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Congress, Obama Return to Washington With No Clear Path to Fiscal Cliff Deal

Amid growing public pessimism that a fiscal cliff compromise is possible and uncertainty in Washington about where it would even begin, Congress is preparing to make a last attempt to act before large automatic tax increases and automatic spending cuts take effect.

Lawmakers were trickling back to Washington on Wednesday with only unsettled ideas for addressing the looming fiscal crisis after taking a break for Christmas.

The Senate was scheduled to return to business Thursday, but that business is to consider amendments to a reauthorization of the Foreign Intelligence Surveillance Act. The House was scheduled to meet only in a pro forma session after Republican leaders said the onus was now on the Senate to produce a legislative solution after their own bid fell apart in the fractured GOP caucus last week.

In a joint statement released Wednesday afternoon, the House GOP leaders repeated that position, noting the Senate has yet to act on two bills the House has passed so they will wait for that to happen and react accordingly.

“The Senate first must act,” they said. “The lines of communication remain open, and we will continue to work with our colleagues to avert the largest tax hike in American history, and to address the underlying problem, which is spending.”

House GOP leaders have promised to give members 48 hours notice before calling them back to the Capitol. They have not given that notice and are still discussing scheduling decisions, a House leadership aide said Wednesday.

Because it could take weeks for households to feel the effects of the austerity measures, policymakers may be bracing for a brief trip over the cliff. According to a Gallup poll released Wednesday, Americans are considerably less confident Congress will reach a solution by Jan. 1 than they were earlier in the month, with 50 percent saying that a deal is very or somewhat likely and 48 percent saying an agreement will probably not be made.

Still, nearly all political leaders have signaled a desire to pass some sort of fiscal package in the coming days, and the potentially harsh judgment of voters and financial markets may spur action as the deadline nears.

Exactly what sort of legislation could move quickly through the Republican House and Democratic Senate remains uncertain.

After weeks spent trying to resolve long-term budget problems with House Speaker John A. Boehner, R-Ohio, President Barack Obama is pushing for a less ambitious package that extends tax cuts on household income below $250,000, continues unemployment benefits and delays the across-the-board spending reductions.

A scaled-down deal could also include a patch for the alternative minimum tax that indexes it to inflation for 2012, a one or two-year renewal of various, targeted tax breaks known as “extenders,” and a temporary Medicare adjustment to prevent payment cuts to doctors.

Options, No Solution

Whether any solution can win enough support to get through both chambers remains unclear, and the legislative efforts behind the scenes may be patched together to position lawmakers in a round of finger-pointing that will come if no deal is reached.

Under one scenario, the Senate could pass a bill and then dare the House to reject it in the face of growing public pressure.

There are signs that Senate Republicans could accept such a strategy. “The truth of the matter is, if we do fall off the cliff after the president is inaugurated he’ll come back and propose just what he proposed yesterday in leaving Washington and we’ll end up adopting it,” Sen. Johnny Isakson, R-Ga., said Sunday on ABC’s “This Week.”

“But why should we put the markets in such turmoil and the people in such misunderstanding or lack of confidence. Why not go ahead and act now?” he said.

For the Senate to pass a bill, Republicans would have to forego a filibuster or at least eight Republicans would need to join Democrats to reach a 60-vote majority. It would be up to Senate Minority Leader Mitch McConnell of Kentucky to decide on a filibuster, but McConnell has remained largely apart from the legislative machinations surrounding the talks and has said it is up to the White House and Senate Democrats to come up with a plan.

Aides close to the leadership said McConnell and Senate Majority Leader Harry Reid, D-Nev., had not been in contact since last week, when the Senate broke for the holiday.

The Senate has already passed legislation (S 3412) to continue tax cuts on income below $250,000 so there is not much mystery about what a new bill would look like, a Democratic leadership aide said.

“We have legislation. It’s basically our bill from July plus whatever else people are willing to add,” the aide said. “All that stuff can be assembled in 15 minutes. The question is whether Republicans will agree to let it move.”

But a smaller plan of the sort Obama described may be more difficult for House Republicans to swallow than a broader package that included larger tax increases but also substantial, identifiable spending cuts.

As it stands, Democrats are proposing to let tax cuts expire on incomes above $200,000 for individuals and $250,000 for couples, a policy that would raise roughly $800 billion if continued over 10 years.

By contrast, Obama’s last offer to Boehner included a tax increase of $1.2 trillion along with more than $900 billion in spending cuts. Boehner wanted at least $1 trillion in spending cuts and no more than $1 trillion in new revenues, most of that from a tax overhaul and some from allowing rates to rise on income above $1 million.

The leaders were also interested in ending or permanently extending temporary policies and raising the debt ceiling for at least another year in an effort to avoid future fiscal battles, make more room for other legislative initiatives and improve the climate for economic growth.

For now, however, both sides may be settling in for what may be more tough negotiations over many of the same issues they have not been able to resolve over the past two years of trying to strike a grand bargain. “I remain committed to working towards that goal,” Obama said on Dec. 21, “whether it happens all at once or whether it happens in several different steps.”

Paul Krawzak contributed to this story.

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