In the House, 172 Democrats voted for the bill, with 16 who opposed it. Of the 16, nine lean more liberal, including Rep. Peter DeFazio, Ore., who explained:

While the Senate plan included an extension of unemployment insurance that will save benefits for over 29,000 Oregonians and an essential ‘doc-fix’ that will continue payments to doctors who treat Medicare patients, this ‘deal’ hinders our ability to deal meaningfully with the deficit and burgeoning debt and puts in jeopardy Social Security and Medicare in the coming confrontation over the debt limit.

Jim Moran, Va., also more liberal, argued that the bill just paves the way for three more showdowns over the budget:

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The plan that passed will raise $620 billion in revenue over 10 years and pay down the sequester for two months. It only got 85 votes from House Republicans, with 151 voting against it. Rep. Paul Ryan, R-Wis., was one of the more notable yes votes, though House Majority Leader Eric Cantor, R-Va., and House Majority Whip Kevin McCarthy, R-Calif., both voted against it.

And though the deal pulls the country back from painful fiscal cliff cuts, it's only temporary. The sequester is paid down for two months, not-so-coincidentally timed with when the government will reach its spending limit and Congress will have to vote to raise the debt ceiling.

From the AP:

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"Everyone knows, including the speaker of the House of Represenatives today, that if they had brought up the Senate-passed bill that would give relief to everyone making less than $250,000 a year, it would pass overwhelmingly," Reid said. "Every Democrat would vote for it, Republicans would vote for it. But the speaker, he says, 'No, we can't do that.' It has to be a majority of the majority. So they've done nothing."

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Starbucks CEO Howard Schultz wrote in a blog post on the company's website that “Rather than be bystanders, we have an opportunity — and I believe a responsibility — to use our company’s scale for good by sending a respectful and optimistic message to our elected officials to come together and reach common ground on this important issue.”

"It’s a small gesture, but the power of small gestures is what Starbucks is about! Imagine the power of our partners and hundreds of thousands of customers each sharing such a simple message, one cup at a time," Schultz writes.

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Obama was expected to arrive in Washington early Thursday, the White House said late Tuesday. First lady Michelle Obama and the couple's two daughters are scheduled to remain in Hawaii until Jan. 6.

In the past, the president's end-of-the-year holiday in his native state had stretched into the new year. The first family left Washington last Friday night.

Congress was expected to return to Washington on Thursday. Before he departed for Hawaii, Obama told reporters he expected to be back in the capital this week.

Without action by Obama and Congress, automatic budget cuts and tax increases are set to begin in January, which many economists say could send the country back into recession. So far, the president and congressional Republicans have been unable to reach agreement on any alternatives.

Lawmakers have expressed little but pessimism for the prospect of an agreement coming before Jan. 1. On Sunday, Sen. Kay Bailey Hutchison, R-Texas, said she expects any action in the waning days of the year to be "a patch because in four days we can't solve everything."

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Sen. Joe Lieberman predicted Sunday: "We're going to spend New Year's Eve here, I believe."

Even those who see the possibility of a deal don't expect a lot.

Sen. Kay Bailey Hutchison, R-Texas, said she expects "it is going to be a patch because in four days we can't solve everything."

With the collapse Thursday of House Speaker John Boehner's plan to allow tax rates to rise on million-dollar-plus incomes, Lieberman said: "It's the first time that I feel it's more likely we'll go over the cliff than not," meaning that higher taxes for most Americans and painful federal agency budget cuts would be in line to go ahead.

"If we allow that to happen it will be the most colossal consequential act of congressional irresponsibility in a long time, maybe ever in American history because of the impact it'll have on almost every American," said Lieberman, a Connecticut independent.

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"How we get there, God only knows," Boehner told a Capitol Hill news conference just hours after his rank-and-file handed him a stunning tactical defeat.

The Republican leader spoke the morning after he was forced by his members to abandon legislation that would have raised taxes on incomes above $1 million.

In the aftermath, Boehner said any deal with the president to avoid the looming "fiscal cliff" would require more compromise by Obama and greater involvement of Senate Majority Leader Harry Reid, D-Nev., and the minority leader, Mitch McConnell, R-Ky.

But compromise appeared elusive in the Senate, where Reid and McConnell swapped barbs over how to deal with tax rates.

Reid again called on the House to pass an Obama-backed Senate plan to raise top tax rates on households making more than $250,000 a year. He also urged Boehner to return to the negotiating table with Obama.

