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Flashpoints in fiscal cliff negotiations

President Obama and lawmakers must overcome significant hurdles over several issues to reach a budget and tax deal, including:

 Taxes: Obama insists on increasing taxes on upper-income earners, raising the rates paid on family income over $250,000 with a boost in the top rate from 35 percent to 39.6 percent. GOP leaders vow to block any increase in rates but say they could support revenue increases as part of a tax reform plan that curbs deductions and uses the resulting revenue to both lower rates and defray the deficit. That approach, however, is opposed by many Tea Party GOP conservatives who have signed a pledge to oppose any tax increase.

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 Entitlements: Medicare, Social Security, and the Medicaid health program for the poor — called entitlements because participation is based on eligibility criteria — are a major flash point. As a condition of voting for higher revenues, Republicans are demanding fundamental reforms such as increasing the Medicare eligibility age from 65 to 67, making wealthier seniors pay more for Medicare, and a less generous inflation adjustment for Social Security.

 War spending: Democrats want to claim $1 trillion or so in savings from the drawdown of troops in Iraq and Afghanistan as budget cuts. Republicans see this as a gimmick since the savings are occurring anyway.

 Defense budget: Some Democrats want further cuts to the Pentagon on top of a 10-year $487 billion cut taken as part of last summer’s budget and debt pact. Obama, however, has not proposed further cuts, and GOP budget hawks say they would halt any further attempt to squeeze that budget.

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