Senate leaders will try to cobble together a legislative package over the weekend to avert nearly $600 billion in automatic tax increases and spending cuts slated to go into effect at midnight on Monday.
Following a meeting with House and Senate leaders on Friday afternoon, President Barack Obama said that he is hopeful that Congress can resolve the so-called fiscal cliff over the next 72 hours.
“I’m optimistic we may still be able to reach an agreement that can pass both houses in time,” Mr. Obama said at a White House briefing.
Just before Mr. Obama spoke, Senate Majority Leader Harry Reid, D-Nevada, and Senate Minority Leader Mitch McConnell, R-Ky., walked onto the Senate floor to declare that progress was made in the White House talks.
“I think it was a very positive meeting,” Mr. Reid said. He indicated that he and Mr. McConnell would work on legislation for introduction on Sunday.
“I’m hopeful and optimistic,” Mr. McConnell said.
It’s not clear what would be in the legislation. On Friday, Mr. Obama advocated a limited package that extends Bush administration tax cuts for households making less than $250,000, continues unemployment benefits for about two million Americans and would set a framework for deficit reduction in 2013.
It is unclear whether it would renew the alternative minimum tax exemption or suspend $1.2-trillion in domestic spending cuts over the next 10 years.
A bill passed by Senate Democrats last summer contained many of the same elements as Mr. Obama outlined on Friday and also would set capital gains and dividend rates at 20%. It did not address the expiring estate tax rate of 35% with a $5 million individual exemption.
If Senate leaders cannot reach a compromise, Mr. Obama urged that Congress to act on something like this summer’s Senate bill before midnight on Dec. 31. He is confident that the measure would garner bipartisan majorities – if House Speaker John Boehner, R-Ohio, allows a vote in that chamber and Senate Republicans do not filibuster it.
“We should let everybody vote,” Mr. Obama said. “That’s the way this is supposed to work. If you can get a majority in the House and a majority in the Senate, then we should be able to pass a bill.”
In the White House meeting, Mr. Boehner pledged a House vote on a bill that emerges from the Senate.
“The speaker told the president that if the Senate amends the House-passed legislation and sends back a plan, the House will consider it – either by accepting or amending,” said Mr. Boehner’s aide. “The group agreed that the next step should be the Senate taking bipartisan action.”
An aide to Mr. McConnell said that the Senate is poised to act.
“Members of the Senate will continue to work to0ward producing a bipartisan package in a timely manner to protect American taxpayers and jobs from a massive tax hike in January,” Don Stewart, chief spokesman for Mr. McConnell, wrote in an email.
Investment advisers are wary of the developments in Washington until they see the details of a plan.
“It depends on which taxes [are in the agreement] and how long they’ll be extended,” said Jason Hochstadt, executive vice president of the investment advisory firm Jedi Management Inc. “People would rather have no deal than a bad deal.”
Simon Roy, president of Jemstep Inc., criticized Congress for bringing the fiscal-cliff decision – if one can be reached – down to the last minute, when it has known about the Dec. 31 deadline for two years.
“This sort of legislative behavior really decreases investor confidence in the political process in the U.S. to resolve tough issues,” Mr. Roy said. “That’s like a tax increase on all of us.”