Fiscal Cliff Situation Remains in Flux

October 18, 2012 04:11 AM

via a special arrangement with Informa Economics, Inc.

Some lawmakers want to repeat delaying key decisions, even after Nov. 6 elections

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.

As the end of 2012 approaches and the so-called "fiscal cliff" looms, the focus on how Congress and the administration will come to terms on a solution is rising in Washington.

The fiscal cliff is the group of must-decide issues that Congress and the White House have repeatedly kicked the can down the road – largely due to lack of leadership on all signs, and too much weight given to the extreme positions in both political parties. The issues include expiring 2001 and 2003 tax cuts, the expiring payroll tax holiday, a needed "fix" for the Alternative Minimum Tax (AMT) to avoid more middle class tax payers from being impacted, the estate tax exemption (now at $5.1 million, double for spouse, but goes to $1 million in 2013 if not acted on), and other key issues.

House Speaker John Boehner (R-Ohio) said in a conference call Wednesday that he and President Obama have not spoken about the impending fiscal cliff in nearly four months. Politico called the admission by Boehner "striking" and said it is "clear evidence that the most urgent legislative concerns are frozen until after the election." An aide to Boehner said that "the speaker did talk to Obama in September, but the topic was foreign policy, not the fiscal cliff."

Veto threat. Administration officials are signaling that unless Republicans give in to President Obama's demand "to raise tax rates for the wealthy," he is "prepared to veto legislation to block year-end tax hikes and spending cuts, collectively known as the 'fiscal cliff,'" the Washington Post (WP) reported.

Obama "allies" say the president "is ready to play hardball with Republicans, who have so far successfully resisted a deal to tame the debt that includes higher taxes." The WP added, "If he wins reelection, Obama may finally be able to dictate the terms of a bipartisan debt-reduction deal. And if he loses to Republican Mitt Romney, Obama could make sure that tax rates rise before he hands over the keys to the White House on Inauguration Day in late January. Administration officials declined to say whether the veto threat will stand if Obama loses the election."

Comments: This kick-the-can-down-the-road Washington shows the lack of leadership at many levels. It will be interesting to see if leaders show up after Nov. 6 elections. If not, bond traders may well teach Washington "leaders" a lesson they will not soon forget.



NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.






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