Below are portions of Saturday morning articles providing the latest details on the seemingly never-ending saga in Washington. Links to the full articles are provided.
From the Washington Post - “A breakthrough”
President Obama and Senate leaders were on the verge of an agreement Friday that would let taxes rise on the wealthiest households while protecting the vast majority of Americans from historic tax hikes set to hit in January.
The development marked a breakthrough after weeks of paralysis. After meeting with Obama at the White House, Senate Majority Leader Harry M. Reid (D-Nev.) and Minority Leader Mitch McConnell (R-Ky.) said they would work through the weekend in hopes of drafting a “fiscal cliff” package they could present to their colleagues on Sunday afternoon.
Threading all the legislative needles now falls to Reid and McConnell, who pledged to work together to craft a package that can win significant bipartisan support.
Either way, the wheels are now in motion for the Senate to vote on New Year’s Eve, Senate aides said. If that vote were successful, the Republican-controlled House would have mere hours to decide whether to approve the legislation or take the blame for letting taxes rise next month for nearly 90 percent of Americans — and for potentially sparking a new recession.
At the White House, according to the House Republican briefed on the meeting, Boehner repeatedly deferred to Senate leaders on policy details, saying only: “Let us know what you come up with, and we’ll consider it — accept it or amend it.”
From the Wall Street Journal - “Increasingly concerned about being blamed”
The two Senate leaders now have to concoct a deal that has eluded Washington since the election, and it remained unclear how the two sides could bridge their remaining differences, in particular over the threshold at which higher tax rates would kick in. Mr. Obama left open the possibility at the White House meeting of going higher than $250,000, a senior administration official said.
How the House will respond to any Senate deal is a crucial unanswered question. According to a spokesman, Mr. Boehner told the president the House would consider whatever bill passes the Senate, either accepting or amending it.
Senate Republicans have indicated they could accept some kind of compromise that would raise the threshold for income tax increases to $400,000—the level Mr. Obama had agreed to as part of broader budget talks with Mr. Boehner that broke down last week.
The optimism expressed by Mr. McConnell Friday was noteworthy because until a day earlier he had been on the sidelines of negotiations.
Republicans are growing increasingly concerned about being blamed if the country topples over the cliff, and a GOP lawmaker suggested Friday they wouldn’t stand in the way if a deal can be reached.
From the New York Times - “I’ve got a positive feeling now”
Bipartisan agreement still hinged on the Senate leaders finding an income level above which taxes will rise on Jan. 1, most likely higher than Mr. Obama’s level of $250,000. Quiet negotiations between Senate and White House officials were already drifting up toward around $400,000 before Friday’s White House meeting. The two sides were also apart on where to set taxes on inherited estates.
But senators broke from a long huddle on the Senate floor with Mr. McConnell on Friday night to say they were more optimistic that a deal was within reach. Mr. McConnell, White House aides and Mr. Reid were to continue talks on Saturday, aiming for a breakthrough as soon as Sunday.
With the House set to return to the Capitol on Sunday night, Mr. Boehner has said he would place any Senate bill before his chamber and let the vote proceed and the chips fall. The House could also change the legislation and return it to the Senate.
If the Senate is able to produce a bill that is largely bipartisan, there is a strong belief among House Republicans that the same measure would easily pass the House, with a large number of Republicans.
“I’ve got a positive feeling now,” said Senator Kay Bailey Hutchison, Republican of Texas, who said a burst of deal-making talk broke out as soon as the leaders returned to the Capitol.
Mr. Boehner appeared to recognize that he was no longer dictating terms. According to the aide, the speaker said repeatedly, “Let us know what you come up with, and we’ll consider it — accept it or amend it.”
After the meeting, Mr. Obama and officials at the White House appeared visibly optimistic. The president was cheerful with his aides before he walked into the Brady Press Briefing Room to deliver his remarks before assembled reporters. A person briefed on the meeting described a “give and take” atmosphere.
From Bloomberg - “An opportunity for a real result”
“For the first time, you’re seeing an opportunity for a real result rather than the phony-baloney acts that they’ve been engaged in,” said Senator John McCain, an Arizona Republican. “Republicans know that they’re losing the PR battle but the president knows that history will judge him.”
If Congress doesn’t act, taxes would rise by more than $3,400 per household, automatic spending cuts would start taking effect and expanded unemployment benefits would lapse. If there is no resolution soon, the economy would likely go into recession in the first half of 2013, according to the Congressional Budget Office.
The absence of a debt ceiling agreement would make the limit on U.S. borrowing authority the next major event forcing a fiscal debate. Republicans plan to use it as leverage to force Obama to accept spending cuts.
From Reuters - “Deal can easily be retroactive”
“Regardless of whether the government resolves the issues now, any deal can easily be retroactive. We’re not as concerned with January 1 as the market seems to be,” said Richard Weiss, a senior money manager at American Century Investments.
S&P rating agency said on Friday the fiscal cliff impasse did not affect the U.S. sovereign rating. That lifted the immediate threat of a downgrade from the agency, which cut the United States’ triple-A rating in August, 2011 in an unprecedented move after a similar partisan budget fight.
Updated charts and comments available via Twitter (@CiovaccoCapital).