Time is running out for U.S. lawmakers and President Barack Obama to agree on a budget deal by year end to avoid triggering more than $600 billion in tax increases and spending cuts, Sen. Joseph Lieberman said.
In the aftermath of House Speaker John Boehner's failure to garner support from his caucus for "Plan B," which would have extended tax cuts on incomes below $1 million, the odds are that both parties won't be able to reach an agreement, Lieberman, a retiring Connecticut independent, said on CNN's "State of the Union" program. He said Senate leaders now must take charge of resolving the budget stalemate or risk going over the so-called fiscal cliff.
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Still, "for the first time I feel it's more likely that we will go off the cliff," Lieberman said. Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell "have the ability to put this together again and pass something" and "they can do some things that will avoid the worst consequences of going over the fiscal cliff."
Tax cuts signed into law by President George W. Bush and extended by Obama are scheduled to expire Jan. 1. In addition, automatic spending reductions to domestic and defense programs are scheduled to start next month. Failing to avoid the fiscal cliff would push the U.S. into recession for the first half of 2013, according to the nonpartisan Congressional Budget Office.
Sen. Kent Conrad, a North Dakota Democrat who is chairman of the Senate Budget Committee, said on "Fox News Sunday" that it's still possible to reach an agreement before the deadline. Obama and Boehner "were so close and then Speaker Boehner went off on Plan B. I never understood why, it had no prospect of succeeding."
Obama on Dec. 21 urged leaders of both parties to put together an interim bill to keep taxes from rising on middle-income Americans as they work on a more comprehensive package.
Republican Rep. Mick Mulvaney of South Carolina said that the rejection of Boehner's plan doesn't change the probability that the cliff provisions will be triggered because the Obama administration won't compromise.
"Passing Plan B the other night would not have changed the outcome," Mulvaney said on CNN. "We were going to go over the cliff then, we are going to go over the cliff now. You cannot negotiate with someone who does not want to negotiate."
Rep. Steven LaTourette, a nine-term Ohio Republican who is retiring after this session, said on CNN today that Boehner dropped his proposal because it didn't have broader support from members, and that he is more willing to allow disagreement than his predecessors were.
"The reason Speaker Boehner has trouble managing the House Republican Conference isn't a lack of leadership," LaTourette said. "It's because we have a lot of divergent opinions and he lets people participate, which wasn't the case in the past."
Wyoming Sen. John Barrasso, a member of the Republican leadership, said that the fiscal cliff probably will occur because President Obama believes doing so will hurt Republicans.
"I believe the president is eager to go over the cliff for political purposes," Barrasso said on Fox today. "He senses a victory at the bottom of the cliff. I think it hurts our country and hurts our economy."
By splitting the difference between their rival plans, Obama and Boehner, an Ohio Republican, probably can agree on a sufficient package and avoid a fiscal contraction that causes a recession and increased unemployment, Conrad said.
"What we ought to do is take Speaker Boehner's last offer, the president's last offer, split the difference, and that would be a package of about $2.6 trillion," Conrad said on Fox. "You couple that with the $1.1 trillion that's already done. And, that would be close to the $4 trillion needed to stabilize the debt and begin to bring it down."
Both Obama and Boehner have offered concessions in talks between the two, both in person and by telephone, since Dec. 5.
The president initially sought $1.6 trillion in new revenue, including a return to pre-Bush income tax rates for household income over $250,000 a year. The speaker first rejected any increase in tax rates, instead offering $800 billion in revenue by limiting unspecified tax exemptions.
After Boehner proposed raising taxes for households earning more than $1 million a year, Obama countered with a proposal to raise taxes on more than $400,000 of income.
Obama also has agreed to accept cuts in entitlement spending on programs such as Medicare, while Boehner has maintained that new taxes and spending cuts must be balanced on a one-to-one basis.
In sum, the two have approached the outlines of a plan that would raise about $1 trillion in tax revenue and cut about $1 trillion in spending. Any final agreement between the two, however, requires approval of a Republican-run House which has balked at tax increases and the Democratic-controlled Senate.
The Senate has passed legislation making the reductions permanent for income up to $250,000 for families and $200,000 for individuals, which would affect 98 percent of taxpayers and 97 percent of small businesses. Every Senate Republican voted against the package.
House Republicans have voted to extend all of the Bush tax cuts, which Democrats oppose. They've also passed legislation with no Democratic votes to cut food stamps and other domestic programs rather than defense.
The CBO said last month that extending the tax cuts for families earning $250,000 or less would boost the U.S. Gross Domestic Product by 1.25 percent, while extending them for all taxpayers would boost the GDP by less than one-quarter of a percent more.
Sen. Mark Warner, a Virginia Democrat, said that lawmakers may still be able to agree on a scaled-down plan that gives them time to make a larger deal later.
"I think there's unfortunately only going to be a small deal," Warner said today on "Face the Nation" on CBS. "We have to realize it's going to take revenues, spending cuts and entitlement reform."
Republican Sen. Kay Bailey Hutchison of Texas also said on the same program that the president and Congress could work out a deal before the end of the year. Lawmakers may return after Christmas to work out a temporary deal, she said.
"I have an abiding faith that we will not leave," Hutchison, who is retiring, said today. "We've got to do something to do a patch now, which, clearly, on Dec. 27, when Mark Warner and I go back, it is going to be a patch because in four days we can't solve everything."