"Fiscal cliff" deal could fall in Harry Reid's hands

(CBS News) HAWAII - Democrats are now moving ahead on their own plan to avoid the so-called "fiscal cliff" now that talks have broken down with House Speaker John Boehner.

The White House and congressional leaders have until January 1 to work out a budget deal.

Lawmakers still see path to avert "fiscal cliff"
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Whatever happens next may essentially be a last-ditch effort to avert the "fiscal cliff." Sources tell CBS News that aides to the president have been in preliminary talks with aides to Senate Majority Leader Harry Reid, who himself was in Hawaii this weekend for the funeral of Sen. Daniel Inouye.

Reid is now working, sources say, on a smaller package than the comprehensive deal the president was working on with Boehner. The package would prevent tax rates from rising for middle-class families and perhaps cut some spending and tie up a few other loose ends.

So far Reid has not been consulting with Republicans on the bill. Technically, any bill involving taxing authority must originate in the House, not the Senate, but Reid could easily take a revenue-raising House bill that has already passed, gut it, and use it as a vehicle for his fiscal cliff legislation.

Aides to Speaker Boehner and Senate Minority Leader Mitch McConnell said Monday they have had absolutely no communication with Sen. Reid's office on the topic.

"We have no clue what Reid plans to do that can solve the problem. They're not talking to anyone as far as I can tell," one McConnell aide told CBS News.

Democrats hope that Republicans will consider voting for this smaller plan even if they don't like it, because it's the "last train leaving the station" -- the last chance to prevent taxes from going up for everyone on January 1.

If Reid's plan doesn't work, either he or Boehner could still introduce a bill in the New Year that reinstates the tax cuts for middle class Americans.

Like Reid, the president and first lady also attended Senator Inouye's funeral this weekend.

This is the president's first real vacation in about a year, but he is cutting it short and heading home right after Christmas to deal with this "fiscal cliff" standoff.

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    Nancy Cordes is CBS News' congressional correspondent.

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