Less than a week remains before a still-recovering U.S. economy confronts a draconian austerity regime of automatic, across-the-board tax increases and deep cuts to federal spending. Hopes of averting the so-called “fiscal cliff” by January 1 are dimming with each passing day.
Call it Washington’s version of "Mission Impossible".
What is the U.S. Fiscal Cliff?
An agreement intended to force politicians to compromise and make deals.
Without a deal by January 1, 2013, sharp spending cuts would hit military and social programs.
Tax hikes also would go into effect.
The combination would reduce economic activity, and could boost unemployment and push the nation back into recession.
The challenge? A politically-divided and chronically-gridlocked Congress has just days to forge a deficit reduction package acceptable to legislators of both parties and President Barack Obama. The package would have to pass both houses of Congress and be signed into law by midnight New Year’s Eve, or the United States will, indeed, step off the fiscal cliff.
In other words, Washington must accomplish in a few days what years of intensive negotiations have failed to produce: a blueprint for stabilizing America’s runaway national debt, which stands at $16 trillion and is projected to top $20 trillion in a few years.
“I do not want us to go over the cliff. I want to find a solution," said Republican Senator John Barrasso on Fox News Sunday.
His words were echoed by Democratic Senator Amy Klobuchar on ABC’s This Week program.
“It is time to get back to the [negotiating] table,” she said.
For more than a month, negotiations were led by President Obama, a Democrat, and Republican House Speaker John Boehner. Now, Boehner has all but removed himself from the talks. After failing to narrow differences with Obama, Boehner last week sought to pass legislation on his own that would save all but millionaires from a federal tax increase. But ultra-conservative Republicans refused to back the measure, and Boehner canceled the vote and adjourned the House until further notice. Boehner said the burden of forging a deal now falls to President Obama and Senate leaders.
The Senate convenes Thursday and presumably will stand ready to vote on any deal that may materialize. Some Senate Republicans, like Lindsey Graham, say they would be willing to vote for higher taxes on top earners, as Democrats demand.
“I would vote for revenues, including tax rate hikes, even though I do not like them, to save the country from becoming [like] Greece,” he said.
Graham spoke on NBC’s Meet the Press program. Meanwhile, some Democratic Senators, like Amy Klobuchar, advocate a large-scale deal that addresses taxes as well as federal spending, including reforms to costly programs that provide health care and other benefits to retirees.
“I would love to see a bigger deal. I would like nothing more, and there are always miracles," she said. "It is Christmas.”
Before heading to Hawaii for a Christmas vacation, President Obama suggested a scaled-back package of tax relief for America’s middle class may be the only remaining viable option ahead of the fiscal cliff.
“There is absolutely no reason, none, not to protect these Americans from a tax hike,” he said.
Some political analysts believe lawmakers will find the political will to compromise only after January 1, when they will face the wrath of constituents angry over higher taxes and lower take-home pay combined with reduced government services brought on by federal spending cuts. In the meantime, financial markets could be thrown into turmoil, consumers may limit spending, and businesses may scale back operations in anticipation of austerity measures, putting the nation’s fragile economic recovery at risk.