the House Rep. John Boehner (R-OH) (2nd L) speaks as House Majority Leader Rep. Eric Cantor (R-VA) (L) and House Majority Whip Rep. Kevin McCarthy (R-CA) (R) talk about the fiscal cliff. Senator Harry Reid Thursday said it appears the U.S. is headed over the fiscal cliff. (Photo by Alex Wong/Getty Images)

UPDATE Noon:

A last-gasp effort Thursday to avoid automatic tax increases and spending cuts got off on the same convulsive, partisan tone that marked congressional attempts to resolve the impasse before lawmakers left Washington to go home for Christmas.

With a Dec. 31 deadline for an agreement to avert the so-called "fiscal cliff" rapidly approaching, leaders in each party demanded the other side take the initiative. The new flare-up happened despite a round of calls that President Barack Obama made to congressional leaders by phone Wednesday night from Hawaii before he boarded Air Force One to head home from vacation.

The market was glum, with stocks falling for the fourth day in a row amid the stalled negotiations and a report that consumer confidence had plunged to its lowest level since August.

Obama's plane landed in late morning at a suburban Maryland Air Force base, not long after Majority Leader Harry Reid took to the Senate floor to chastise House Republicans who last week opposed Speaker John Boehner's efforts to pass a narrowly crafted bill. Boehner's "Plan B" would have raised tax rates only on the very wealthiest Americans. But the opposition within his own party caucus forced the Ohio Republican to cancel a vote on the bill.

Reid charged Thursday that the House was "being operated with a dictatorship of the speaker."

"John Boehner seems to care more about keeping his speakership than about keeping the nation on sound financial footing," the Nevada Democrat said on the Senate floor.

Upon his return from a brief vacation, Obama was facing what has become a familiar 11th-hour scenario - one the GOP says is his fault - and even a stopgap solution was in doubt.

Without congressional action, current tax rates will expire on Dec. 31, resulting in a $536 billion tax increase that would touch nearly all Americans. Moreover, the military and other federal departments would have to cut $110 billion in spending.

But while economists have warned about the economic impact of tax hikes and spending cuts of that magnitude, both sides are increasingly proceeding as if Congress could still act in January in time to retroactively counter the effect on most taxpayers and government agencies without causing economic harm.

The issue has been Obama's first test of muscle after his re-election in November. Obama ran on a theme of having the wealthy pay a greater share toward deficit reduction with a focus on raising upper tax rates for individuals earning $200,000 or more and couples making more than $250,000. In negotiations with Boehner toward a deficit reduction plan of more than $2 trillion over 10 years, he offered to increase that threshold to $400,000, but those negotiations collapsed.

House GOP leaders this week put the burden on Reid, urging him in a statement Wednesday to take up a House-passed bill that would extend current tax rates to all taxpayers, a bill Obama has vowed to veto.

Reacting to Reid's floor remarks Thursday, Boehner spokesman Brendan Buck said: "Harry Reid should talk less and legislate more if he wants to avert the fiscal cliff. The House has already passed legislation to do so."

The White House said Obama, before leaving Hawaii, called Boehner, Reid, Senate Minority Leader Mitch McConnell and House Minority Leader Nancy Pelosi. The White House statement said the president got an update on the "fiscal negotiations," but offered no detail on who, exactly, was negotiating and whether those talks were getting anywhere.

McConnell's office said Obama's phone call was the first from a Democrat on the fiscal cliff since Thanksgiving.

Last Friday, Obama and Reid voiced support for a proposal that would extend current rates to taxpayers with earnings up to $200,000 and families with earnings up to $250,000. Taxpayers above those thresholds would see their top rates rise. The proposal would have included extended aid to unemployed workers and some surgical cuts to avoid steeper and broader spending cuts.

For the Senate to act would require a commitment from McConnell not to demand a 60-vote margin to consider the legislation on the Senate floor. McConnell's office says it's too early to make such an assessment because Democrats have not put forward a specific plan and have been unclear on whether extended benefits for the unemployed would be paid for with cuts in other programs or on how it would deal with an expiring estate tax, among other issues.

The questions hanging over Washington Thursday centered on whether Reid would offer a specific piece of legislation, whether McConnell would allow it to proceed to a vote on the Senate floor and, if the Senate bill passed, whether Boehner would then call House lawmakers back to Washington to vote on it. All those issues remained unresolved, and success before the end of the year appeared a long shot at best.

Reid said the GOP-controlled House easily could have passed a White House-approved plan with a majority of Democratic votes and a few dozen Republican votes. But House leaders generally avoid such tactics, because they might alienate the Republican caucus and jeopardize the speaker's job.

The House has passed a Republican plan to avert the fiscal cliff, and the Senate has passed a Democratic version. Their deficit-reduction projections differ by hundreds of billions of dollars over 10 years.

