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Fiscal cliff: Is there a deal in the making?

President Obama and House Speaker John Boehner disagree about whether tax rates on the top two percent of earners should go up. The White House says, 'yes' and Republicans say, 'no'. Most Americans don't think the two sides will reach an agreement by January 1, according to a recent poll. But others are more optimistic. 

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White House spokesman Jay Carney dismissed Boehner's proposals as "magic beans and fairy dust."

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Boehner countered: "If the president really wants to avoid sending the economy over the fiscal cliff, he has done nothing to demonstrate it."

Tax rates have emerged as one of the most intractable issues, with Obama insisting the rates on the top 2 percent of earners must go up and Boehner standing steadfast that they must not.

Boehner, instead, has proposed raising $800 billion through unspecified loophole closings and limits on tax deductions.

On Tuesday, the president said he would consider lowering rates for the top 2 percent of earners — next year, not now — as part of a broader tax overhaul effort that would close loopholes, limit deductions and find other sources of government revenue. "It's possible that we may be able to lower rates by broadening the base at that point," Obama said.

On Medicare and Social Security, the Republican proposals would do relatively little to curb the deficit over the next decade, but the impact would grow over the longer term.

Raising the Medicare retirement age from 65 to 67, for instance, would wring $148 billion from the program over 10 years, according to a Congressional Budget Office estimate last year, about one-fourth of the savings House Republicans hope to claim from federal health programs.

Another idea that gained currency during the Obama-Boehner talks last year would change the annual inflation measure used for Social Security cost-of-living increases and the indexation of tax brackets for inflation.

Many economists and government budget specialists believe the system is a more accurate measure of inflation because it takes into account changes in purchasing behavior.

The White House has not foreclosed the idea of addressing Social Security cost-of living changes in a new deal, but it has not embraced it because Obama's aides argue Social Security is not contributing to the federal deficit.

The two sides are also close, at least in theory, on curbing spending on a host of miscellaneous programs, as well as new fees. These could lead to higher airline ticket prices, for example, an end to Saturday mail delivery, fewer food stamps and lower farm subsidies.

Republicans claim they could glean $300 billion from such cuts and fees over 10 years; the White House promises $250 billion.

So far, the public seems ready to hold Republicans responsible if negotiations fail. A new Washington Post-Pew Research Center poll shows that 53 percent say the Republicans would deserve blame if the nation tips over the fiscal cliff, and only 27 percent of those surveyed say Obama would be to blame.

Forty-nine percent don't believe Obama and Congress will reach a deal by Jan. 1, whereas 40 percent are more optimistic.

Associated Press writer Jim Kuhnhenn, Andrew Taylor and Donna Cassata contributed to this article.

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