Capitol Hill negotiations to avert a fiscal crisis before the New Year’s deadline appeared to falter Sunday in the Senate, as lawmakers struggled to find common ground while bringing the country ever-closer to a 2013 shockwave of tax hikes and spending cuts.
Senators spent the weekend trying to craft a new proposal that they originally claimed could be ready as early as Sunday. But Senate Democratic Leader Harry Reid reported late in the day that there was significant distance between the two sides, following a tense afternoon during which Vice President Biden was brought in to referee.
Talks now push on, likely into Monday -- but President Obama has already made clear he will press Reid to call a vote on a separate White House plan if nothing is produced by then.
The stumbling block Sunday initially appeared to be a provision in the Republican proposal that would change the way Social Security benefits are calculated -- effectively reducing benefits over time.
But while that drew the ire of Democrats, some Republicans indicated they were willing to drop the provision. Instead, they voiced serious concern about a Democratic push to use new tax revenue for new spending.
“The biggest obstacle we face is that President Obama and Majority Leader Reid continue to insist on new taxes that will be used to fund more new spending, not for meaningful deficit reduction," said Alabama Sen. Jeff Sessions, the ranking Republican on the Senate Budget Committee.
Reid said late Sunday afternoon the Social Security provision -- knows as chained CPI -- never should have been added to what would now be a basic, final-hour deal that would include taxes increases for top earners and perhaps an extension of unemployment insurance and a promise to negotiate later on spending cuts.
Reid said later that he was gratified that Republicans had taken the provision off the table but added "there's still significant distance between the two sides."
Reid mentioned in passing that he had a new proposal, but a Reid staffer clarified afterward that Democrats have yet to make a formal counter offer.
Should Congress fail to reach a deal, a mix of $600 billion on tax increases and federal cuts in 2013 would start to kick in Jan. 1.
"We can't accept a bad deal just because we're here," said Sen. Patty Murray, D-Wash. "It's real disturbing we were thrown in a change to Social Security at the last minute.”
Signs that a deal was unraveling surfaced by mid-afternoon when Reid said his party could not make a counteroffer to Republicans. And Minority Leader Mitch McConnell said he had to call Biden to "jump-start" the negotiations.
The Senate got to work on a compromise plan after House Speaker John Boehner’s proposal in the Republican-controlled House collapsed less than two weeks ago.
Before Sunday, Hill lawmakers and staffers were working behind the scenes to craft a deal that can pass in both chambers.
Republican Sen. Lindsey Graham said earlier Sunday the chances of Congress cutting a deal before the deadline were “exceedingly good.” However, he sounded downcast about the process and the outcome.
“Whatever we accomplish, political victory to the president,” the South Carolina senator said on “Fox News Sunday.” “He's going to get tax rate increases. … And the sad news for the country is, that we have accomplished little in terms of not becoming Greece or getting out of debt.”
If Reid and McConnell cannot reach a deal, Reid purportedly will present Obama’s bare-boned plan of tax increases for families making more than $250,000 annually and extending unemployment insurance.
Obama said on “Meet the Press” that Congress should “first and foremost” prevent taxes increases for the “vast majority” of Americans.
“We have been talking to the Republicans ever since the election was over,” the president said during the interview, taped Saturday. “They have had trouble saying yes to a number of repeated offers.”
Republicans immediately criticized Obama’s remarks.
“Americans elected President Obama to lead, not cast blame,” Boehner said.
McConnell spokesman Don Stewart said Sunday: "While the president was taping those discordant remarks yesterday, Senator McConnell was in the office working to bring Republicans and Democrats together on a solution."
A House Democrat and a House Republican said Saturday they didn’t expect a vote until after the weekend on any proposal to avert the looming fiscal crisis.
Reps. Steve Stivers, R-Ohio, and John Yarmuth, D-Ky., both told Fox News they expected the Senate to work on a proposal through Sunday and perhaps into Monday morning before voting, then pass the legislation to the House for a final vote.
Senate leaders from both sides of the aisle vowed late Friday to scramble over the weekend to produce a new bill, on the heels of a high-stakes White House meeting with Obama. At the time, several senior administration officials told Fox News that McConnell, R-Ky., was showing strong signs that he will help seal a deal.
However, they acknowledged he will have a difficult time getting a deal passed in the Republican-controlled House, which has so far rejected any plan that includes allowing tax rates to increase for higher-earning Americans.
The immediate challenge for negotiators, though, will be to craft a plan that does enough to spare most Americans a big hike without doing so much as to complicate the bill's passage. There is a host of expiring provisions next year -- from Medicare rates to doctors to payroll tax cuts -- that some lawmakers hoped to address before the end of the month. The more items added to the bill, the trickier it gets to pass it.
Lawmakers have been hesitant to predict whether Congress will be able to arrive at any solution.
Fox News' Ed Henry, Mike Emanuel, Chad Pergram and Fox Business Network's Rich Edson contributed to this report.