On Monday Vice President Joe Biden and Senate Republican leader Mitch McConnell participated in the negotiations and seemed to offer the last hope for avoiding the across-the-board tax increases and draconian cuts in the federal budget that will be triggered at the start of the New Year because of a deficit-reduction law enacted in August, 2011.
The leaders of both parties in the Senate had hoped to clear the way for swift action on Sunday. However any possible votes are postponed by Harry Reid, Senate Democratic leader, as well as the Senate adjourned until Monday, because of the two sides being still at loggerheads in talks.
The main sticking point between Republicans and Democrats remained whether to extend existing tax rates for everyone, as Republicans want, or just for those earning below $250,000 to $400,000, as Democrats have proposed, reports the Reuters
Hopes for a “grand bargain” of deficit-reduction measures vanished weeks ago as talks stalled.
The fiscal cliff is the combination of the expiring Bush-era tax cuts and the impending across-the-board spending cuts Congress mandated when it last agreed to raise the debt ceiling. The tax cuts expire and the government is required to start cutting about $100 billion after the new year.
According to the Huff Post, the cut that GOP leaders had proposed – picking up on a now-defunct offer from President Barack Obama – involved basing Social Security cost-of-living adjustments on a chained consumer price index (CPI), which grows more slowly than current measures of inflation and therefore would give seniors less in benefits as time went on.
Senator John McCain (R-Ariz.) said: “CPI has to be off the table because it’s not a winning argument to say benefits for seniors versus tax breaks for rich people.”
“We need to take CPI off the table – that’s not part of the negotiations – because we can’t win an argument that has Social Security for seniors versus taxes for the rich,” – he added.
According to the Senate Majority Leader Harry Reid, Democrats had made a counteroffer at the meeting in the Capitol Democrats, although he did not say what.
The GOP would like to institute this limited inflation measure at some point, even if they have to wait for a broader debt, deficit and tax reform plan next year.
A payroll tax holiday Americans have enjoyed for two years looks like the most certain casualty as neither Republicans or Democrats have shown much interest in continuing it, in part because the tax funds the Social Security retirement program.
The current 4.2 percent payroll tax rate paid by about 160 million workers will revert to the previous 6.2 percent rate after December 31, and will be the most immediate hit to taxpayers.