UPDATE: 8:30 p.m.
Racing against the clock, the White House reached agreement with congressional Republicans late Monday on a deal to prevent across-the-board tax increases and spending cuts to government programs from taking effect at midnight, according to administration and Senate Democratic officials.
These officials said a New Year's Eve vote in the Senate to ratify the deal was possible later in the evening, barring opposition from majority Democrats.
There was no immediate confirmation from aides to the top Republicans in Congress, Sen. Mitch McConnell and House Speaker John Boehner.
Vice President Joseph Biden headed for the Capitol to brief the Democratic rank and file.
The officials who described the developments did so on condition of anonymity, saying they were not authorized to discuss the details.
Hours earlier, President Barack Obama said, "It appears that an agreement to prevent this New Year's tax hike is within sight. ... But it's not done," he added of legislation that redeems his campaign pledge to raise taxes on the wealthy while sparing the middle class.
Even by the dysfunctional standards of government-by-gridlock, the activity at both ends of historic Pennsylvania Avenue was remarkable as the White House and Congress struggled over legislation to prevent a "fiscal cliff" of tax increases and spending cuts.
As darkness fell on the last day of the year, Obama, Biden and their aides were at work in the White House, and lights burned in the House and Senate. Democrats complained that Obama had given away too much in agreeing to limit tax increases to incomes over $450,000, far above the $250,000 level he campaigned on. Yet some Republicans recoiled at the prospect of raising taxes at all.
A late dispute over the estate tax produced allegations of bad faith from all sides.
Senate Republican leader Mitch McConnell -- shepherding final talks with Biden -- agreed with Obama that an overall deal was near. In remarks on the Senate floor, he suggested Congress move quickly to pass tax legislation and "continue to work on finding smarter ways to cut spending" next year.
The White House and Democrats initially declined the offer, preferring to prevent the cuts from kicking in at the Pentagon and domestic agencies alike. Officials said they might yet reconsider, although there was also talk of a short-term delay in the reductions.
While the deadline to prevent tax increases and spending cuts was technically midnight, passage of legislation by the time a new Congress takes office at noon on Jan. 3, 2013 -- the likely timetable -- would eliminate or minimize any inconvenience for taxpayers.
For now, more than the embarrassment of a gridlocked Congress working through New Year's Eve in the Capitol was at stake.
Economists in and out of government have warned that a combination of tax hikes and spending cuts could trigger a new recession, and the White House and Congress have spent the seven weeks since the Nov. 6 elections struggling for a compromise to protect the economy.
Even now, with time running out, partisan agendas were evident.
Obama used his appearance to chastise Congress, and to lay down a marker for the next round of negotiations early in 2013 when Republicans intend to seek spending cuts in exchange for letting the Treasury to borrow above the current debt limit of $16.4 trillion.
"Now, if Republicans think that I will finish the job of deficit reduction through spending cuts alone -- and you hear that sometimes coming from them ... then they've got another think coming. ... That's not how it's going to work at least as long as I'm president," he said.
"And I'm going to be president for the next four years, I think," he added.
Officials in both parties said agreement had been reached to prevent tax increases on most Americans, while letting rates rise on individual income over $400,000 and household earnings over $450,000 to a maximum of 39.6 percent from the current 35 percent. That marked a victory for Obama, who campaigned successfully for re-election on a platform of requiring the wealthy to pay more.
Officials said any agreement would also raise taxes on the value of estates exceeding $5 million to 40 percent, but a late dispute emerged on that point as well as on spending cuts. Democrats accused Republicans of making a 11th-hour demand to have the $5 million threshold rise each year to take inflation into account. GOP officials said the White House had agreed to the proposal on Sunday night, a claim administration officials disputed.
Any compromise was also expected to extend expiring jobless benefits for 2 million unemployed, prevent a 27 percent cut in fees for doctors who treat Medicare patients and likely avoid a near-doubling of milk prices.
Much or all of the revenue to be raised through higher taxes on the wealthy would help hold down the amount paid to the Internal Revenue Service by the middle class.
In addition to preventing higher rates for most, any agreement would retain existing breaks for families with children, for low-earning taxpayers and for those with a child in college.
In addition, the two sides agreed to prevent the Alternative Minimum Tax from expanding to affect an estimated 28 million households for the first time in 2013, with an average increase of more than $3,000. The law was originally designed to make sure millionaires did not escape taxes, but inflation has gradually exposed more and more households with lower earnings to its impact.
