America’s fiscal cliff anxiety is reaching a climax as lawmakers are expected to come to an agreement—for better or worse—sometime within the next ten days.
Most economic experts agree on three things: 1) Lawmakers are highly unlikely to reach an agreement before Jan. 1, when deep automatic spending cuts and crippling tax increases will automatically occur. 2) When they do implement a fiscal cliff plan, it will probably be little more than a quick-fix to avert only the harshest consequences of their failure avert the cliff. 3) Talks over the fiscal cliff have become more about political grandstanding and less about protecting Americans’ bottom lines.
President Barack Obama reportedly cut short his Hawaiian Christmas vacation Wednesday in order to return to Washington and ready himself for a Senate proposal on a fiscal cliff plan. The President and fellow Democrats are unwavering in demanding that high-income Americans not be sheltered by Bush-era tax cuts after the Jan. 1 deadline. Meanwhile, Republican opposition to any tax increase has been strong.
The two sides seemingly made progress last week when Obama offered to set $400,000 as the income threshold for a tax rate increase rather than the $250,000 he had originally proposed. Republican House Speaker John Boehner countered the President’s proposal with a $1 million income threshold for the tax increase, but was quickly cut down by other members of the GOP who outright oppose any tax increase.
More recently, GOP lawmakers appear to be softening in their opposition to higher tax rates because pressure from Democrats is creating a situation of political gridlock and making even small fiscal cliff agreements impossible.
Representative Nan Hayworth (R-N.Y.) said on CNN, acknowledging that Republicans have little choice but to allow some tax increases: “If that’s where people have to go, we’ll make the threshold as high as we can. Because the more relief we provide, the better off we’ll be.”
The GOP’s weakening stance on higher taxes has provoked threats from anti-tax crusader Grover Norquist, who vows to mount political assault in the form of primary challenges against Republicans who violate a pledge they signed against ever voting for a tax increase.
Meanwhile, as lawmakers continue to fail to create a plan, the economy is already experiencing the initial impact of what may result from the underwhelming political response to impending fiscal calamity. On Wednesday, reports from Wall Street indicated a weakening stock market despite being on the heels of the usually rallying holiday season.
“There’s just no certainty and people don’t know where to step,” Stephen Guilfoyle of Meridian Equity Partners told NBC. “We’re kind of in a quandary here—the market didn’t catch at 1,422 like it was supposed to and the next catch point is 1,415 on the S&P. There’s not a lot of volume and you have a lot of traders with question marks on their heads right now.”