Senate Majority Leader Harry Reid (D-NV) told the Senate just before 6:00 pm ET that talks with Republicans would continue on how to avert the fiscal cliff. The statement came after a tense day where earlier he had said the talks were at an impasse because Republicans wanted to add a provision that would change how Social Security cost of living increases are calculated.

As the afternoon began, Senate Republican leader Mitch McConnell (R-KY) criticized Reid for taking so long to respond to a proposal Republicans made the previous evening. McConnell told the Senate that he had sent a proposal to Reid about 7:00 pm ET Saturday evening, but had received no response by 2:00 pm this afternoon.  Reid then took the floor and replied that he had no counteroffer to make.  While complimenting McConnell for negotiating in good faith, Reid said the two were simply too far apart on “some pretty big issues.”

The focus of the talks has been on tax rates and other tax breaks that will expire at midnight tomorrow.  Aides to Reid were quoted as saying that now is not the time to bring Social Security benefits into the debate.

The Senate recessed to allow each party to caucus and determine how to proceed. Republicans emerged insisting that they did not know that the proposed change — using the chained price index to calculate cost of living increases, which would reduce those increases — was a dealbreaker and they would take the issue off the table.  About two hours later, Reid returned to the floor and said he was happy to hear it, and talks would continue.  He said there is still time for a deal, but his manner did not convey optimism.

As for the automatic spending cuts that will take place on January 2 — the sequester — several media sources that closely follow Capitol Hill politics are reporting that there is virtually no chance that Congress will act to stop it.  How long it would take for the draconian cuts — 9.4 percent for defense, 8.2 percent for the rest of discretionary spending — to impact government and contractor personnel and programs is a matter of debate.  Since it begins with cuts to spending in FY2013, which is already underway, people are getting increasingly nervous.

Nothing is certain until the deadlines pass, of course, and even then the 113th Congress — which begins on Thursday — can fix problems left by the 112th.  Aphorisms like “it’s always darkest before the dawn” or “it ain’t over till the fat lady sings” may be cliches, but they also often are true.  If the stock market continues its decline tomorrow, the parties may be motivated to find a solution.

With half of the 48 hours gone already, Senate Democratic and Republican leaders still have not reached a deal to avert the fiscal cliff.   Meanwhile, Aerospace Industries Association (AIA) President Marion Blakey issued a stern warning today about the impact on the aerospace sector if sequestration goes into effect.

After a meeting at the White House yesterday,  Senator Democratic Leader Harry Reid (NV) and Republican Leader Mitch McConnell (KY) agreed to spend the weekend trying to reach an agreement that would pass the Senate and, hopefully, the House before the clock strikes midnight on Monday, December 31.  A deal is expected to be presented to their respective caucuses tomorrow afternoon.  

The Senate was in session Thursday and Friday, but not today.  The House has been in recess since before Christmas.  Both chambers are scheduled to meet tomorrow in a rare Sunday session.  House Majority Leader Eric Cantor (R-VA) alerted Members that the House could remain in session through January 2.   That is the last possible day for the 112th Congress.  The 113th Congress, with new and returning members elected on November 6, begins on Thursday.  All pending legislation dies at the end of a Congress.   Democratic Senators reportedly are drafting legislation to be introduced as soon as the 113th Congress convenes to cut tax rates if no agreement is reached before then.

Few details have been made public about what progress is being made other than that tax rates remain at the heart of the disagreement.   Republicans have insisted all along that tax rates should remain the same for all income levels while President Obama wants tax rates for the wealthiest individuals to return to levels prior to the George W. Bush Administration.  President Obama is calling for rates for those who earn over $250,000 to go up, but recently indicated he would compromise at $400,000.   House Speaker Boehner attempted to win support from his Republican caucus for the higher rates to apply only to those with incomes $1 million or more, but that was rejected.

The tax increases — not only from the expiration of the Bush-era tax cuts, but a number of other expiring provisions such as adjustments to the Alternative Minimum Tax, estate tax reductions, tax credits for college tuition, and the payroll tax holiday — are only one part of the fiscal cliff scenario.   Extended unemployment benefits will expire and Medicare reimbursements to doctors will be cut if Congress does not act. 

Another leg of the stool is sequestration — deep cuts to defense and non-defense discretionary spending.  AIA has been leading the charge all year on highlighting the dire impacts to the defense aerospace sector as well as NASA and NOAA if the spending cuts take place.  Under the Budget Control Act (BCA) of 2011, defense spending would be cut 9.4 percent and NASA and NOAA (and other government non-defense discretionary spending) would be cut 8.2 percent. 

Blakey starkly warned today that if Congress does not fix the sequestration problem it will be a “grave dereliction of duty.”  Agreeing that budget cuts are needed to deal with the deficit, she insisted that sequestration is “the wrong way to do it” and a “mindless meataxe approach that will cause immense disruption and harm our economy and national security.”

Republicans agreed to the defense cuts when the BCA was passed in August 2011, but changed their minds this year and now are seeking to exempt defense from the cuts and reduce government spending elsewhere in exchange, such as by entitlement reform or changes to the tax code (but not tax rates).  Democrats want at least some cuts to defense, for which spending mushroomed during the past decade with the Iraq and Afghan wars.

President Obama said in his weekly address today that if all else fails, he wants the Senate to vote on a modest package that would keep tax rates at their current levels for people with incomes under $250,000, extend unemployment insurance, and set the stage for future progress on the other issues.  He said he believes such a package could pass both the House and Senate if it is allowed to come to a vote.  “That’s the way this is supposed to work,” he said, adding that “We just can’t afford a politically self-inflicted wound to our economy.”

