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Fiscal cliff: Progress, but no promise of deal that could pass House, Senate

Senate Majority Leader Harry Reid D-Nev. retreats closed-door meeting with fellow Democrats as he Senate Minority Leader Mitch McConnell R-Ky.

Senate Majority Leader Harry Reid, D-Nev., retreats to a closed-door meeting with fellow Democrats as he and Senate Minority Leader Mitch McConnell, R-Ky., work to negotiate a legislative path to avoid the so-called "fiscal cliff," at the Capitol in Washington, Sunday, Dec. 30, 2012. Senate and House leaders rushed to assemble a last-ditch agreement to stave off middle-class tax increases and possibly delay steep spending cuts in an urgent attempt to find common ground after weeks of gridlock. (AP Photo/J. Scott Applewhite)

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Updated: December 31, 2012 12:29AM

WASHINGTON — Congress returns to work Monday — with only hours to go until the looming year-end “fiscal cliff” deadline — with some progress Sunday, but no promise of a deal that could pass the House and Senate.

Almost all of the action Sunday was in the Senate — behind the scenes, on the Senate floor and in closed-door separate meetings for Democratic and GOP senators.

After negotiations with Senate Majority Leader Harry Reid (D-Nev.) stalled, Minority Leader Mitch McConnell (R-Ky.) at one point took to the Senate floor to implore Vice President Joe Biden to intervene “to help jump-start the negotiations on his side.”

By nightfall, Biden and McConnell, I was told, ended up talking at least three times.

I was with a group of reporters who talked to Sen. Barbara Mikulski (D-Md.) after she emerged from the Democratic meeting, where she called the mood “grim.”

There are many moving parts to the revenue and spending negotiations.

“It’s not like a deal where you pull one lever,” Mikulski said. “It’s more like a kaleidoscope,” where the pieces keep re-arranging themselves.

At this stage, much of the drama in the fiscal cliff negotiations is over the extension of the tax breaks put in place under former President George W. Bush, starting in 2001. Everyone in the nation will pay more if Congress does nothing. The wallet hit for consumers is why the last-ditch talks have more to do taxes than with the far more difficult job of cutting massive long-term government spending.

Here’s the latest:

†Will Congress go over the fiscal cliff? Maybe. I lean to the highly likely. But there are degrees of going over. If there is a deal and lawmakers need a bit more time to conclude the paperwork and vote, then the impact of finishing up on Tuesday or Wednesday is minimal; the legislation can be retroactive to Jan. 1. A more pressing deadline is noon Thursday, when the new Congress is sworn in.

†What happens Monday? The House and the Senate are in session starting Monday morning. Whether they are in the Capitol through New Year’s Eve is anybody’s guess.

†What happens Tuesday? Well, if taxes go up for everyone at midnight, a Tuesday or Wednesday vote will be a vote for cutting taxes. That may give some members political cover.

†What are some of the revenue sticking points? Tax rates: President Barack Obama campaigned for re-election calling for letting taxes rise for households with income above $250,000. He is open to a higher number. Senate Republicans were in the $450,000 to $550,000 income range on Sunday; Democrats countered with $360,000 to $450,000. There was some talk of a surtax for those who earn more than $1 million, said Sen. Susan Collins (R-Maine). The estate tax: Democrats are resisting giving estate tax breaks to about 6,000 people “from the wealthiest families,” in the nation, said Sen. Dick Durbin (D-Ill.).

†What about the payroll tax break? Under Obama, everyone who has earned income has paid less Social Security tax for the past two years. No one is talking about extending that tax break, so every paycheck in 2013 will be less.

†Why did the GOP take Social Security cuts off the table? GOP senators, at their meeting, decided to drop a very contentious proposal, to curb the growth of Social Security by basing cost-of-living boosts to an index called the “chained CPI.”

Messing with Social Security at the same time as Republicans were trying to preserve tax breaks for high earners was asking for trouble. Emerging from the meeting, Sen. John McCain (R-Ariz.) told reporters, “We cannot win a PR battle where we are holding fast on tax breaks for the wealthiest people versus the chained CPI. It’s not a winning hand.”

†What happens next in the Senate? If Reid and McConnell do not get a compromise on Monday, Reid will try to move a barebones bill to preserve unemployment benefiits and tax breaks for households below $250,000.

†What happens next in the House? If the Senate passes a bill, House Speaker John Boehner (R-Ohio) has said he will have the House consider it. However, the Senate bill would be subject to amendments — which means elements could change.

House and Senate Democrats and Republicans held their own meetings on Sunday.

“The House is waiting for the Senate to act,” Rep. Peter Roskam (R-Ill.) told me as he emerged from his meeting. Boehner declined any comment when he walked out.

Rep. Jan Schakowsky (D-Ill.) told me, “Right now everything is on hold.”

Why is all of this being done on deadline?

Sen. Olympia Snow (R-Maine) who ends her Senate career on Thursday, said the 11th-hour negotiations show how dysfunctional Congress is.

“Just when you think it couldn’t get much worse, it does. . . . More than anything else, I think it suggests a detachment from the real world. . . . This could all have been avoided,” she said.

The Senate had plenty of time to work this out, she said. It’s not because “we had so much on our agenda we just couldn’t possibly fit this in. That’s the travesty. This is a failure of historic proportions.

“. . . We have to go back to the art of legislating, governing, compromising, consensus building. It truly is a lost art.”

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