Curated by ABC's Z. Byron Wolf and Sarah Parnass
Click HERE to read our latest full round-up on the last-minute New Year's Eve scramble by Vice President Joe Biden to find a bipartisan route around the 'Fiscal Cliff.'
Or look below for live updates on the negotiations, the political posturing, the ramifications and what ABC's troops at the White House and Capitol Hill are hearing before it is fully fleshed out:
1:00 a.m. (one hour past cliff)
The Senate will still likely vote in the wee hours on the proposal and Democrats seem confident it can pass. The House will be another story tomorrow. So we're wrapping this live blog 'til tomorrow. Meantime, get the latest from Sunlen Miller, who is in it for the long haul on Capitol Hill. Read our wrap HERE.
Shaking his head, Capitol Hill policeman on the Hill says he's been here for 25 years and has "never seen Congress as bad as this"
- Sunlen Miller (@SunlenMiller) January 1, 2013
12:00 a.m. (Happy New Year!; Hello Fiscal Cliff) But Senate deal could see votes tonight or tomorrow. 11:56 p.m. (four minutes to cliff) Milk Prices - McConnell 'Cliff' Deal Would Also Avert Spike From AP -
White House and congressional bargainers have agreed to prevent milk price increases as part of their compromise to avert the "fiscal cliff." Senate Agriculture Committee Chairwoman Debbie Stabenow says negotiators have agreed to extend portions of the expired farm through September. She says that includes language keeping milk prices from potentially doubling, but excluding other provisions including energy and disaster aid for farmers. Stabenow, a Michigan Democrat, says she considers the extension to be "Mitch McConnell's version of a farm bill." She was referring to the Senate minority leader from Kentucky, who she said forced bargainers to accept the version of the farm bill that appeared in the deal.
Boehner Says House Consider Senate Proposal, But Leaves Wiggle Room - But the House Speaker and his leadership team do not specifically say they'll bring the proposal up for an up or down vote. They could, as they say in a statement, seek to amend the deal. Here's the entirety of what his office has said about the Senate deal:
House Speaker John Boehner (R-OH), Majority Leader Eric Cantor (R-VA), Majority Whip Kevin McCarthy (R-CA), and Republican Conference Chair Cathy McMorris Rodgers (R-WA) issued the following statement on the Senate agreement: "The House will honor its commitment to consider the Senate agreement if it is passed. Decisions about whether the House will seek to accept or promptly amend the measure will not be made until House members - and the American people - have been able to review the legislation."
Biden Concludes Meeting, Reid Says Vote Tonight
ABC's Sunlen Miller reports the closed-door meeting between Vice President Biden and Senate Democrats has concluded. It lasted more than an hour and a half. Reaction ranged from supportive to frustrated among lawmakers leaving the meeting. Senate Majority Leader Harry Reid said he would call a vote tonight.
Sen. Tom Harkin, a leading liberal who earlier Monday said he couldn't support the outlines of the deal, had no comment for reporters, but promised he would let his opinion be known on the Senate floor.
But Sen. Chuck Schumer, the New York Democrat and number three senator in his party, said there is "strong" support for the plan by Senate Democrats.
"The number of people who believe we should go over the cliff rather than vote for this is very small," he said.
Schumer predicted a "strong Democratic vote for this."
"There is a feeling that it's not that this proposal is regarded as great or as loved in any way, but it's a lot better than going off the cliff," he said.
10:17 p.m. (one hour and 43 minutes to cliff)
Miller reports the plan among Senate leaders is to still push for a vote tonight in the Senate, after the Democrats' caucus meeting finishes.
The aide says lawmakers likely will not wait for a Congressional Budget Office score to vote since pieces have already been scored in bits over the year.
Sen. Reid, according to the aide, heard and met from many Democrats today as the deal was being worked out.
But Vice President Biden, who spearheaded the last-ditch negotiations with Minority Leader Mitch McConnell, is at the meeting tonight "to hear people's concerns and respond to them."
9:50 p.m. (two hours and ten minutes to cliff)
A Fiscal Cliff Deal* - Senate Republicans and the White House have a deal. Earlier reports that they were close have become more definitive. Vice President Biden is briefing Senate Democrats to bring them on board.
