A Democratic source familiar with the talks tells CNN they have hit a major setback because Republicans are now insisting that any fiscal cliff deal include chained CPI."
Chained CPI, which Democrats consider a poison pill,would change the way Social Security benefits are adjusted for inflation, effectively meaning Social Security recipients would receive less money over the years.
The Democratic sources understanding is that the president offered this in talks with House Speaker John Boehner, but Democrats say that was in the context of a larger deal -- in exchange for changes to the way the debt ceiling is approached, which is not in the plan anymore.
This source did not want to be identified because of the closed nature of the talks, but was clearly giving the information to CNN to make public the Democrats point of view and push the Republicans to give in on this high-stakes issue.
The source also told CNN that Democrats are currently going outside their comfort zone in these talks with regard to tax rates -- keeping tax rates in place for higher income households than the president wants. The source also said Democrats are negotiating with Republicans on extending the current lower estate tax rate, a big issue for many Republicans as well as moderate Democrats.
A Senate Republican leadership source responded by pointing to the presidents comments in an interview that aired Sunday suggesting he is willing to look at chained CPI in pursuit of strengthening Social Security for the long term.
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