Politics

Senators from both parties hopeful about fiscal cliff deal

Dec. 28, 2012 at 9:49 AM ET

With the deadline to avoid the economy going over the “fiscal cliff’’ looming on Jan. 1, senators from both parties struck an optimistic note on Friday that an agreement can be reached to avoid tax hikes and spending cuts totaling $600 billion.

“I am hopeful there will be a deal that avoids the worst parts of the fiscal cliff, namely taxes going up on middle-class people,’’ Sen. Chuck Schumer (D-N.Y.) told TODAY’s Willie Geist. “I think there can be, and I think the odds are better than people think that there could be.’’

“I think in the end we’ll get a deal,’’ Sen. John Thune (R-S.D.) told Geist. “The question is the timing of that. It is encouraging that sides are sitting down. They continue to have lines of communication there open, and I view that as optimistic as well.”

Senate Majority Leader Harry Reid (D-Nev.), Senate Minority Leader Mitch McConnell (R-Ky.), House Speaker John Boehner and (R-Ohio), and House Minority Leader Nancy Pelosi (D-Calif.) are scheduled to sit down with President Obama on Friday afternoon to continue talks, and Congress will continue to work on an agreement through this weekend.

The average family earning $50,000-$75,000 a year could see their taxes increase by $2,400 in 2013 if a deal is not reached, according to CNBC’s Tyler Mathisen. Income taxes would also increase at every level, taxes on capital gains and dividends would jump, the alternative minimum tax would hit more families, and long-term unemployment benefits would expire. According to the Tax Policy Center, nearly 90 percent of American households would be affected if a deal is not reached or retroactive fixes do not negate the harsher parts of the fiscal cliff.

Schumer believes a positive development signaling a deal will get done is the simple fact that crucial leaders in the process are engaged in talks with the President.

“I am getting a little more optimistic today,’’ Schumer told Geist. “Sometimes it’s darkest before the dawn, and there are two good signs for optimism today. One is that leader McConnell is actively engaged. For the first time, leader McConnell is speaking to the President. If the Senate is going to be the place where action starts, you need both of them there.

“The second reason for optimism is Boehner is back at the table, because you can’t pass something just through the Senate, and we see what a mess the House is; they couldn’t even pass Speaker Boehner’s own Plan B. The fact that he’s come back and the four of them are at the table means to me, we could come up with some kind of agreement that would avoid the main parts of the fiscal cliff, particularly taxes going up on middle-class people.’’

Thune feels the two sides have to reach an agreement on spending cuts because closing the revenue gap cannot be achieved solely through tax increases. The two political parties remain particularly divided on the issue of raising taxes on the wealthiest Americans to raise revenues and close the U.S. budget deficit.

“What we’d like to see is something that deals with spending,’’ Thune said. “We believe this isn’t a revenue issue; this is a spending issue, and that ought to be a part of any solution. Secondly, we ought to focus on jobs and the economy, and anything that is done ought to be focused on what we can do to get the economy expanding. That makes all these problems much smaller by comparison, but jobs and growth ought to be a guiding principle in this discussion, which is why Republicans are so reluctant to go for these big tax increases that the President is trying to get through.’’

“Obviously there are cuts in the budget,’’ Schumer said. “We know we have to cut some of the mandatory programs and do other cuts, but it has to be accompanied with revenues. I am hopeful, and it can be a balanced package. We’ve always said it could be a balanced package, and the problem has not been Democrats being willing to do cuts – we did a trillion of them last year. We’re willing to do more this year. The problem is revenues.’’

The question remains whether the two sides can agree on a specific amount of tax increases and spending cuts in time to avoid a potentially disastrous situation.

“Republicans have been willing to accept the idea that revenues have to be part of this solution,’’ Thune said. “Right now, we’re at a stalemate because the Democrats haven’t been willing to consider the issue of spending, and all they want to deal with right now is tax increases, and that’s bad for the economy. I think that it’s encouraging that people are talking. There is an agreement out there that can be reached.’’

“When push comes to shove, they will find a way to bridge their differences, and it may not be pretty but it will get done,’’ Greg Ip of The Economist magazine told NBC News. “It may get done in such a chaotic fashion that the economy will pay a price.’’

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