Moving Closer To The “Fiscal Cliff”

Fiscal-cliff-ahead-jpgWashington, D.C.

Following House Speaker John Boehner’s failed emergency meeting last Thursday evening for “Plan B,” which would have extended tax cuts on incomes below $1 million and increased revenues to $1 trillion over 10 years, both Republicans and Democrats have been blaming one other for failing to compromise on the looming “fiscal cliff’ that is now only 7 days away, threatening to send the U.S. back into recession with a combination of over $ 600 billion in spending cuts and tax increases set to kick in on January 1st unless a last minute compromise is reached.

The U.S. payroll tax cut, which impacts 122 million U.S. workers, is also set to expire on January 1st which will lead to a tax increase from the current rate of 4.2 percent back to 6.2 percent.

The payroll tax cut has increased disposable income by $112 billion, or 0.7 percent of GDP. The elimination of the payroll tax cut will reduce on average $920 for the average American family, according to the non-partisan Tax Policy Center.

Unemployment benefits are also expected to be cut beginning in January. It is projected that 2.1 million Americans will no longer be able to apply for unemployment benefits in 2013, according to the National Employment Law Project.

“Plan B” Breakdown

Senate Majority Leader Harry Reid (D-Nevada) responded last Friday to the political stalemate on Capitol Hill as the fiscal cliff deadline looms closer and investors nervously await for signs of a fiscal compromise.

“We know the so called “Plan B” was no plan at all. It couldn’t pass the Senate, it turns out it couldn’t pass the House either” he said.

Senator Reid wasted little time criticizing “Plan B,” calling it a political stunt.

“It’s too bad Speaker Boehner wasted a week on his futile, political stunt and that’s all we can call it,” he admitted.

“It’s time for the Speaker and all Republicans to return to the negotiating table we’ve never left Mr. President. It’s time for Republicans to work with us to find middle ground, that’s the only hope of diverting the devastating impact of the fiscal cliff ” he said.

Republican Reaction

Republican Senator Mitch McConnell (R-Kentucky) went on the Senate floor last Friday and blamed Democrats for the “Plan B” meltdown that occurred last Thursday in Republican chambers, leading to no vote at all for the failed budget plan.

Senator McConnell called on the President to lead and said that “it’s the President’s job to find a solution that can pass Congress.”

 “They stood in front of the cameras and laughed, laughed. They giggled at a bunch of bad jokes and told the American people they didn’t plan to do anything this week” he said.

“This isn’t John Boehner’s problem to solve. He’s done his part. He’s bent over backwards” Senator McConnell insisted.

“How about rallying your party around a solution? How about getting Democrats to support something?” he questioned.

House Speaker John Boehner  (R-Ohio) deflected the blame away from himself for failing to get enough Republican votes for “Plan B” to reach the House floor and suggested that many House Republicans didn’t want to be on record as supporting any effort to raise taxes.

“While we may not have been able to get the votes last night, I don’t think they were taking it out on me. They were dealing with the perception that someone might accuse them of raising taxes.”

House Republicans are left questioning if it is more important to preserve their political image by showing a united front and resisting tax hikes on the rich or else face the possibility of criticism and loss of political support by failing to reach a bipartisan compromise with the President and Democrats, leading to tax increases on all Americans.

President Obama Weighs In

President Obama held a press conference on Friday and explained that he has already made some key concessions to avoid the U.S. going over the “fiscal cliff.”

“I met them half-way on taxes and more than half way on spending. In terms of actual dollar amounts, we are not that far apart” he admitted.

Obama stressed that bipartisan support is needed to reach a fiscal compromise.

“We move forward together or we don’t move forward at all.” 

 

 

About Johnathan Schweitzer 1533 Articles
Welcome to Schweitz Finance. I hope that my financial website will provide you with relevant market information to help you manage your investments with greater clarity and insight.
Contact: Website