Congressional sources tell ABC's Jonathan Karl there is a deal. But he reports that now Biden must convince Senate Democrats to support it. The vote in the Senate is expected either tonight or tomorrow with a subsequent vote - surely tomorrow - in the House.
A White House official says both top Democrats on Capitol Hill - Senate Majority Leader Harry Reid and House Minority Leader Nancy Pelosi have signed off.
"It is a compromise, so we don't love it," says a senior White House official. "But it is the right thing to do for the economy."
Here are the specifics:
- Bush era tax cuts extended, permanently, for individuals making under $400,000, households making under $450,000.
- Automatic "sequester" cuts are postponed for two months (paid for half by cuts elsewhere and half by new revenue)
- Estate tax rises to 40 percent for estates over $5 million
- Long-term unemployment benefits extended for 1 year.
- Capital gains and dividends to be taxes at 20 percent.
*But Karl points out: even if this deal is passed, another cliff lies ahead in two months when the debt ceiling is hit and those sequester cuts kick in.
Bipartisanship! Senators Frustrated at Working New Year's Eve
ABC's Sunlen Miller reports: One thing Senators can agree on tonight as they burn the midnight oil? This perhaps is not their favorite New Years Eve in memory.
Sen. Claire McCaskill, D-MO., tweeted this evening, "This will not go down as one of my favorite New Years's Eves. Memorable yes."
Replied Sen. John Cornyn, R-Texas, to McCaskill via a tweet, "we can agree on that."
Beyond that there is not much agreement in the halls of the Senate at the moment.
Biden Enroute - Sunlen Miller reports that Vice President Joe Biden, who negotiated the potential deal with Senate Minority Leader Joe Biden, will brief members of the Democratic caucus on the proposal at 9:15 p.m. Already some liberal Democrats - notably Sen. Tom Harkin of Iowa - have said they don't like the idea of approving higher tax rates only for households making more than $450,ooo.
7:59 p.m. (four hours and fifty-nine minutes to cliff)
Boehner and Cantor Call it a Night - House Speaker John Boehner and Majority Leader Eric Cantor have both left the Capitol for the night, reports ABC's John Parkinson. That means the House won't vote on any cliff deal until after midnight. And it is hard to imagine how a deal could be transferred to legislative language and receive a vote in the Senate.
The House adjourned at 6:27
They'll meet tomorrow at 12 noon. And while everyone has been told to stay close to the Hill, it is more and more clear there will be no vote in the House, at least, before Midnight. There could still be one in the Senate.
Republicans Upbeat After Meeting, Predict Pre-Midnight Vote in Senate
Emerging from a closed-door meeting, many Republicans were optimistic that they could vote for a bill to pass through the Senate even though the exact details are still being ironed out. Senate Republicans met for over an hour with their caucus, according to ABC's Sunlen Miller, who is up on Capitol Hill.
Sen. John McCain, R-Ariz., was asked "Deal or no deal?"
"Deal," he replied point blank
Sen Dan Coats, R-Indiana, who earlier chided President Obama for a celebratory-seeming event at the White House, said the new deal this will pass the nation thru the "mini cliff." (The latest proposal would extend tax rates for people making less than $400,000 per year and stave off automatic spending cuts for two months). But in two months, lawmakers would again have to visit the spending cuts as well as an increase to the nation's debt ceiling.
"We're hopeful to have a vote this evening, within a couple of hours….we're still tying down the details."
Sen. Kay Bailey Hutchison, R-Tex., who is retiring in two days, said the deal is not something she would normally support but indicated she'd be in support of it.
"It's not something that any of us would say 'oh I love it' but I think that they've done a very good job of negotiating," she said.
She says the CBO still needs to score the proposal.
"When all of that is done the view is that we would like to vote, hopefully before midnight."
5:24 p.m. (six hours and 36 minutes to cliff)
Former Major League Baseball outfielder Jose Canseco piped up on Twitter Monday, sharing his unexpected opinion on fiscal cliff negotiations.
Canseco started off saying he "lost a deal in washington dc because of the fiscal cliff," though he didn't elaborate what that deal might have been.
Canseco, who plays for the Rio Grande Valley WhiteWings, went on to tweet his solution to the fiscal cliff: first replace the income tax with a spending tax, next reduce number of armed forces in the "central east," and lastly, make all elected officials' posts unpaid, voluntary positions.
