Still No Deal on Fiscal Cliff, But Talks Continue After Tense Day

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.