Republicans are demanding that Chained CPI be part of any temporary solution. This would be a reduction in Social Security benefits, as Greg Sargent explains:
At the same time, Republicans are not willing to raise the debt ceiling. They want to retain the leverage the debt ceiling gives them when the longer term "fiscal cliff" talks resume next year.
And so the current Republican demand, as I understand it, is that Dems must agree to Social Security cuts and a higher income threshold for the lower tax rates (either $400,000 or $500,000, depending on the source), in exchange for an extension of middle class tax cuts (which Republicans also want) and an extension of unemployment benefits. If Dems don't give up those things, while allowing Republicans to retain their debt ceiling leverage, taxes go up on everybody and unemployment benefits expire for over two million Americans.
Why would Democrats agree to Social Security cuts and lower tax rates on many wealthy households even as Republicans hold on to their leverage to extract still more in spending cuts later? No wonder a Dem aide described this as a "serious setback."