Blame Game As The Fiscal Cliff Approaches

Blame Game As The Fiscal Cliff Approaches

With the “fiscal cliff” coming in nine days, more concerns have started to emerge on the possible increases in taxes and cuts in spending if no agreement is reached.

There will be no discussions on possible solutions to the problem between President Barack Obama and Speaker John Boehner during the holidays since both leaders are out for the holidays. Congress will only have a couple of days before the fiscal cliff deadline comes at the end of the year.

Some Republicans also have indicated that the president may welcome the increases in taxes and defense reductions in addition to the opportunity to hold the Republicans responsible for not agreeing to his proposals. They indicated that this will be a political victory for the president, who promptly denied it.

On the other hand, the Democrats have hinted that Boehner does not want a deal prior to the January 3 swearing in of House members, who will vote for the new speaker. A Democrat lawmaker indicated that Boehner is concerned at the possibility that his speakership may be jeopardized by an agreement before the January 3, which falls after the “fiscal cliff” deadline.

Claims such as these have increased after the election as the “fiscal cliff” deadline draws near. The risk of cuts in spending and increases in taxes of around $600 billion was supposed to compel both sides to come up with a plan to control federal spending and provide tax relief to the people.

If economy falls over the “fiscal cliff”, it may result to another recession in the country that is still recovering from the effects of the financial crisis.

The financial market will likely be among the first to feel the effects of the situation even as it was fairly quiet during the period when both sides were debating on the issue. If no deal is reached prior to the “fiscal cliff” deadline, income taxes will increase by January 1 while unemployment benefits will expire.

In this situation, it will be necessary for a deal to be reached within the first week of January or after the “fiscal cliff” deadline has passed.

A number of lawmakers have hinted at the possibility that a short-term agreement on reducing debt will be reached soon, before a lasting deal will be worked out in the coming year. However, such an agreement needs support from both sides and the president has already indicated that he will veto any bill that will not increase taxes of the richest taxpayers.

Many Republicans are looking past the “fiscal cliff” deadline, and are focusing at the debt ceiling, which will allow them to leverage president into increasing reductions in the federal budget.

Posted by James Fried on Monday December 24 2012, 6:51 AM EST. Ref: Reuters. Link. All trademarks acknowledged. Filed under Finance. Comments and Trackbacks closed. Follow responses: RSS 2.0