Lawmakers set up 11th-hour bid on "fiscal cliff"

WASHINGTON Thu Dec 27, 2012 6:30pm EST

1 of 4. The U.S. Capitol building is pictured behind a fence as lawmakers return from the Christmas recess in Washington December 27, 2012.

Credit: Reuters/Mary F. Calvert

WASHINGTON (Reuters) - Lawmakers on Thursday gave themselves a last chance to prevent the United States from plunging off a "fiscal cliff" by setting up a late session in Congress a day before taxes are due to rise for most working Americans.

Republican leaders in the House of Representatives told their members to be back in Washington from the Christmas holiday break on Sunday in case they need to vote on budget measures.

That leaves the door open to a last-minute solution to avert big tax hikes due to kick in on January 1 and deep, automatic government spending cuts set to begin on January 2 - together worth $600 billion - that could push the United States back into recession.

But the two political parties remained far apart, particularly over plans to increase taxes on the wealthiest Americans to help close the U.S. budget deficit.

The coming days are likely to see either intense bargaining over numbers, or political theater as each side attempts to avoid blame if a deal looks unlikely. Talks could go down to the wire on New Year's Eve.

"Hopefully, there is still time for an agreement of some kind that saves the taxpayers from a wholly, wholly preventable economic crisis," Mitch McConnell, the top Republican in the Democratic-controlled Senate, said on the Senate floor.

McConnell said he was willing to look at any plan by President Barack Obama to avoid the fiscal cliff and a Senate aide said congressional leaders could hold talks with the president on Friday.

The rhetoric was still harsh on Thursday after months of wrangling - much of it along ideological lines - over whether to raise taxes and by how much, as well as how to cut back on government spending.

Senate Majority Leader Harry Reid, the top Democrat in Congress, accused Republican House Speaker John Boehner of running a "dictatorship" by refusing to allow bills he did not like onto the floor of the chamber.

"It's being operated with a dictatorship of the speaker, not allowing a vast majority of the House of Representatives to get what they want," Reid told the Senate.

Reid urged the Republicans who control the House to prevent the worst of the fiscal shock by getting behind a Senate bill to extend existing tax cuts for all except those households earning more than $250,000 a year.

MARKETS EASE

U.S. stocks sharply cut losses after news of the House reconvening as investors clung to hopes of an 11th-hour deal. Even a partial agreement on taxes that would leave tougher issues like entitlement reform and the debt ceiling until later could be enough to keep markets calm.

"I'm not convinced it will result in a deal, but you could get enough concessions by both parties to at least avoid the immediacy of going over the cliff," said Randy Bateman, chief investment officer of Huntington Asset Management, in Columbus, Ohio.

Obama arrived back at the White House on Thursday from a brief vacation in Hawaii that he cut short to restart stalled negotiations with Congress.

He is likely to meet the toughest resistance from Republicans in the House, where a group of several dozen fiscal conservatives oppose any tax hikes at all.

Strictly speaking, the fiscal cliff measures begin on January 1 when tax rates go up but the House might stay in session until the following day if an agreement is being worked out.

"This January 1 deadline is a little artificial. We can do everything retroactively. We have to get it right, not get it quickly," said Republican Representative Andy Harris.

Another component of the "fiscal cliff" - $109 billion in automatic spending cuts to military and domestic programs - is set to kick in on January 2.

The House and Senate passed bills months ago reflecting their own sharply divergent positions on the expiring low tax rates, which went into effect during the administration of former Republican President George W. Bush.

Democrats want to allow the tax cuts to expire on the wealthiest Americans and leave them in place for everyone else. Republicans want to extend the tax cuts for everyone.

In another sign that Americans are increasingly worrying about their finances as Washington fails to address the budget crisis, consumer confidence fell to a four-month low in December. The fiscal wrangling in Congress sapped what had been a growing sense of optimism about the economy, a report released on Thursday showed.

Americans blame Republicans in Congress more than congressional Democrats or Obama for the fiscal crisis, a Reuters/Ipsos poll showed.

When asked who they held more responsible for the "fiscal cliff" situation, 27 percent blamed Republicans in Congress, 16 percent blamed Obama and 6 percent pointed to Democrats in Congress. The largest percentage - 31 percent - blamed "all of the above."

(Additional reporting by Fred Barbash in Washington and David Gaffen in New York; writing by Alistair Bell; editing by Todd Eastham)

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Comments (62)
lucky12345 wrote:
Lesson # 1:
* U.S. Tax revenue:       $ 2,470,000,000,000
* Fed budget:                 $ 3,620,000,000,000
* New debt:                   $ 1,150,000,000,000
* National debt:              $16,271,000,000,000
* Recent budget cuts:   $    38,500,000,000

Let’s now remove 8 zeros and pretend it’s a household budget:

* Annual income: $  24,700.00
* Money spent:   $  36,200.00
* New debt:                 $  11,500.00
* Outstanding balance:   $ 161,710.00
* Total budget cuts so far: $      38.50

Lesson # 2:
Here’s another way to look at the Federal Debt Ceiling:

Let’s say, You come home from work and find there has been a sewer backup in your neighborhood…. and your home has sewage all the way up to your ceiling.

What do you think you should do ……

Raise the ceiling, or remove the waste?

Dec 27, 2012 9:49am EST  --  Report as abuse
jaham wrote:
Of course you’re going to have budgetary problems and debt ceiling run-in’s when you re-elect the POTUS who has added more dollars to the federal debt than any other in history…America got just what they voted for (unfortunately) and now we all have to suffer through economic stagnation, fiscal inaction and stubborn unemployment for another 4 years, at least….

Dec 27, 2012 10:28am EST  --  Report as abuse
jaham wrote:
Good post lucky12345, I like how you removed some zero’s so that the problem can be perceived a bit more clearly.

We have a spending problem so large that we cannot tax our way out of it. Obama likely knows this, but he’s more interested in token political initiatives such as taxing the rich than he is interested in solving America’s fiscal problems.

Dec 27, 2012 10:57am EST  --  Report as abuse
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