For the first time, a substantial improvement can be seen in the "fiscal cliff" talks with House Speaker John Boehner appearing more flexible to President Barack Obama's key demands to avert $600 billion in tax hikes and spending cuts set to take effect by the year's end.
Reuters quoted sources as saying that Boehner proposed extending low tax rates for all who have earned less than $1 million, and rates would increase for wages above that – a departure from his earlier demand to extend all of the Bush era's lower tax rates.
"Boehner has now accepted the premise of higher rates. So now we're just arguing over details. I think it's a significant step," Greg Valliere, chief political strategist at Potomac Research Group, was quoted as saying. A framework deal spelling out tax revenue and spending cut targets to be finalized in the new year could be possible, he said.
Other sources told CBS News that Boehner's call to Obama on Friday, placed after the president's emotional statement on the Newtown, Conn., elementary school shooting, was the most productive of the fiscal cliff process.
The tax rate Boehner offered was 39.6 percent, the top rate under the Clinton-era tax code Obama favors and which would generate about $450 billion in revenue – against the target of $1 trillion. The additional revenue would be collected through a rewrite of the tax code next year and by slowing the inflation adjustments made to tax brackets.
Boehner wants $1 trillion in spending cuts from programs like Medicare. Many Republicans want the eligibility age for Medicare to increase to 67 from 65, and link the program to the income of recipients so that wealthier retirees pay more for their care.
The sources say it is theoretically possible to pull everything together by mid-week, but many issues remain unresolved.
It is yet to be seen what Obama will offer in return.
"The political burden is now shifted back to the president, who must be willing to take on his party in order to get a deal Boehner can ultimately pass. We do not think the president will overreach: Obama will work with Boehner to get to a deal," Sean West, U.S. policy analyst at Eurasia Group, a political risk consultancy, was quoted as saying.