Adding to the mix of developments pushing toward a "fiscal cliff," Treasury Secretary Timothy Geithner on Wednesday informed Congress that the government was on track to hit its borrowing limit on Monday and said he would take "extraordinary measures as authorized by law" to postpone a government default.

Still, he added, uncertainty about the outcome of negotiations over taxes and spending made it difficult to determine how much time those measures would buy.

UPDATE 8:20 a.m.: Progress toward avoiding the "fiscal cliff" seemed stalled Thursday, as the Senate's top Democrat accused Republican House Speaker John Boehner of acting in dictatorial ways that prevent a solution to looming tax hikes and spending cuts.

Senate Majority Leader Harry Reid, speaking in the Senate chamber, said the nation appears headed over the cliff because of a lack of progress in negotiations as the Dec. 31 deadline nears. He blamed House Republicans, who last week opposed Boehner's efforts to pass a narrowly crafted bill that would raise tax rates only on the very wealthiest Americans, prompting Boehner to cancel a vote on the bill.

Reid said the House is "being operated with a dictatorship of the speaker."

"John Boehner seems to care more about keeping his speakership than about keeping the nation on sound financial footing," Reid said.

Reid said the GOP-controlled House easily could have passed a White House-approved plan with a majority of Democratic votes and a few dozen Republican votes. But House leaders generally avoid such tactics, because they might alienate the Republican caucus and jeopardize the speaker's job.

Also Thursday, the White House said Obama, before leaving Hawaii, called Boehner, Reid, Senate Minority Leader Mitch McConnell and House Minority Leader Nancy Pelosi. The White House statement said the president got an update on the "fiscal negotiations," but offered no detail on who, exactly, was negotiating and whether those talks were getting anywhere.

Obama was returning from vacation to the deadline showdown in the nation's capital, with even a stopgap solution now in doubt.

The House has passed a Republican plan to avert the fiscal cliff, and the Senate has passed a Democratic version. Their deficit-reduction projections differ by hundreds of billions of dollars over 10 years. Many Washington insiders say the gap could be bridged if partisan positions were not so firmly entrenched.

Leaders of the two parties are essentially daring each other to let the year end without resolving the pending confluence of higher taxes and deep spending cuts that could rattle a recovering but still-fragile economy.

Adding to the mix of developments pushing toward a "fiscal cliff," Treasury Secretary Timothy Geithner on Wednesday informed Congress that the government was on track to hit its borrowing limit on Monday and said he would take "extraordinary measures as authorized by law" to postpone a government default.

Still, he added, uncertainty about the outcome of negotiations over taxes and spending made it difficult to determine how much time those measures would buy.

In recent days, Obama's aides have been consulting with Reid's office. But Republicans have not been part of discussions, suggesting much still needs to be done if a deal, even a small one, is to be struck and passed through Congress by Monday.

At stake are current tax rates that expire on Dec. 31 and revert to higher rates in place during the administration of President Bill Clinton. All in all, that means $536 billion in tax increases that would touch nearly all Americans. Moreover, the military and other federal departments would have to cut $110 billion in spending.

But while economists have warned about the economic impact of tax hikes and spending cuts of that magnitude, both sides appear to be proceeding as if they have more than just four days left. Indeed, Congress could still act in January in time to retroactively counter the effects on most taxpayers and government agencies, but chances are that a large deficit reduction package would be put off.

House Republican leaders on Wednesday said they remain ready to negotiate but urged the Senate to consider or amend a House-passed bill that extends all existing tax rates. In a statement, the leaders said the House would consider whatever the Senate passed. "But the Senate first must act," they said.

Aides said any decision to bring House members back to Washington would be driven by what the Senate does.

Reid's office responded shortly thereafter, insisting the House act on Senate legislation passed in July that would raise tax rates only on incomes above $200,000 for individuals and $250,000 for couples. Obama has been pushing for a variant of that Senate bill that would include an extension of jobless aid and some surgical spending reductions to prevent the steeper and broader spending cuts from kicking in.

For the Senate to act would require a commitment from McConnell not to demand a 60-vote margin to consider the legislation on the Senate floor. McConnell's office says it's too early to make such an assessment because Obama's plan is unclear on whether extended benefits for the unemployed would be paid for with cuts in other programs or on how it would deal with an expiring estate tax, among other issues.

What's more, Boehner would have to let the bill get to the House floor for a vote. Given the calendar, chances of accomplishing that by Monday were becoming a long shot.

PREVIOUSLY: Senate Majority Leader Harry Reid says the government appears headed over the fiscal cliff because of a lack of progress in bipartisan negotiations.

The Nevada Democrat says it's up to congressional Republicans to come up with a plan that both houses would pass and President Barack Obama would sign.

Reid says of missing the Dec. 31 deadline to avoid the fiscal cliff, quote: "it looks like that's where we're headed."

Major tax hikes and spending cuts will hit most Americans if Congress and the White House don't reach a compromise by the year's end.

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