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House Republicans canceled the vote over the proposal last night after they failed to collect enough votes. Had it passed, "Plan B" would have partially averted the cliff by allowing taxes to increase only for those making over $1 million a year, though both Senate Majority Leader Harry Reid and the White House said they would not let the proposal make it much farther.

"The President will work with Congress to get this done and we are hopeful that we will be able to find a bipartisan solution quickly that protects the middle class and our economy," said White House Press Secretary Jay Carney after the proposal collapsed.

So where can Boehner go from here?

From the New York Times, one option is that Boehner works with Obama to pass something without the support of the more conservative members of his caucus:

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For one thing, according to a whip count by The Hill, the proposal already has 25 likely defections by Republicans. If all Democrats vote against the proposal, Republicans can't get more that 24 defections in order for it to pass.

House Majority Leader Eric Cantor, R-Va., said earlier that Republicans have the votes to pass the proposal, which would partially avoid the fiscal cliff by allowing taxes to increase only for those making over $1 million a year.

But a number of conservative groups have lined up against it as well.

The Tea Party group Freedomworks, which had previously said it tentatively supported the plan, just now flipped and said they oppose it. “After review of the Boehner Plan B legislation, pending in the House today, FreedomWorks has found it must oppose the legislation, and will be urging House members to vote NO on the bill,” the group said in a statement. “We will post our formal opposition letter on our site, soon.”

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Senate Majority Leader Harry Reid, D-Nev., said lawmakers would return to the Capitol on the Thursday after the holiday as a grand bargain to avoid the automatic tax hikes and spending cuts proved elusive.

Across the Capitol, House Majority Leader Eric Cantor, R-Va., said the GOP has the votes for a bill, dubbed "Plan B" by Boehner, aimed at upping the year-end pressure on Capitol Hill Democrats and Obama.

"We, as Republicans, have taken concrete actions to avoid the fiscal cliff," Cantor insisted at a news conference. He expressed confidence the GOP leadership will have enough votes to pass the bill.

But the legislation looked to be a dead letter in the Senate and earned a White House veto threat.

The possibility of a ruined holiday and the absence of a deal left hard feelings all around. Senate Republican leader Mitch McConnell blamed the president and Democrats.

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White House communications director Dan Pfeiffer says it is unlikely that such a bill would pass the Senate. In a statement, he says the deficit reduction that would result from the 'Plan B' approach is minimal and offers no spending cuts.

Pfeiffer says Obama urges Republican leaders to work with the White House to find a reasonable solution instead of engaging in "political exercises." Unless both sides reach an agreement, a series of tax hikes and spending cuts will go into effect starting Jan. 1.

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With exactly two weeks to automatic tax hikes and spending cuts, Boehner offered a measure, dubbed “plan B,” that would cancel tax increases due to take effect Jan. 1 on everyone earning $1 million or less, while allowing tax increases on those earning more than that amount.

Boehner insisted that his plan would address the burgeoning deficits and that the president has failed to produce a balance plan in weeks of post-election negotiations.

But the speaker’s alternative was a non-starter with the White House and Democrats, and perhaps more damaging to its prospects, got a frosty reception from rank-and-file House Republicans in a morning closed-door meeting.

“The president is willing to continue to work with Republicans to reach a bipartisan solution that averts the fiscal cliff, protects the middle class, helps the economy, and puts our nation on a fiscally sustainable path,” White House spokesman Jay Carney said. “But he is not willing to accept a deal that doesn’t ask enough of the very wealthiest in taxes and instead shifts the burden to the middle class and seniors.”

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The moves signal a new stage in the negotiations, which picked up steam Monday with Obama's offer to drop his long-held insistence that taxes rise on individuals earning more than $200,000 and families making more than $250,000. He is now offering a new threshold of $400,000 and lowering his 10-year tax revenue goals from the $1.6 trillion he had argued for a few weeks ago.

Obama's move follows concessions by Boehner on higher tax rates for the wealthy.

In the new proposal, Obama abandoned his demand for permanent borrowing authority. Instead, he is now asking for a new debt limit that would last two years, putting its renewal beyond the politics of a 2014 midterm election.

And in a move sure to create heartburn among some congressional Democrats, Obama is proposing lower cost-of-living increases for Social Security beneficiaries, employing an inflation index that would have far-reaching consequences, including pushing more people into higher income tax brackets.

