Three (thin) reasons why Congress could yet avoid the fiscal cliff
A deadline, the promise of a House vote on whatever the Senate can produce, and a sharp reaction on Wall Street boost prospects that gridlocked lawmakers will act to avert at least some aspects of the fiscal cliff by Jan. 1.
With just three days to the fiscal cliff, itâ€™s down to the SenateÂ â€“Â which has not passed a budget in three yearsÂ â€“Â to find a way out in time for a vote on New Yearâ€™s Eve.
Yet, despite a culture of failure that has settled on Washington like an ice storm, there are 11th hour pressures that could drive Congress to avert at least some elements of the â€śfiscal cliffâ€ť set to begin Jan. 1, including a week-long sell-off on Wall Street and a rare pledge that the GOP-controlled House will allow a vote on whatever the Democrat-controlled Senate produces.
â€śWe just canâ€™t afford a politically self-inflicted wound to our economy,â€ť said President Obama in his weekly radio address on Saturday. â€śThe economy is growing, but keeping it that way means that the folks you sent to Washington have to do their jobs.â€ť
Ever since the 2011 debt-ceiling crisis, the focus of efforts to come up with a deficit-reduction plan has been private talks between President Obama and House Speaker John Boehner (R) of Ohio. Those efforts collapsed last week after a critical mass of GOP conservatives rejected Mr. Boehnerâ€™s â€śPlan Bâ€ť to exclude incomes over $1 million from an extension of the Bush-era tax cuts.
Now, itâ€™s up to Senate majority leader Harry Reid (D) of Nevada and minority leader Mitch McConnell (R) of Kentucky, seasoned veterans at partisan floor maneuvers to thwart the other side, to switch gears and rally support for a bipartisan deal, especially finding an acceptable cut-off point for extending the Bush tax cuts.
There are other elements of what has come to be known as the fiscal cliff â€“ a $600 billion mix of tax hikes and spending cuts set to take hold on Jan. 1 â€“ that may be postponed in the rush to an 11th hour agreement.
These include $110 billion in mandated spending cuts, known as the "sequester," unemployment benefits set to drop back to 26 weeks from a current 99 weeks, the end to a $5 million exemption for the estate tax, and a "patch" to the alternative minimum tax, set to hit some 40 million families, if Congress not act. Also on the table: a hike to the debt ceiling, now set to be breached early on Dec. 31, which the Treasury says can be delayed for weeks byÂ emergency measures.
In a White House meeting with congressional leaders on Friday, President Obama restated his goal of extending tax breaks only for family incomes below $250,000. But in negotiations with Boehner, the president had proposed raising that threshold to $400,000 â€“ a level endorsed by many Senate Republicans and likely to win the support even of some Tea Party conservatives.
â€śIf in the final analysis what Iâ€™m given is something that does protect a certain percentage but not all, I may well vote for that, because itâ€™s not going to affirmatively raise taxes,â€ť says Sen. Rand Paul (R) of Kentucky. â€śIf we do nothing, taxes will automatically raise.â€ť
Both Senate leaders left a White House meeting with the president and House leaders on Friday sober but somewhat optimistic that a deal was still possible.
â€śIâ€™m going to do everything I can. Iâ€™m confident Senator McConnell will do the same,â€ť said Senator Reid, after debriefing colleagues in a mass huddle on the Senate floor.
â€śWhatever we come up with is going to be imperfect,â€ť he added. â€śSome people arenâ€™t going to like it. Some people will like it less. But thatâ€™s where we are.â€ť Senator McConnell, also speaking on the floor, said he was â€śhopeful and optimistic.â€ť
But they also enter weekend talks with a critical asset: A commitment from Speaker Boehner to allow a vote on whatever bill the Senate produces â€“ a sharp break with current practice.
â€śWe have said we will take up whatever they produce and either vote to accept it or vote to amend it and send it back to the Senate,â€ť said Boehner spokesman Kevin Smith, in an e-mail on Saturday.
If that commitment holds, it allows Boehner to take to the floor a tax compromise that could not pass muster in his own caucus but that, up against a deadline, could win bipartisan support on the floor.
â€śIn a government that can be dysfunctional, crisis is the way they govern,â€ť says Julian Zelizer, a congressional historian at Princeton University. â€śThey need the crisis. They need the sense of urgency.â€ť Â
â€śIt is a concession for the speaker to let the Senate make the agreements that he is not able to make at this point. If it holds, it is significant,â€ť he adds.
For Mr. Boehner, who faces reelection as Speaker Jan. 3, such a decision to allow a bill on the floor that may be opposed by many in his caucus is a critical one. Ever since Republicans took back the House in 1995, a guiding principle for GOP Speakers has been to only take bills to the floor that command the support of â€śa majority of the majority.â€ť This principle has been sorely tested in votes over deficit reduction.
Members of Congress are also closely watching the response of Wall Street to the prospects of a failure to avert some $600 million in tax hikes and spending cuts that economists say could drive the economy back into recession.
On Friday, the Dow Jones Industrial Average dropped 158 points, or 1.2 percent, capping a 374 point slide for the week. Mondayâ€™s results could help drive a compromise, much as the adverse reaction on stock markets drove the House to reverse itself and pass President Bushâ€™s Troubled Asset Relief Program in 2008.