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Fiscal Cliff Talks Turn Into a Game of Chicken

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Far from seeking common ground to avert a year end calamity of automatic tax hikes and spending cuts that could trigger another recession, the Democrats and Republicans appear to be trying to escort each other over the fiscal cliff.

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The differences flared up yesterday after administration officials conferred behind closed doors with Boehner and Democratic congressional leaders on Capitol Hill. Treasury Secretary Timothy F. Geithner and White House congressional liaison Rob Nabors signaled to the Republicans that the president still intended to seek $1.6 trillion in new taxes over the coming decade, starting with an immediate increase in the rates for the wealthiest 2% of Americans, The Washington Post reported.

While the Republicans have indicated they might go along with half that amount of new revenue, they refuse to raise the top rates. Instead, they insist they could generate the revenue by capping the amount taxpayers can claim in deductions and overhauling and simplifying the tax code to make it more efficient, an assertion the Democrats don't buy.

Moreover, the administration demanded that Congress relinquish control over federal debt levels and approve at least $50 billion in new spending to boost the economy next year as part of an agreement to avert the year-end fiscal cliff, according to the Post.

In return, the president offered to find $400 billion over 10-years in savings from federal health and retirement programs. But those savings would be wiped out, the Republican aides said, by Obama's proposal to extend a slew of expensive policies, including emergency unemployment benefits and a temporary payroll tax holiday that is now set to expire at the end of the year.

Republicans apparently viewed the offer as a slap in the face, and Boehner at his news conference sharply criticized Democrats for not outlining possible expenditure cuts. Republican leaders stipulated these reductions as part of a "grand bargain," including additional tax revenues to shrink the deficit over the long term.

With only a few more weeks before the lame duck Congress runs out of time, some lawmakers said yesterday they were dismayed the negotiations aren't further along. Sen. Jeff B. Sessions of Alabama, the ranking Republican on the Senate Budget Committee, said, "I can't imagine the president of the United States at this late date isn't willing to say what he thinks and what his vision for America is. He has not discussed the $16 trillion debt. He will not tell the American people they're on an unsustainable path."

Senate Finance Committee Chairman Max Baucus, D-Mont., said, "We're going to have to get together. There isn't a lot of time left. It's negotiating time, it's good faith time, it's getting this done time, that's number one. Because that's what the American people want, the markets want some predictability and certainty. This is a no brainer. People have got to get together."

Editor's Note: This article by Eric Pianin originally appeared on The Fiscal Times.

For more from The Fiscal Times:


Your Easy-to-Use Guide to the Fiscal Cliff

Insider-Trading Probe Looms Over Hedge Fund Titan

Shocking Chart on Tuition vs. Earnings for College Grads

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