Fiscal Cliff

Republican Sen. Lindsey Graham said on Sunday that chances for a small "fiscal Cliff" deal in the next 48 hours were "exceedingly good" and that President Barack Obama had won.

Republicans on Sunday conceded on their demand that any “fiscal cliff deal trim Social Security cost-of-living increases, signaling the end — for now — of their push to reform entitlements in exchange for higher tax rates.
Proponents said they might try to revisit the issue next year, but senators from both parties said they were playing a losing hand when they appeared to be demanding cuts to the federal governments public pensions program in exchange for protecting tax rates for families making more than $250,000.

Financial markets would be affected adversely if U.S. lawmakers fail to agree on a "fiscal cliff" deal before Tuesday, President Barack Obama said in an interview broadcast on Sunday, while urging Congress to act quickly to extend tax cuts for middle-class Americans.

Not everyone thinks the "fiscal cliff" is so bad.

If the Dec. 31 deadline passes, income taxes will go up and across-the-board spending cuts will hit government programs. But while most of the political world frets as if a major disaster is looming, others have treated it more like the Y2K bug: a fiscal canard ginning up a lot of unnecessary panic.

The cliff is a "fantasy," former House speaker Newt Gingrich told a sold-out crowd at the Ronald Reagan library in Simi Valley, Calif., a week before Election Day.

A possible deal to avert the midnight deadline for the "fiscal cliff" of automatic tax increases and spending cuts began to take shape Monday, including an agreement to raise the income tax rate on top earners to what it was during President Bill Clinton's last term in office, according to sources close to the process.
The potential deal also includes an increase in the estate tax and an extension of unemployment benefits, according to the sources.

Mandatory federal spending cuts designed to be prohibitively drastic will become a reality on Wednesday if negotiators remain unable to reach an agreement to avert the reductions.

The cuts would hit a broad array of departments and programs, from the military's purchase of mine-resistant vehicles to government food inspections. They would slash funding for Secret Service details and cut rental housing subsidies in rural areas.

A frantic round of late-night negotiations on Sunday between Vice President Joseph R. Biden Jr. and Senator Mitch McConnell of Kentucky, the Republican leader, moved the Senate close to a deal to stave off hundreds of billions of dollars in tax increases and across-the-board spending cuts that would begin to kick in on Tuesday, according to people familiar with the talks.

With roughly 12 hours left before the fiscal crisis deadline, Senate Democratic Leader Harry Reid took to the floor Monday to announce that Senate leaders still had not reached an agreement -- upping the chances that the New Year's Eve ball drop will coincide with massive tax hikes and spending cuts.
"We really are running out of time," Reid said. "Americans are still threatened with a tax hike in just a few hours."

Congressional and White House negotiators are closing in on a deal to avert across-the-board tax hikes and spending cuts that take effect at midnight, as the nation teeters on the edge of the so-called fiscal cliff.

An emerging tentative agreement would extend current tax rates for households making $450,000 or less; extend the estate tax at its current level of 35 percent for estates larger than $5 million; and prevent the Alternative Minimum Tax from hammering millions of middle-class workers, sources said.

With hours to go, President Obama and Congress barreled toward the New Year's Day “fiscal cliff,” trading last-minute offers and narrowing the range of options Sunday, but reaching no deal.