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Deadline Day Arrives: Congress ‘Very Close’ to Tax Deal, Unresolved on Deficit

December 31, 2012 at 12:00 AM EDT
The last day of 2012 marked the last day for Congress to resolve bitter disagreements over tax and deficit issues and prevent the automatic expiration of tax cuts and major budget spending cuts. Judy Woodruff talks to Todd Zwillich of WNYC about the progress but no last-minute deal on Capitol Hill.
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JUDY WOODRUFF: The old year ticked down today, and with it went any hope of meeting the midnight fiscal cliff deadline.

House Republicans opted not to hold any votes on the issue tonight. So, officially, at least, more than $600 million in tax hikes and spending cuts begin taking effect tomorrow.

In the meantime, Senate Republicans and the White House continue working on a possible deal.

SEN. HARRY REID, D-Nev.: We really are running out of time. Americans are still threatened with a tax hike in just a few hours.

JUDY WOODRUFF: New Year’s Eve morning at the Capitol began with a warning from Senate Majority Leader Harry Reid, after a long weekend of tense negotiations. Vice President Joe Biden had spent Sunday dealing directly with the Senate’s Republican minority leader, Mitch McConnell. And those contacts continued today.

By early this afternoon, amid reports of progress, President Obama emerged in a campaign-style setting.

PRESIDENT BARACK OBAMA: Today, it appears that an agreement to prevent this New Year’s tax hike is within sight. But it’s not done. There are still issues left to resolve. But we’re hopeful that Congress can get it done. But it’s not done.

JUDY WOODRUFF: It was widely reported that the deal would include making the Bush era tax cuts permanent for families with incomes under $450,000 a year. For households making more than that amount, rates would rise from the current 35 percent to 39.6 percent.

The agreement would also raise the estate tax. In addition, unemployment benefits would be extended for one year. Otherwise, some two million Americans face the end of their benefits beginning in January.

On the Senate floor shortly before mid-afternoon, Minority Leader McConnell confirmed that the stalemate on taxes appeared to be over.

SEN. MITCH MCCONNELL, R-Ky.: I can report that we have reached an agreement on all of the tax, the tax issues. We are very, very close. As the president just said, the most important piece, the piece that has to be done now is preventing the tax hikes.

JUDY WOODRUFF: There was no agreement on what to do about across-the-board spending cuts, known as sequestration, due to start tomorrow. Democrats wanted to delay the cuts by a year. And the president served notice that, even then, he would insist on a balanced approach.

BARACK OBAMA: Now, if Republicans think that I will finish the job of deficit reduction through spending cuts alone, if they think that’s going to be the formula for how we solve this thing, then they have got another thing coming. That’s not how it going to work.

JUDY WOODRUFF: For his part, Sen. McConnell said that issue shouldn’t stand in the way of a tax deal.

MITCH MCCONNELL: We will continue to work on finding smarter ways to cut spending. But let’s not let that hold up protecting Americans from the tax hike that will take place in about 10 hours.

JUDY WOODRUFF: But other Senate Republicans bridled at doing any deal now without substantial spending reductions.

SEN. BOB CORKER, R-Tenn.: I just want to say I’m very disappointed with what the president had to say. And I’m one senator. I just want to go on record that is it’s absolutely unacceptable to pay for the sequester with revenues.

JUDY WOODRUFF: Meantime, there was growing grumbling in Senate Democratic ranks that Vice President Biden had given too much ground.

SEN. TOM HARKIN, D-Iowa: As I see this thing developing, quite frankly, as I have said before, no deal is better than a bad deal. And this looks like a very bad deal, the way this is shaping up.

JUDY WOODRUFF: Even the president acknowledged that he would have preferred a grand bargain on taxes and spending now. But he said:

BARACK OBAMA: With this Congress, that was obviously a little too much to hope for at this time.

JUDY WOODRUFF: As the day wore on and the bargaining continued, other key issues were hanging fire, including a one-year bill to prevent milk prices from doubling in the New Year.

Joining us from the Capitol with the very latest is Todd Zwillich. He’s Washington correspondent for “The Takeaway” on Public Radio International and he’s a regular guest on the NewsHour.

So, Todd, you’re back with us again.

Six hours to go until midnight, progress reported, but still to deal.

TODD ZWILLICH, WNYC Radio: Senate Republicans, Judy — the latest thing that has happened is Senate Republicans came out of a conference meeting with their leader, with Mitch McConnell, all sounding positive. They all echoed what you had in the piece there from McConnell, saying they were very, very close.

The sequester, the automatic spending cuts, remained an outstanding issue and kind of got thrown into the mix again today.

