By Alexander Bolton - 12/28/12 05:09 PM EST
Senators are growing more optimistic of a deal to avoid part of the fiscal cliff as Senate Republican Mitch McConnell (Ky.) works with Senate Majority Leader Harry Reid (D-Nev.) and President Obama to craft a last-minute deal.
The president will meet with McConnell, Reid, Speaker John Boehner (R-Ohio) and House Democratic Leader Nancy Pelosi (Calif.) at the White House at 3 p.m. Friday.
Senate Republican Whip Jon Kyl (Ariz.) said the White House meeting could accelerate negotiations among the president and Senate leaders.
Sen. Charles Schumer (D-N.Y.), the Senate's third-ranking Democrat, said on the "Today" show Friday that leaders are closer to a potential deal than many people in Washington think.
A senior Senate Democratic aide said if McConnell wants to raise the threshold for extending the Bush-era income tax rates to $400,000 — up from the $250,000 cutoff Obama campaigned on — Democrats would like to see unemployment insurance benefits, a freeze in scheduled cuts to doctors’ Medicare payments, and a package of "tax extenders" added to it. The tax-extender package would address expiring business and renewable energy tax breaks.
Addressing the estate tax rate could be the key to getting Republican and centrist Democratic support for higher income taxes. The estate tax is now set at 35 percent with an exemption of $5 million per spouse. It will leap to 55 percent without congressional action. If a last-minute tax deal extends the estate tax rate at 35 percent or a level lower than the 45 percent rate proposed by the Democratic leadership, it could draw strong Republican support, say GOP senators.
A Democratic aide said any tax package hammered out over the next three days could be the last chance for months to address the estate tax. Democratic senators will discuss what to support at a lunch meeting Friday afternoon.
Republican senators say Boehner is likely to support any deal that attracts broad endorsement from the Senate Republican conference.
Asked if there’s any scenario in which the Senate will agree to something that Boehner would not agree to, Kyl said: “I think that is pretty unlikely. Our effort here is to try and get a result. If you know the House isn’t going to do something than why go through the charade? Then it becomes political gamesmanship.”
“We have said now for quite a long time that the time for that is over. We have to get to a result here. I think everybody recognizes that we are either going to get something in the next few hours or not. There is no more posturing time left,” he added.
Senate Finance Committee Chairman Max Baucus (D-Mont.) has prepared several backup tax proposals in case Congress goes over the fiscal cliff on Jan. 1, said a Senate aide.
Baucus has worked out these measures as part of an ongoing effort to avoid the fiscal cliff, not in anticipation of President Obama and congressional leaders failing to reach agreement, the aide emphasized.
"He has a number of things he can pull off the bookshelf and insert as needed," said the aide.
Any legislation introduced after Congress went over the fiscal cliff would have to be tweaked depending on the circumstances.
Senate Finance panel members say Baucus has been preparing policy alternatives for weeks.
“Chairman Baucus has long been talking with Finance members about various ways to proceed,” said Sen. Ron Wyden (D-Ore.), a member of the committee. “One of the advantages that the Finance Committee provides here is because we've looked at a variety of different options, when there's discussion about a particular course, the Finance Committee, which has worked on a lot of these issues, can in effect dial in numbers.”
— Ben Geman contributed to this report.