"that's all i've got but it is more than enough," Canseco tweeted.
Later he told President Obama and House Speaker John Boehner he is available if they need him, offering encouragement and " hugs."
- Jose Canseco (@JoseCanseco) December 31, 2012
4:45 p.m. (seven hours and 15 minutes to cliff) House Likely to Miss Midnight Vote
The AP reports that lawmakers in the House have not yet scheduled a vote on a fiscal cliff deal that is still being hammered out over in the Senate. Both President Obama and Minority Leader Mitch McConnell said Monday afternoon that White House and Senate negotiators were close to some sort of accord. McConnell suggested the Senate could vote on just tax provisions involved in the cliff and move on later to curbing automatic spending cuts.
The situation could still change and the House could still vote. Also, lawmakers could pass retroactive legislation in the coming days.
But at least one house of Congress seems very unlikely to vote before the originally presumed Midnight deadline.
The House will miss the midnight Monday deadline lawmakers set for voting to avoid the "fiscal cliff."
House Republicans notified lawmakers that the chamber will vote Monday evening on other bills. They say that will be their only votes of the day.
President Barack Obama and Senate Republican leader Mitch McConnell said Monday they are near a deal to avoid wide-ranging tax increases and spending cuts - the fiscal cliff - that take effect with the new year.
Both men said they were still bargaining over whether - and how - to avoid $109 billion in cuts to defense and domestic programs that take effect on Wednesday.
It remained unclear whether the Senate would vote Monday.
Congress could pass later legislation retroactively blocking the tax hikes and spending cuts.
4:09 p.m. (seven hours and 51 minutes to cliff) What Happens If We Go Over the Cliff?
Chris Good has the facts:
As has been well documented, the "cliff" is not one thing, but a ball of expiring economic provisions that lead to automatic policy changes at year's end, loosely grouped under the catch phrase. They fall into two categories, taxes and spending.
Should we fall off the cliff, the tax code would change most dramatically with the expiration of the so-called "Bush tax cuts," which created new brackets and lowered tax rates for both middle-class and high earners. According to the Tax Policy Center at the Washington, D.C.-based Brookings Institution, the average American taxpayer would see a tax hike of $3,446, ABC's David Muir reported for "World News."
Where do the hikes fall, exactly? For many tax brackets, rates would jump by at least three percentage points. The middle class would see the worst of it, according to analysis from the Congressional Research Service, the nonpartisan research arm that studies policy changes at Congress's request.
For high earners, married couples making more than $222,300 but less than $397,000, rates would jump from 33 percent to 36 percent. For the highest earners, couples making over $397,000, taxes would rise from 35 percent to 39.6 percent.
But they'd rise for almost everyone else, too. Couples making $145,900 - $222,300 would see a rate jump from 28 percent to 31 percent. Couples making $72,300 - $145,900 would see rates jump from 25 percent to 28 percent.
3:57 p.m. (eight hours and three minutes to cliff)
ABC's Sunlen Miller reports:
Here's something I suspect a lot of Americans would support.
Sen. Rob Portman, R-Ohio, called on President Obama today to rescind a raise for Congress and federal employees if no deal is struck.
"At a time when our country is facing record debt and trillion dollar deficits, the last thing Washington should do is reward itself with a pay increase," Portman writes in a paper statement, " I am calling on President Obama to withdraw his recent Executive Order raising federal salaries - including for Members of Congress. Until a long-term deficit reduction agreement is reached, we should not consider increasing the pay for Congress."
Last week Obama ordered pay increases starting in March for all federal workers -everyone from janitors to military and judges. The order would not increase the president's own pay.
While it is technically a raise, it's tiny - about a 1 percent increase - basically for inflation.
President Obama signed a pay freeze in 2010, and federal workers haven't seen a pay increase since 2009.
3:29 p.m. (eight hours and thirty-one minutes to cliff)
McCain Says Obama Event Antagonized GOP
And here is the latest guidance from ABC's Jonathan Karl:
Keep the cliff champagne on ice. Dem aide: "There is no deal yet and big issues to resolve." But, hey, there's still plenty of time, right?
