President Obama talks about the fiscal cliff negotiations on Friday, December 28 2012.
WASHINGTON (USA TODAY) - President Obama said he remains hopeful Congress will reach a deal to avert the "fiscal cliff," but negotiations stalled Sunday afternoon on Capitol Hill where Senate leaders are trying to find a compromise to avert year-end tax hikes and spending cuts that threaten economic recovery.
"At this stage, we are not able to make a counter-offer," said Senate Majority Leader Harry Reid, D-Nev., in response to the most recent offer made by Senate Minority Leader Mitch McConnell, R-Ky., on Saturday evening. "Perhaps as the day moves on I will be able to."
Reid added: "We're apart on some pretty big issues."
Negotiations hit a wall when McConnell asked to include a provision to change the way cost-of-living adjustments are made for Social Security benefits, according to a Senate Democratic aide who isn't authorized to discuss the status of negotiations and spoke on condition of anonymity. Republicans broadly support the proposal, which could ease passage for a final legislative package in a divided Congress, but the proposal is a non-starter for Democrats.
"I am concerned about the lack of urgency," McConnell said, because he has yet to receive a counteroffer from Reid. "I want everyone to know I'm willing to get this done, but I need a dance partner."
McConnell said he made a call Sunday to Vice President Joe Biden "to see if he could help jumpstart negotiations on his side." McConnell and the vice president have had a strong working relationship in previous fiscal negotiations. Reid said he also spoke Sunday with the president.
Congress reconvened Sunday with just one day remaining before all of the George W. Bush era tax rates expire and the first $100 billion in scheduled $1.2 trillion in across-the-board spending cuts take effect at the start of the new year.
If they fail to reach an agreement, Reid is prepared to bring to the floor Monday a stripped down bill to extend the middle class tax rates and unemployment benefits. If it passes the Democratic controlled Senate, it would be sent to the Republican controlled House, where passage is not guaranteed because of GOP opposition.
"Now the pressure's on Congress to produce," Obama said Sunday on NBC's Meet The Press in his first appearance on the show since 2009.
Lawmakers in both parties remained optimistic that Senate leaders could find an agreement that could pass both chambers. House Speaker John Boehner, R-Ohio, has said he will not take up a bill unless the Senate can pass it first. Post-election efforts by Obama and Boehner to reach a broader deal to reduce the deficit have evaporated, and Congress is now only in search of a compromise that addresses immediate fiscal issues.
"There are certainly no breakthroughs yet ... but there's certainly a possibility of a deal," Sen. Charles Schumer, D-N.Y., said on ABC's This Week.
"Responsible people on both sides of the aisle do need to try and come together," said Sen. Jon Kyl, R-Ariz., who appeared with Schumer.
Schumer said Reid and McConnell were working on a framework to extend for the middle class the tax rates enacted under President George W. Bush. The revenues gained from higher rates on the wealthy would be used to pay down the automatic spending cuts triggered Jan. 2 in order to protect defense and social programs.
Less public attention has been paid to the impending spending cuts - which were enacted as a backstop after Congress failed to find a deficit reduction agreement on its own - but lawmakers voiced increasing concerns about the impact of the cuts if they occur unaltered.
Sen. Lindsey Graham, R-S.C., told Fox News Sunday that he spoke Saturday evening with Defense Secretary Leon Panetta, who voiced concerns about the impending $54 billion in defense cuts for 2013. "He's worried to death," Graham said.
So far, partisan gridlock has left Washington unable to bridge the two parties' philosophical differences on taxes. The president has called for an extension of the current Bush-era rates for households earning $250,000 or less, which affects about 98% of earners. In previous negotiations with Boehner, the president was willing to raise the threshold to $400,000.
Republicans, particularly in the House, have resisted any proposal that would allow tax rates to rise, including a failed effort by Boehner to pass a bill that protected the current tax rates for earners making less than $1 million. Republicans want more spending cuts, particularly from costly entitlement programs like Medicare, which Democrats have been unwilling to cede.
If Congress is unable to send him a proposal, Obama said he will insist that Congress vote on his own, scaled-back plan to extend tax rates and expiring unemployment insurance benefits affecting 2.1 million Americans. Reid said Friday that if he and McConnell can't come to terms on an agreement, he would bring Obama's proposal to the floor on Monday.
"If we can get that done, that takes a big bite out of the fiscal cliff," Obama said. "It avoids the worst outcomes. And we're then going to have some tough negotiations in terms of how we continue to reduce the deficit, grow the economy, create jobs."
Obama granted the Meet The Press interview in part to pressure Congress - particularly the Republicans - into signing off on a fiscal cliff agreement.
The president said he has put up fair offers to the Republicans in the past - "they have had trouble saying yes" - and made clear he would blame the GOP if taxes rise while the government falls over the cliff.
"If Republicans don't like it, they can vote no," Obama said. "But I actually think that there's a majority support for making sure that middle class families are held harmless."
Managing the fiscal cliff is essential to improving the economy, Obama said. The nation is poised to improve economic growth in 2013, he said, "but what's been holding us back is the dysfunction here in Washington."
Susan Davis and David Jackson, USA TODAY