You know, the president in that appearance in the Executive Office Building today in front of a supportive crowd, not really a press conference, more of like a mini-rally, talked about the sequester and his desire to have any delay in the sequester paid for with revenue increases.

You know, I talked to a few House members just a few moments ago. Not only the tone of the president’s presentation, but also that demand which they consider moving the goalposts, even though the Democrats dispute that, on the issue of the sequester, a lot of them are really, really mad about it, Judy.

And they thought the president was twisting the knife, was goading them, was ridiculing them in front of the public.

It has made some of them, frankly, very, very angry, I was told. But how does that affect a deal in a practical sense? Probably not much. But this sequester is — you know, it’s a big part of the fiscal cliff. Monetarily, it’s not quite half of it. It’s worth $110 billion, and those spending cuts go into effect tonight. It’s unclear if they are going to solve that part of it.

JUDY WOODRUFF: But, Todd, is there — on the tax side, has there been agreement there, at least, on the Senate side? Because, as we just reported, some Democrats say they’re — they don’t like what they see.

TODD ZWILLICH: Well, they don’t need everybody. Keep in mind, you — what you need in the Senate usually is 51 votes. We have gotten into this environment here where we assume that everything needs 60 votes. It doesn’t have to be that way.

You heard from Sen. Harkin there. Now, he and a bunch of other Senate liberals, Sheldon Whitehouse, Al Franken, Jay Rockefeller, others, huddled in Harry Reid’s office earlier today. I was standing outside that room when they came out. They were tight-lipped. They were grim. They went into a side meeting all their own to try and decide what to do. They weren’t talking when they came out.

What you are looking for there is, will they block this thing? Will they slow it down? They haven’t indicated that they will do that. They can vote against it as long as Reid and McConnell can muster 51 votes for this thing.

And it appears as though, if there are no procedural delay tactics, which we can’t afford right now, that they will be able to do that.

Now, that is the Senate side. On the House side, the question remains — this is a deal on the tax side that has no spending cuts. They’re all very aware of that.

Can John Boehner muster the votes on the House side to get this passed? Republicans do not like this on the House side. There are no spending cuts, so many of them say they will vote against it.

Maybe the question then becomes, can John Boehner muster 40 or 45 Republican votes and then use the 185 or 190 votes that Nancy Pelosi would deliver, potentially for a deal like this, with no spending cuts, to pass it there tomorrow or the next day? The House side is unclear at this point.

JUDY WOODRUFF: So, Todd, you’re saying that as we sit here this evening, we’re hearing there may be a Senate vote tonight. The House may vote tomorrow. But at this point, it still is not known the outlines of what a potential deal would look like.

TODD ZWILLICH: Well, I think the outlines are known on the tax side. And it was described accurately in your piece there, Judy…

JUDY WOODRUFF: Right.

TODD ZWILLICH: … with the tax rates at $450,000 for families. Dividends would go up, the estate tax part of it.

What is important is the one-year extension on unemployment benefits. There are two million people set to lose their benefits, so that is all in there. Everybody must keep in mind that no matter what happens, even if you are under $450,000 or $250,000, as the president has been discussing, your taxes are going up tonight because the payroll tax holiday expires. That happens for everybody. They’re not going to renew that holiday.

So that is important to remember. On the tax side, they appear to be pretty much there. It appears that the tax part of the cliff is going to be solved. And even if it is solved after New Year’s, remember, the Treasury Department can mess with the withholding rules so that your paycheck doesn’t actually change.

On the spending cut side, on the government sequester side, that is not solved. Not clear that it will be. They may have to come back at that one.

JUDY WOODRUFF: So, Todd, at this point, what you are watching as a reporter who has been covering this? The action is where tonight?

TODD ZWILLICH: The action is in the Senate Democratic Caucus. You’re watching for a briefing that Democrats want from the White House on the outlines of this deal. They want to hear from Joe Biden or one of his representatives. How did you arrive at this deal and what does it mean for us?

You’re watching for senators, ideological senators, frankly,on both sides of this deal, liberals upset that the income threshold is at $450,000, conservatives upset that there are no spending cuts in this deal, that it is all revenue. Will somebody slow it down and block it? You have to watch that on the Senate side, because that pushes the Senate over the cliff too.

On the House side, once they’re aware of what this deal is, how many votes can John Boehner get on the Republican side, until you get to 218 through any combination of Republican and Democratic votes at this point?

JUDY WOODRUFF: Not much celebrating tonight in the capital or at the Capitol itself.

Todd Zwillich, thank you very much.

TODD ZWILLICH: Always a pleasure, Judy.