- Jonathan Karl (@jonkarl) December 31, 2012
Back to top 3:00 p.m. (nine hours to cliff) McConnell, Biden Have Tax Agreement, GOP Leader Wants Vote on Just Tax Portion: In a short statement on the Senate floor, Minority Leader Mitch McConnell suggested his attempts to reach a bipartisan agreement with Vice President Joe Biden have been successful. He did not go into specifics (although we believe the deal includes a permanent extension of Bush era tax rates for everyone making less than $400,000 ($450,000) for couples. More on that HERE. McConnell seemed to push the idea of a vote today by senators on the tax portion of the deal. That would allow more time for the lawmakers to work on the portion of the deal that would deal with spending cuts set to start kicking in Jan. 2. A McConnell aide told ABC's Sunlen Miller: "the deal is done on taxes. The tax piece is done…there is an agreement to fix the tax problem that is finalized." He confirmed that the sticking point, as noted below, are on how long to delay the sequester (automatic spending cuts). A Republican source said that there are still discussions going on but indicated that they don't think the sequester will hold up the deal. "The sequester shouldn't be an impediment to taxes to taxes going up," the Republican aide says. "Republicans believe the replacement of the sequester needs to be dollar for dollar. Point is, vast majority of this deal is done. " Here is the entirety of McConnell's short public statement:
"Yesterday, after days of inaction, I came to the floor and noted we needed to act, but that I needed a dance partner. So I reached out to the Vice President in an effort to get things done. "I'm happy to report that the effort has been a successful one and as the President just said, we are very close to an agreement. "We need to protect American families and job creators from this looming tax hike. Everyone agrees that action is necessary. And I can report that we've reached an agreement on the all the tax issues. "We are very, very close. "As the President just said, the most important piece, the piece that has to be done now, is preventing the tax hikes. He said: "for now our most immediate priority is to stop taxes going up for middle class families starting tomorrow. "He suggested that action on the sequester is something we can continue to work on in the coming months. "So I agree, let's pass the tax relief portion now. Let's take what's been agreed to and get moving. The President wants this, members of Congress want to protect taxpayers, and we can get it done now. "Let me be clear: We will continue to work on finding smarter ways to cut spending, but let's not let that hold up protecting Americans from the tax hike that will take place in about 10 hours. "We can do this. We must do this. "I want my colleagues to know that we'll keep everyone updated."
2:14 p.m. (nine hours and 46 minutes to cliff) House Vote on 'Cliff' Proposal Unlikely Tonight John Parkinson reports from the House: This afternoon, many of the House GOP's top members - chairmen, whips, leaders, etc. - gathered in the speaker's office to hear the latest on the fiscal cliff negotiations from the speaker. In summary, they're still waiting for the Senate to act, but even if the Senate votes today to successfully avert the cliff, it does not necessarily mean there will be enough time to get something through the House before midnight tonight. House Intelligence Committee Chairman Mike Rogers said that House Republicans are still waiting on leaders in the Senate to finalize a deal, adding that while nothing is definitive, it's unlikely the House would vote tonight on any potential Fiscal Cliff legislation. "Knowing how this place works, [I've] been here long enough, I don't see how you get something voted on today. I just don't see how you do it," Rogers, R-Mich., said. "Even if they get a handshake deal today, you have to put the whole thing together and that's probably not going to happen before midnight. So it would make sense to roll into tomorrow to do that." Throughout the stalemate, members have warned of the difficulty in setting fiscal cliff legislation to take effect retroactively, but given tonight's midnight deadline, there is an increased possibility that any eventual solution might take into account elements of the Cliff that already lapsed. "It poses a problem, most importantly not for here, but for real people at home. I mean those checks will be different. 