Majority Leader Harry Reid will call the Senate into session at 11 a.m. this morning but it is unclear what he will do after that.

Fiscal cliff negotiations now appear to be developing along two separate tracks: Minority Leader Mitch McConnell and Vice President Joe Biden are negotiating a deal that would raise taxes on all incomes above about $450,000, extend unemployment benefits, fix the alternative minimum tax, prevent Medicare doctor payment cuts, and delay scheduled sequester spending cuts for at least one year.

Separately, Reid is preparing his own fall-back proposal that would raise taxes on all incomes over $250,000, extend unemployment benefits, and leave all other issues unresolved.

The McConnell-Biden talks are reportedly hung up on the spending side of the equation. Republicans are insisting that new tax revenues go to deficit reduction, not new spending. “We raise taxes, and we spend more?” Sen. Kay Bailey Hutchison, R-Texas, asked remarked to The New York Times. “It’s business as usual.”

Reid’s proposal probably could pass the Senate with at least 51 votes, but, due to Senate rules, a single Republican objection could delay final vote on the bill till after New Year’s even if Reid rounded up 60 votes to defeat a filibuster.

Unless some outside event triggers recalculations on both sides of the aisle, it looks like we will go over the cliff. And many in both parties seem fine with that. “The world won’t end,” Sen. Tom Harkin, D-Iowa, told The Wall Street Journal. “Things can be made retroactive.”

So far it seems that Wall Street shares Harkin’s ambivalence. U.S. stock futures are pointing to a slightly higher open on Wall Street this morning. If market confidence carries through to the end of the day it is hard to see how any deal gets done.

From The Washington Examiner
Examiner Editorial: Sotomayor punts on religious freedom, for now
Phil Klein: Any ‘fiscal cliff’ bill would violate GOP’s ’72 hour’ pledge
Michael Barone: When government tries to help, it often makes a mess
Tim Carney: Lobbying blitz to save tax credits for wind energy
Sean Higgins: Teamster local challenges Obama on NLRB recess appointments

In Other News
Associated Press, Hillary Clinton hospitalized with blood clot: Secretary of State Hillary Rodham Clinton was admitted to a New York hospital Sunday after the discovery of a blood clot stemming from the concussion she sustained earlier this month.
McClatchy Newspapers, Another ho-hum year for the economy likely in 2013: For the third straight year, economists are only a bit more optimistic about prospects for growth and hiring than they were 12 months earlier.
The Wall Street Journal, Fed’s Computer Models Pose Problem: The computer models the Federal Reserve is using to estimate how long it will create money failed to foresee the financial crisis in 2008 and have tended to overestimate the strength of the economy for several years.
The Wall Street Journal, Senate Report Widens Fault for Benghazi Failures: The State Department and Pentagon had no viable way to rescue Americans in Benghazi, Libya, falling short of their responsibility to develop plans to evacuate U.S. citizens, according to the first bipartisan congressional investigation of the Sept. 11 assault.

Righty Playbook
Erick Erickson wants Reid to put HR 8 up for a vote on the Senate floor.
Yuval Levin calls Obama “Preener in Chief”
James Pethokoukis on The best and worst economic ideas of 2012.

Lefty Playbook
Jared Bernstein says Better to Go Over Than Accept a Bad Deal.
John Judis admits the Obama tax hikes won’t be enough.
Ezra Klein on Why our ambassadors need to be rich.