Senate Dems Balk At Last-Minute GOP Fiscal Cliff Demand

Late night and early morning negotiations between Senate Minority Leader Mitch McConnell and Vice President Joe Biden brought the parties closer to a consensus on how to avoid the fiscal cliff — a deal that includes potential Democratic revenue concessions and a GOP agreement to green light new spending without offsetting budget cuts.

But at least one key substantive issue remains, and on Monday morning, a leading liberal senator suggested he might quash the agreement, if it ever reaches the floor as legislation.

“There is definitely no deal yet,” said a senior Democratic aide. “Republicans are pushing a three-month sequester turnoff which Democrats cannot accept because it just kicks the can down the road.”Republicans hope to defuse the tax piece of the fiscal cliff and delay its spending cut provisions until early next year, at around the time when the debt limit will have to be increased, and Congress will have to appropriate funds to run the federal government.

The parties are nearing agreement that the Bush tax rates, including on capital gains, should be locked in for income up to a minimum of $450,000. Republicans would like to kick that up to over $500,000. Democrats are also prepared to make permanent the current low estate tax, which is set to increase, and apply to much less valuable estates, in 2013.

In exchange, Democrats are asking to extend expiring unemployment benefits, and Medicare physician payments, without offsetting spending cuts.

The net effect of the measure would likely not reduce the deficit. But it would set up a spending-cut cliff early next year. And Democrats are balking. They insist that automatic spending cuts scheduled to take effect later this week be put off for longer than three months, as Republicans have offered.

And on the Senate floor Monday morning, Sen. Tom Harkin (D-IA), chairman of the Health, Education, Labor and Pensions Committee, panned the deal, and argued that any deal should be cut from a post New Year’s baseline after all the Bush tax cuts have expired.

Senate rules will allow any senator to derail any deal, which would have to be passed by both the Senate and House before the end of the day. And Harkin has suggested he and other liberal Democratic senators might do just that. But avoiding blame for going over the fiscal cliff is a key imperative for both parties. And both GOP and Democratic leaders will pressure all members not to stand in the way, if the parties cut a deal.

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