401Ks are gonna take a hurt that will be very hard for somebody who's getting ready to retire to make up the difference if it has an impact on the markets," Rogers said. "There's lot of concerns about trying to at least come up with something that is doable in both chambers and that the president will sign. That's been certainly the challenge thus far." As has been reported, the sequester is stumping negotiators right now. But in the Republican-controlled House, members are reluctant to support a deal unless the sequester cuts are offset with other cuts to spending. "In order to get the sequester moved, you're gonna have to have real, concrete spending cuts. [Without that], I don't know how it passes the House," Rogers said. "I just don't see it. I mean, I've been in all of these conferences. I just don't know how it would pass the House." Back to top 2:00 p.m. (10 hours to cliff) Obama Event Angers GOP - President Obama held a short event in an auditorium in the White House where he said a deal is within reach, but not yet reached. Relaxed and reassured, Obama said it was notable that some Republicans seemed poised to accept tax increases when before the election they said there would be none. But he pointed out that it would not be any sort of grand bargain. He was surrounded by some supporters and they applauded him at times. He told Republicans he would not accept spending cuts alone in future negotiations to deal with the debt ceiling or budget. If there is a deal in the works, some Republicans immediately pointed to Obama's televised event at the White House as a complicating factor. "I'm very disappointed in what the president had to say," said Sen. Bob Corker, a Republican who has worked toward fiscal proposals in the past, in a clearly frustrated tone of voice moments after the president's event concluded. The chief of staff in Sen. Mitch McConnell's personal office had this to say on Twitter:
Potus just moved the goalpost again. Significantly. This is new - Josh Holmes (@HolmesJosh) December 31, 2012
1:36 p.m. (10 hours and 24 minutes to cliff) LIVE from the White House: It's New Year's Eve - The live stream from the South Court Auditorium at the White House is up - just waiting on the president. Watch here: http://abcnews.go.com/live.
1:26 p.m. (10 hours and 34 minutes to cliff) The Makings of a Deal - ABC's Devin Dwyer reports there have been updates to an emerging deal hatched by Vice President Biden and Senate Minority Leader Mitch McConnell. As currently described, it would increase the estate tax from 35 percent to 40 percent for estates above $5 million for an individual and $10 million for couples. It would extend unemployment benefits for one year only.
Earlier today ABC's Jon Karl reported a mini deal in the works could:
- Extend tax cuts for households making up to $450K - Keep the estate tax at current level (35% on estates over $5 million) - Prevent the alternative minimum tax from hammering millions of middle class workers - Extend unemployment benefits - Prevent a drastic cut in payments to doctors serving Medicare patients - Delay by three months automatic spending cuts to defense and domestic programs (lining up another cliff with debt ceiling in March)
Note what is not in here: - No increase in debt ceiling - Nothing to control the runaway cost of entitlement programs (no Bowles-Simpson!) - Nothing to seriously reduce the deficit
Dwyer says the sticking point is how long to delay the sequester, and whether to offset delay with any cuts. Democrats want a one-year extension to deal with it. Republicans want shorter.
ABC's Sunlen Miller reports: Some Senators took to the floor today to express who the big loser is in all of this: Congress.
A normally restrained Sen. Thune, R-S.D., waved his arms, raised his voice and yelled from the floor, emphasizing every word: "It's. December. Thirty. First."
"We're sitting here because we have twiddled our thumbs for month after month after month and here in the United States Senate," Thune ranted from the Senate floor, "we've known about this for a long time. Yet for month after month after month after month this year nothing was done about it."
Thune said if the nation goes over the fiscal cliff tomorrow it will be a "disaster" and will "ruin" the economy.
"But where were we? Where were we for the past month and the month before that and the month before that? Dealing with what we knew was going to be this very set of circumstances that we face today. and so I just find it really hard to sit and listen to people come up now and wring their hands and talk about gee whiz, I hope we can get something done here in the last day."
As Senate Minority Leader Mitch McConnell, R-Ky., and Vice President Joe Biden worked in the last day towards a deal, Thune chastised the process that led the negotiating process to come down to just two men.
"There are two people in a room deciding incredibly consequential issues for this country while 99 other United States senators and 435 members of the House of Representatives, elected by their constituencies to come to Washington are on the sidelines. Why didn't we have a bill on the floor of the United States senate that we could actually debate? Why didn't we put something out here under regular order?"
Concluded Thune, "We are where we are because this process was grossly mismanaged up until this point. And so now we're faced with a crisis."
Sen. Rand Paul, R-Ky., took a sarcastic tone on the floor, pointing out that any deal should not be celebrated as solving any problems.
"By all means, let's complete a deal today so we can go home," Sen. Paul said curtly, "Let's complete a deal. Let's raise taxes. Let's stick it to those rich people. Let's not touch spending. And let's pretend as if we've done something. The deal will do absolutely nothing to save this country."
