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,” which Democrats consider a “poison pill.”

The Democratic source says they understand 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…

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.