Congressional action in the week after returning from the Thanksgiving recess was characterized by its level of rhetoric and frustration, rather than production.

Efforts to reach agreement to avoid the “fiscal cliff” (Bush tax cuts ending on Dec. 31, 2012 and $109 billion automatic spending cuts (sequestration) set to go into effect on Jan. 2, 2103) entered the second phase this week. 

The first phase was the post election period during which the president and congressional Democrat and Republican leaders built up expectations for some sort of resolution by expressing cautious optimism that a deal could be reached.  Both sides made conciliatory statements, the president met with congressional and business leaders and staff began work to set the framework for at least a short-term fix.

This week, however, partisan intransigence reappeared as both sides returned to their hard positions on taxes and spending as they sought to gain public support through wide-spread public relations campaigns.  

During this second phase, the president is pressing hard to gain support for his proposal to increase tax rates on incomes over $250,000.  Republicans, while appearing open to some form of revenue increases, are pushing hard for “tax reform” (e.g., limiting deductions, and expanding the tax base) in lieu of increases to tax rates.  On the spending side, Democrats are pushing back against the idea of changes to social security and Medicare to reduce expenditures, while Republicans are demanding that any deal must contain social security and Medicare spending reductions.  It appears to be a high stakes poke game with both sides demanding that the other side “show its cards” before they play their hand.  The result, at least for the time being is stalemate.

Treasury Secretary Timothy Geithner (negotiating on behalf of the president) did meet with House Speaker John Boehner (R-OH) to offer a plan reported to increase tax revenues by $1.6 trillion with minimal spending cuts plus another $50 billion stimulus spending for infrastructure.  But, Boehner quickly dismissed the proposal saying the proposal was not a serious one.

Both sides acknowledge that there is a stalemate in negotiations.  But, they insist an agreement is still possible in the four weeks left before taxes are set to increase and sequestration will go into effect.  Meanwhile, a jittery public and Wall Street are finding it difficult to share this optimism.

Even as the negotiations on the fiscal cliff stuttered, Congress moved to make some headway on the large backlog of administrative and legislative actions.

House Democrats held their leadership elections and as expected elected Rep. Nancy Pelosi (D-CA) to be Minority Leader.    Rep. Steny Hoyer (D-MD) will remain House Minority Whip and Rep. Jim Clyburn (D-SC) stays on as Assistant Democratic Leader.  

The House passed a bill to grant permanent residency annually to 55,000 foreigners after they earn advanced degrees in science, technology, and math at U.S. universities.  However, this bill likely will be held over until next year when the 113th Congress addresses immigration reform.

Legislation to open more land to hunting and fishing, seemingly headed for bipartisan approval in the Senate, was stalled as Republicans thwarted efforts to move the bill to a final vote.  The dispute appears to revolve around budget treatment of a $10 increase in duck stamps prices to fund wetlands conservation.  However, both sides still hope to reach resolution and send the bill to the House before the session ends.

The Senate began debate on the FY2013 Defense Authorization bill.  Senate leaders hoped to complete the bill this week, but the large number of remaining potential amendments pushed final action into next week.  If the Senate completes action next week, House and Senate committee leaders hope to resolve the differences between the two bills quickly and send a final bill to the president before the end of the year.

Meanwhile, the drumbeat continued this week for federal aid to state and local governments to recover from the devastation caused by Hurricane Sandy.  Senators and Representatives from affected states testified before the Senate Environment and Public Works Committee to press their case for federal aid that could reach $100 billion.  The question is whether members from areas not affected will press for offsets to pay for assistance.