12:43 p.m. (11 hours and 17 minutes to cliff) Obama to Speak on Cliff - Devin Dwyer reports President Obama will deliver remarks about the fiscal cliff at what the White House is describing as an "event with middle class Americans."
The president will address the ongoing talks between VP Biden and Sen. McConnell and the progress that they are making. He will also urge Congress to act and not allow a tax hike to hit the middle class.
12:20 p.m. Boehner and McConnell Haven't Talked Since Friday - ABC's John Parkinson reports from the House side of Capitol Hill that any deal that might be hatched in the Senate between Vice President Biden and Minority Leader Mitch McConnell has yet to pass any sort of muster with Republicans in the House. And that could be a big problem for it's prospects. From Parkinson:
A senior aide to the Speaker tells me that Boehner has not spoken to Senator McConnell today. In fact, the two GOP leaders haven't talked since a meeting Friday at the White House, although their aides have kept in contact.
Multiple senior congressional aides close to the fiscal cliff negotiations said that the sticking point seems to be how to deal with the "sequester" (automatic spending) cuts set to take hold on Jan. 2. Whether there's a three-month or a year-long delay, Republicans want to see that delay equally offset with spending cuts separate from the discussion on revenue and taxes.
Yet another senior House GOP leadership aide said to watch how conservative senators like Rand Paul and Pat Toomey vote. If McConnell can win over the approval of the chambers most ardent crusaders against the deficit and sell this to his conference, others will feel less pressure to oppose the deal.
These aides are all keeping a close eye on the Senate today. If it slides through on 8 Republicans and 52 Democrats, it'd be a rocky road in the House. A strong bipartisan vote in the Senate would help encourage a similar showing in the lower chamber. Getting 70 or 80 votes in favor of an agreement in the Senate would almost certainly ensure Speaker Boehner would bring the legislation up in the House for a vote.
The House could hold its first series of votes at 1 p.m., but this exercise would simply be an opportunity for leadership to whip votes on a Senate package - not a vote on fiscal cliff legislation. If and when the Senate passes something, we'll have a better sense how this plays out in the House and how it can get to the floor for a vote.
12:13 p.m. Deal or No Deal… The Tone is Set - ABC's Rick Klein points out that no matter what happens on the fiscal cliff at this point, there is not a lot of optimism about Republicans and Democrats coming together to accomplish big things. From Rick:
Regardless of whether Democrats and Republicans reach some kind of last-minute bargain to avoid the worst effects of tax hikes and spending cuts, the disaster that has been the fiscal cliff negotiations has broad implications for the Washington agenda in 2013 and beyond.
The tone has been set for the new year, and possibly for the rest of President Obama's time in office: Washington's divisions are the only point that matters anymore. Call it dysfunction or call it just plain broken, just don't call it capable of even small legislative moves that involve compromise.
Hopes of a grand bargain on fiscal policy, involving entitlement spending, tax rates, and the debt ceiling, disappeared weeks ago. All that's left are fading possibilities involving the delaying portions of tax increases and restoring some planned cuts.
Those are moves that actually make the deficit outlook worse. More saliently, they should be the politically easy things to get done, yet Congress is paralyzed and the president appears powerless to do anything meaningful to prod action.
Some Senate Democrats are already expressing opposition to the details of a deal coming together on Capitol Hill, indicating the deal, as negotiated by Vice President Biden and Sen. Mitch McConnell, may have trouble getting Democratic votes.
"This is one Democrat that doesn't agree with that at all," Sen. Tom Harkin, D-Iowa, said from the floor of the Senate this morning after reading details of the deal emerging as reported by Jon Karl.
Even before a deal has been announced, Harkin lamented leaks that the tax cuts would be extended for people making up to $450,000 a year and that the estate tax be extended.
"I think that's grossly unfair," Harkin said, "We're going to lock in forever the idea that $450,000 is middle class in America?…what have we forgotten, have we forgotten that average income earners in America are making $25,30,40,50,60 thousand dollars a year? That is the real middle class in America."
Harkin said no deal is better that this deal in its current form.
"As I see this thing developing, quite frankly as I've said before no deal is better than a bad deal and this looks like a very bad deal the way this is shaping up."
