Fiscal Cliff Notes
Explainers on what will happen if Congress doesn't make a deal:
Congress and the White House made yet another public, last-ditch effort to resolve the fiscal cliff on Friday, as the mood increasingly darkened about the prospects of any deal and nearly 90 percent of Americans prepared to face some type of tax hike in the New Year.
Toward the end of the day, it seemed like a small-bore deal was the only possible end-game to avert the cliff. Such a deal would raise tax rates on household income at some yet-to-be determined threshold; patch the alternative minimum tax; attend to the so-called “doc fix”; and potentially, depending on the contours of the package, extend unemployment insurance benefits or preferable breaks on the estate tax rate, according to congressional sources and tax lobbyists. It would not tackle the debt ceiling, sequester, payroll tax holiday, or tax breaks for businesses.
This was the best that anyone could hope for after seven weeks of constant bickering. Gone were any illusions of a grand bargain to tackle the deficit, or any definitive path to tax reform. “The hour for immediate action is here,” said President Obama, warning that Americans would not have patience for the cliff’s politically self-inflicted wound of more than $500 billion in tax hikes and spending cuts.
And, if the Senate leaders could not cut a bipartisan deal, the president said that he would ask Senate Majority Leader Harry Reid to bring a bill to the floor to extend the middle class tax cuts and employment insurance for an up-or-down vote. “That is the bare minimum we should be able to get done,” Obama said.
The president struck just a few notes of optimism in his Friday night statement, peppering it as well with caveats and ‘buts’ about the difficulties of getting anything accomplished in Washington right now.
The passage of a minuscule deal would seem like a miracle at this late stage. Many lawmakers spent Friday milling about the Capitol in wait-and-see mode, or moping around about going over the cliff. Retiring Sen. Ben Nelson, D-Neb., in his waning days as a member, said he was resigned to celebrating the New Year in the Capitol. Sen. Ron Wyden, D-Ore., kept talking about the date of Jan. 3 as a time of “renewal” for both parties.
Sen. Tom Harkin, D-Iowa, said he had no inside knowledge of how the talks were progressing but that, leaning on his decades on the Hill, he felt the current Congress was headed over the cliff with no resolution until new lawmakers were sworn in next week. “January 3rd or 4th,” he predicted a piecemeal package might clear the Congress. That is after, he noted, Speaker John Boehner’s post would have been reaffirmed by the GOP rank-and-file.
And, Sen. Bob Corker, R-Tenn., voiced frustration. “I think every American should be disgusted with all of Washington,” he said.
Reid and Senate Minority Leader Mitch McConnell promised to unveil a potential compromise as early as Sunday. Still, that provided no assurances that such legislation would pass the House, which seems to loathe any tax increases. Reid called any potential compromise “not perfect” but said “that’s where we are.” How different this sounded and looked from the congressional leaders’ last group meeting at the White House in mid-November, when they came to the microphones together and expressed hope for a deal.
McConnell echoed Reid’s sentiment of tentative cooperation by saying that he and Reid were engaged in discussions. “We’ll be working hard to try to see if we can get there in the next 24 hours. So I’m hopeful and optimistic,” he said.
Time is short for any package to pass the two chambers, even a bare minimum one. The best motivation may simply spring from the knowledge that the American public—to say nothing of the stock market—would not look favorably on inaction. Nor is it clear the amount of time Congress and the White House would have to solve the fiscal cliff in January before the financial markets and American consumers reacted poorly.
And, if we go over the cliff, Congress and the White House will set in motion an ongoing series of fiscal battles for the next few months. “We’ve got to break this logjam. Just to go back into it every few months, I think will be very destructive. There is much work that needs to be done, including tax reform,” said Rep. Sandy Levin, D-Mich. and ranking member of the House Ways & Means Committee. “If we can’t collaborate to avoid the cliff, I think it sets a very injurious tone for the period ahead.”
Chris Frates, Shane Goldmacher contributed to this article.