To help businesses, the two sides also agreed to extend an existing research and development tax credit as well as other breaks designed to boost renewable energy production. Details on those provisions were sketchy.
Obama's remarks irritated some Republicans.
Sen. John McCain of Arizona they would "clearly antagonize members of the House."
There was no response from Speaker John Boehner, who has been content to remain in the background while McConnell did the negotiating.
Some Democratic officials said that with his comments, Obama was hoping to ease the concerns of liberals in his own party who feared he had given away too much in the current round of talks over taxes.
Obama campaigned on a call for higher tax rates on income over $200,000 for individuals and $250,000 for couples, far lower than the $400,000 and $450,000 that Biden and McConnell have set.
Similarly, the pending agreement on the estate tax would allow more large estates to escape taxation than many Democrats prefer.
By late afternoon, the two sides remained separated by a stubborn dispute over spending cuts scheduled to take effect on the Pentagon and domestic programs alike.
Officials familiar with the talks said the White House has been seeking agreement to stop the cuts from taking effect, either for a period of months or a year, and wanted to count higher taxes created elsewhere in the legislation to offset the cost.
Republicans have said they are willing to delay the across-the-board cuts, but only if Obama and Democrats agree to targeted savings from government programs to take their place.
UPDATE: 8:00 p.m.
A Democratic aide says the White House and congressional Republicans have reached an agreement to avert the so-called fiscal cliff.
The measure would extend Bush-era tax cuts for family incomes below $450,000 and briefly avert across-the-board spending cuts set to strike the Pentagon and domestic agencies this week.
Vice President Joe Biden was set to sell the agreement to Senate Democrats at a meeting at the Capitol on Monday night.
The aide required anonymity because he wasn't authorized to speak publicly.
UPDATE: 3:20 p.m.
The House will miss the midnight Monday deadline lawmakers set for voting to avoid the "fiscal cliff."
House Republicans notified lawmakers that the chamber will vote Monday evening on other bills. They say that will be their only votes of the day.
President Barack Obama and Senate Republican leader Mitch McConnell said Monday they are near a deal to avoid wide-ranging tax increases and spending cuts -- the fiscal cliff -- that take effect with the new year.
Both men said they were still bargaining over whether -- and how -- to avoid $109 billion in cuts to defense and domestic programs that take effect on Wednesday.
It remained unclear whether the Senate would vote Monday.
Congress could pass later legislation retroactively blocking the tax hikes and spending cuts.
UPDATE: 2 p.m.
Senate Minority Leader Mitch McConnell says he and the White House have agreed on preventing tax hikes that the "fiscal cliff" will trigger after midnight. And he says they are very close to an overall deal that would also prevent budget-wide spending cuts.
The Kentucky Republican did not provide any details. But he said on the Senate floor that lawmakers should pass legislation averting tax increases that would otherwise take effect at the start of New Year's Day.
McConnell spoke after President Barack Obama said in televised remarks from the White House that a deal was in sight.
UPDATE: 1 p.m.
President Barack Obama says it appears that an agreement to avoid the fiscal cliff is "in sight," but says it's not yet complete and work continues.
The president says this has been a "pressing issue on people's minds," and tells an audience of middle-class taxpayers the deal would, among other things, extend unemployment benefits for Americans "who are still out there looking for a job."
He voiced regret that the work of the administration and lawmakers on Capitol Hill won't produce a "grand bargain" on tax-and-spend issues, but said that "with this Congress, it couldn't happen at that time."
Officials familiar with the negotiations say an agreement would raise tax rates on family income over $450,000 a year and increase the estate tax rate.
Monday, December 31, 2012
The contours of a deal to avert the `fiscal cliff' are emerging that would raise tax rates on couples making over $450,000 a year, raise the estate tax rate and extend unemployment benefits for one year.
That's according to officials familiar with the negotiations.
The deal in the works would return tax rates on families making over $450,000 to 39.6 percent. The tax on estates worth more than $5 million would increase to 40 percent. And unemployment benefits would continue for one year.
The officials say the White House and Republicans are at an impasse over what to do about automatic, across-the-board spending cuts set to begin taking effect on Jan. 1. Democrats want to put off the cuts for one year.
The officials requested anonymity in order to discuss the internal negotiations.