In the Republican response, Senator Roy Blunt (R-MO) criticized Democrats on a broad range of issues ending with his own warning against going over the fiscal cliff.  He gave no hint of what compromise might be in the works, reiterating Republican assertions that it is up to the President to lead.

In essence, today seems like politics as usual.  For those who want to avoid falling off the fiscal cliff, one can only hope that the behind-the-scenes deliberations are more productive.

The top Democrat and the top Republican in the Senate reportedly are jointly working on a plan to avoid the fiscal cliff after a meeting at the White House this afterrnoon of top congressional leaders and the President.

Details are sketchy, but multiple news sources are reporting that Senator Harry Reid (D-NV) and Senator Mitch McConnell (R-KY) agreed to spend the weekend trying to come up with a deal that will pass muster with both parties on both sides of Capitol Hill.  The Senate returned to work yesterday; the House will meet for legislative business on Sunday.

The news came after a one-hour meeting among top House and Senate Democratic and Republican leaders and President Obama, Vice President Biden, and top advisors.   The President said at a press conference after the meeting that if Reid and McConnell are unable to reach a bipartisan agreement, he will press for a Democratic proposal to be put forward instead for an up and down vote that would protect the middle class from tax increases, extend unemployment benefits, and lay the “groundwork for future cooperation on more economic growth and deficit reduction.”  He said he believed such a measure would pass both chambers if the leaders would allow it to come to a vote.  He called the meeting today “constructive.”

Ordinarily we’d be explaining that there are no interesting events for a couple of weeks while everyone celebrates the holidays, but this is not an ordinary year.  Here’s what we know — and don’t know — as 2012 ends and 2013 begins.

During the Weeks

It is totally unclear as to what will happen in Washington in the next two weeks with one exception — the 112th Congress will end and the 113th Congress will begin.  (Congresses last for two years.)  Whether the members of the 112th Congress can reach agreement to avoid the fiscal cliff that otherwise will occur in this time period or leave the mess to be cleaned up by the 113th Congress is anyone’s guess. 

The House recessed on Thursday with no fixed date to return for legislative business (it is scheduled to meet only in pro forma session).  House Speaker John Boehner reportedly told his House Republican Conference they were going home until after Christmas and perhaps for the rest of the year after he was unable to round up enough votes in his own party to pass his “Plan B” alternative to President Obama’s latest fiscal cliff avoidance offer.   Boehner’s Plan B included raising taxes on the wealthiest people (over $1 million) and conservative Republicans refused to agree.  They have consistently opposed any new taxes.  

The President responded by saying that he still thinks at least some sort of deal can be reached before the end of the year if everyone is willing to compromise.  He then headed off for his annual Christmas vacation in Hawaii, where he grew up, ready to return to Washington on Wednesday if progress is being made.  The Senate also is in recess with only pro forma sessions scheduled.  It is in the middle of debating a supplemental appropriations bill for the victims of Hurricane Sandy.

Some Washington pundits are trying to ratchet down the “fiscal cliff” rhetoric by calling it a “fiscal slope” to telegraph that the impacts may be more gradual than the word “cliff” implies.  In fact, from a political standpoint, there may be an advantage in letting the tax breaks expire on December 31.   The politicians could quickly pass new legislation in January to return the tax rates to the pre-December 31 level for everyone except the wealthiest people (whether that’s over $250,000 as the President had been insisting, over $400,000 as he recently compromised, or $1 million as Speaker Boenher proposed).   That would count as a tax cut rather than a tax increase and thereby not violate anyone’s pledge to never vote for a tax increase.  As for sequestration, it might be relatively easy to simply delay when it would go into effect, giving everyone time to come up with a better solution, even though they have not been able to find one in the past 17 months.

Two smaller space policy-related items on the “to do” list before the end of the year:

• Congress needs to pass and the President to sign legislation to extend authority for the FAA to indemnify launch service companies from third party claims for certain amounts of money (existing authority expires December 31); and
• The President needs to sign the FY2013 National Defense Authorization Act (NDAA), which the House and Senate passed late last week, including a number of important space-related provisions such as easing export controls on satellites.

The House had scheduled a vote last week on H.R. 6612 (McCarthy) to rename NASA’s Dryden Flight Research Center after Neil Armstrong, but it was never brought up.   There was no public word about progress on S. 3661 (Nelson-Hutchison), which would extend the indemnification provision, provide NASA with another waiver to the Iran-North Korea-Syria Nonproliferation Act (INKSNA) so it can purchase services from Russia for the International Space Station, and give NASA a mandate to explore cis-lunar space.  The House passed a bill in November to extend the indemnification provision only (H.R. 6586, Palazzo) that is awaiting Senate action. 

So all of those bills are still in play until the 112th Congress adjourns “sine die”  — “without a day” to reconvene, meaning the 112th Congress is over.  All pending legislation dies at the end of a Congress.   The 113th Congress will convene on January 3 with the new and returning members who were elected on November 6 and the cycle starts over again for the next two years.

Otherwise, we have only one specific space policy-related event on the calendar for the next two weeks:

Friday, January 4, 2013

• Philosophical Society of Washington Lecture on Human Role in Earth Evolution by David Grinspoon, Astrobiology Chair at the Library of Congress,  Washington, D.C., 8:30 pm ET