Fiscal cliff discussions break down after Republicans demand Social Security cuts

Fiscal cliff curb talks predictably broke down again when Republicans made a late demand for cuts to Social Security in the form of chained CPI:

Talks foundered after Republicans dug in in an effort to get the largest deficit reduction deal in the time remaining, according to numerous Republican and Democratic officials familiar with the negotiations. Republicans told Democrats that they were willing to put off scheduled cuts in payments to health care providers who treat Medicare patients but that they wanted spending cuts elsewhere.

But it was the inflation calculation that forced Democrats from the negotiating table. President Obama has said that in a 'grand bargain' on deficit reduction, he would go along with the change, which would slow the growth of programs whose outlays rise with consumer prices, and would raise more revenue by pushing people into higher tax brackets.

Democrats said that Mr. Obama and Congressional Democrats would accept that change, called 'chained C.P.I.,' only as part of a larger deal that included locking in well more than $1 trillion in revenue over 10 years, along with other Republican concessions. Democrats fear that any such concessions now would only increase demands for addition concessions in the coming weeks, when talks resume on a 'grand bargain' to reduce the deficit.

Speaking from the floor of the Senate, Majority Leader Harry Reid rejected chained CPI:

'The one thing I do want to mention is we're not going to have any Social Security cuts at this stage. That just doesn't seen appropriate,' Reid said. 'We're open to a discussion to entitlement reforms. But we're going to have to take it in a different direction, the present status will not work. We're willing to make difficult concessions as part of a balanced, comprehensive agreement, but will not agree to cut Social Security benefits as part of a smaller, short-term agreement, especially if that agreement gives more handouts to the rich.'

Senate Minority Leader Mitch McConnell has called in Vice President Joe Biden to help in negotiations.

1:14 PM PT:

And just like that Republican senators emerge from their meeting saying chained CPI is off the table, "a losing hand," McCain says.

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