With a self-imposed 3pm deadline to solve the nation's financial problems, the 'fiscal cliff' negotiations hit a "major setback" on Sunday, according to Democratic sources.
A source told ABC that the argument came after Republicans offered a proposal that included changes to how Social Security benefits are adjusted for inflation.
The method, called the "chained consumer price index," or Chained CPI, would lower cost of living increases for Social Security recipients by raising the payments at a lower rate than inflation.
"We thought it was mutually understood that it was off the table for a scaled-back deal," an aide said. "It's basically a poison pill."
Speaking from the Senate floor Sunday afternoon, Senate Majority Leader Harry Reid (D-Nev.) said that the negotiations had reached a standstill and that "at this stage we are not able to make a counteroffer," reports The Hill.
"I will say that the Republican leader has shown pretty good faith, but we are apart on some pretty big issues," Reid said.
But he added, “we’re not going to have any Social Security cuts." “It’s just doesn’t seem appropriate at this time."
President Barack Obama placed much of the blame for the failed negotiations on Republicans in Congress, reports CNN.
"They say that the biggest priority is making sure that we deal with the deficit in a serious way. But the way they're behaving is that their only priority is making sure that tax breaks for the wealthiest Americans are protected," Obama on NBC's "Meet the Press" on Sunday. "That seems to be their only overriding, unifying theme."
President Obama has even considered the idea of chained CPI as part of a grand bargain, despite it being "highly unpopular among Democrats" and opposed by the AARP.
"In pursuit of strengthening Social Security for the long term, I'm willing to make those decisions," he told NBC.
"What I'm not willing to do is to have the entire burden of deficit reduction rest on the shoulders of seniors, making students pay higher student loan rates, ruining our capacity to invest in things like basic research that help our economy grow. Those are the things that I'm not willing to do."