In the event the Senate can’t reach a compromise, Obama has asked Reid to ready a bare-bones bill for a vote by tomorrow to extend expanded unemployment benefits and tax cuts on family income up to $250,000.
In that scenario, Obama said on NBC, “Republicans will have to decide if they’re going to block it, which will mean that middle-class taxes do go up.” Any compromise needs to be passed by the Republican-controlled House of Representatives.
Today marks the first time since Oct. 29, 2000, that both the House and Senate are casting votes on a Sunday, according to congressional records. The House has met on 16 Sundays since World War II, according to records of the House clerk and historian’s offices.
Democrats have insisted that the co-called chained CPI inflation yardstick be accompanied by a multiyear increase in the U.S. debt ceiling. The Republican-run House has used its authority over raising the debt ceiling to extract spending cuts from Democrats.
TALKS WITH BOEHNER
Obama agreed earlier this month to consider the new inflation gauge during budget negotiations with Boehner. After those talks halted, the focus has narrowed to a scaled-back plan in which Democrats and some Republicans say chained CPI has no place.
“That to me is not crucial at all, not at all at this stage,” said South Carolina Senator Lindsey Graham, a Republican.
Graham, a member of the Senate Armed Services Committee, said he had discussed the effect of the spending cuts on the U.S. military with Defense Secretary Leon Panetta last night and was told that it would mean 800,000 layoff notices at the beginning of the year. The result would be destroying “the finest military in the world at the time we need it the most,” he said.
Markets dropped last week as the stalemate continued. The Standard & Poor’s 500 Index fell for a fifth day on Dec. 28, by 1.1 percent to 1,402.45 at the 4 p.m. close in New York. The benchmark Treasury 10-year yield declined four basis points, or 0.04 percentage point, to 1.7 percent at 5 p.m. in New York, according to Bloomberg Bond Trader.
If Congress does nothing, taxes will rise in 2013 by an average of $3,446 for U.S. households, according to the nonpartisan Tax Policy Center in Washington.
Tax filing for as many as two-thirds of U.S. taxpayers could be delayed into at least late March. Defense spending would be cut, and the economy would probably enter a recession in the first half of 2013, according to the Congressional Budget Office.
The effects of the higher tax rates and federal spending cuts would accumulate over a matter of months. Congress could reverse them by acting retroactively in 2013.
The current state of talks isn’t necessarily ominous, said Senator Olympia Snowe of Maine, a Republican.
“The one thing Congress is predictable about, and that is waiting until the very last hour, and maybe it is going to be the eleventh hour,” she said. “We got one more day.”