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The Washington Post reports on the debt ceiling offer:

With the national debt already bumping up against a $16.4 trillion cap set last year, Congress risks a government default unless it acts to raise the debt ceiling in the next few months. Some Republicans had argued that party leaders should use the threat of default to demand additional spending cuts from Obama.

Boehner’s offer signals that he expects a big deal with sufficient savings to meet his demand that any debt limit increase be paired dollar for dollar with spending cuts. That would permit him to keep a key vow to his party — and head off a potentially nasty debt-limit fight — at least until the end of next year.

Over the weekend, Politco and CNN reported that Boehner had also offered to make tax increases on the wealthiest Americans. From CNN:

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Rove writes that Obama's positions on tax increases and additional stimulus spending are both "political" and "ideological. The president does want to expand government's size, cost and reach in order to, in his words, 'transform' America."

He continued that Obama is also hoping that by not backing down on tax increases, he can cause a rift in the Republican party:

He apparently believes that Republicans, in a weakened state and defending an unpopular position, might buckle on a central GOP tenet, opposition to any increase in marginal rates. That might kick off a Republican civil war, resulting in divisive party primaries in 2014 that leave the president's opposition even more weakened and produce more subpar candidates like this year's Republican Senate candidates in Indiana and Missouri.

"This brings us to Mr. Obama's real goal: having Democrats recapture the House in 2014 and once again stave off losses in the Senate," Rove writes.

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From CNN's Dana Bash:

One of the reasons Tuesday night's conversation between President Barack Obama and John Boehner did not go well was because the GOP House speaker sent the White House a fiscal cliff proposal calling for a permanent extension of Bush-era tax cuts for all Americans, including for incomes in the top 2%, a Democratic source said Wednesday.

Democrats took the GOP counter offer to mean that tax reform cannot result in any marginal rates higher than current law, according to the source, who said Boehner's proposal was a "sign" to Democrats that "Boehner and the GOP are unwilling or unable to do any sort of deal that can pass the Senate or be signed by the president."

That may be why Boehner told Republicans not to make plans over the holidays.

Obama has maintained that any deal will have to include an increase of taxes on the top 2 percent, and, according to recent polling, the majority of voters are with him.

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Boehner's comments came as top Democrats pushed back on GOP demands for tough steps like raising the Medicare eligibility age and curbing the cost-of-living adjustment for Social Security.

Boehner and Obama spoke on the phone Tuesday, a day after the president offered to reduce his initial demand for $1.6 trillion in higher tax revenue over a decade to $1.4 trillion. But Obama continued to insist that much of the revenue come from raising top tax rates on the wealthy.

Boehner countered later Tuesday with another offer that GOP aides said stuck close to a document delivered to the White House a week ago. A top White House aide, Rob Nabors, came to the Capitol to respond. A Democratic official said Boehner's counter-offer included permanent extension of all Bush-era tax rates for all taxpayers including the top 2 percent of earners, the same as his earlier proposal. Boehner offers $800 billion in new revenues through a tax reform measure next year. The officials required anonymity because the talks are not public.

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Sixty-five percent of Americans say that Obama has a mandate to raise tax rates on income over $250,000, according to a Bloomberg poll. Among Republicans, that number is 45 percent. The president's job approval also jumped up to 53 percent, according to the Bloomberg poll, the highest since December 2009.

Another poll from ABC News/Washington Post shows that the majority of Americans approve of how Obama is handling the negotiations, by a margin of 49-42 percent. John Boehner, on the other hand, has a 25 percent approval rating on the talks, compared with 49 percent who disapprove.

Despite Obama's leverage, the New York Times reports today that the White House is reportedly unsure about whether Boehner can corral the votes needed for a deal.

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However, Obama held back from directly criticizing Republicans for opposing his tax plans, perhaps signaling that private negotiations over the "fiscal cliff" are showing progress. Obama and Boehner met privately at the White House Sunday.

Obama traveled to Michigan Monday to try to rally public support for his proposals to raise rates on the top 2 percent of income earners. Speaking to auto workers, he said he was willing to support "tough spending cuts" as long as those cuts do not disproportionately hurt the middle class.

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Spokesmen for both Obama and Boehner said the two men agreed to not release details of the conversation, but emphasized that the lines of communication remain open.

The meeting comes as the White House and Congress try to break an impasse over finding a way to stop a combination of automatic tax increases and spending cuts scheduled to kick in at the beginning of the year.

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