Harkin said while he believes in compromise, getting no deal would not be all that bad, since tax rates would go back to those under President Bill Clinton.
"What's so bad about that?" he questioned, "it worked pretty darn well, the economy was going well, we were paying down the deficit, things were going well under Bill Clinton's tax system and that's what we will go back to tomorrow. What's so bad about that?"
If a deal is not reached, the consequences for the economy will be severe, wiping out as many as 5 percentage points of Gross Domestic Product in the coming year, according to some estimates. Though economists argue about the impact of the numbers - the $1.2 trillion in spending cuts would happen over 10 years - nearly all agree the combined effect would be recessionary.
The Dow Jones Industrial Average has lost 400 points since the "cliff" talks began in earnest in mid-December. That wiped out nearly half the gains in the index for the year, which, as of mid-morning, was up 5.9 percent for 2012. It's a blow to investors and 401(k) savers who, since 2008, have seen only about 2 percentage points added to their wealth with the stock market's gyrations.
The Dow Jones Industrial average, after opening sharply higher on hopes for a deal, fell 11 points to 12,938 at 11 a.m. today, the last trading day of the year.
Even if there's a deal, the economy is in for headwinds next year. A 2 percentage point jump in payroll taxes for Social Security will take place Jan. 1, sucking about $2,000 from a worker earning $100,000 a year. Higher taxes on the wealthy - a given in any version of a budget deal - will draw money out of the economy, cutting job creation.
11:16 a.m - Liberals Frustrated with Biden Proposal - President Obama and Democratic leaders will have to lean hard on the liberal wing of their party. They will likely see a proposal that allows tax hikes only for people making more than $400,000 as a defeat. The Harkin mentioned here is Iowa Democratic Sen. Tom Harkin.
Harkin:on the deal before it is announced:"This is looking like a very bad deal the way this is shaping up."
- Jonathan Karl (@jonkarl) December 31, 2012
Vice President Joe Biden and Senate Minority Leader Mitch McConnell are deep in private negotiations to find a bipartisan agreement.
The 'Fiscal Cliff,' you'll recall, is that economy-stalling cocktail of tax hikes (expiring Bush-era tax cuts, really) and automatic spending cuts (more than $110 billion across-the-board that lawmakers originally agreed to as an incentive to pass an earlier failed fiscal measure).
The latest reporting on a proposed deal from ABC's Jonathan Karl goes something like this:
An emerging tentative agreement would extend current tax rates for households making $450,000 or less; extend the estate tax at its current level of 35 percent for estates larger than $5 million; and prevent the Alternative Minimum Tax from hammering millions of middle-class workers, sources said.
The deal would also extend unemployment benefits set to expire Tuesday and avert a steep cut to Medicare payments for doctors.
Both sides also seem willing to delay by three months automatic spending cuts to defense and domestic programs, the sources said, setting the stage for continued fiscal debate in the next few months tied to the debt ceiling.
Democrats and President Obama had originally wanted to extend the expiring tax cuts at a lower rate - for everyone making less than $250,000. Before Christmas Republicans in the House and Speaker John Boehner could not find the votes among their own caucus to pass a bill that would have allowed the cuts to expire on everyone making more than $1 million. Any deal, as a result, would likely pass with support from Democrats in the House and a minority of Republicans there.
The Bush-era tax rates technically expire at midnight on Jan. 1. The spending cuts technically start to kick in on Jan. 2nd. All of those provisions could be dealt with retroactively early next year. But a whole new Congress is sworn in Jan. 3rd. That would give Democrats better numbers in both houses. Failing to reach a deal before then, however, would make all the actual legislation start over from scratch.
Biden and McConnell have to reach an agreement.
Senators from both parties have to agree to allow a vote on it (not to filibuster it).
If any such deal can pass the senate, it would then head over to the House of representatives, where Boehner would have to decide if he would allow a vote on it. This would be a tough decision. His Republican caucus has already made clear it wouldn't vote for even a proposal that set a $1 million threshold for tax hikes. He'd be agreeing to let something pass without a majority of Republicans behind it.
Could all of that happen before midnight? Anything is possible. But it would be an amazing and unprecedented pace of action in a town that has been stymied by gridlock for years.
We'll keep you up-to-date right here.