Look Out Below! We’re Going Over the Fiscal Cliff

December 31, 2012  |  

President Obama during his press conference today, standing before middle class Americans who would be impacted by higher taxes. AP Photo/Carolyn Kaster

After some late nights and a full day (New Year’s Eve, no less) of negotiation, it looks like we’re going over the fiscal cliff. At least temporarily.

January 1 was the deadline for resolution to avoid tax hikes and other economic changes that are set to expire when the ball drops. But with Congress (perpetually) at an impasse, it’s been decided that there will not be a vote in the House of Representatives, which will technically send us over the cliff.

Despite technically toppling from the precipice, President Obama said in a press conference today (in a rather light-hearted way, much to the dismay of Sen. John McCain) that a resolution is “in sight.”

“The potential agreement that’s being talked about would not only make sure the taxes don’t go up on middle class families, it also would extend tax credits for families with children,” he said. “It would extend our tuition tax credit that’s helped millions of families pay for college. It would extend tax credits for clean energy companies creating jobs and reducing our dependence and foreign oil. It would extend unemployment insurance to two million Americans out there actively looking for a job.”

Despite the President’s entreaties to come to a solution, there are still items to be hashed out, specifically, the “sequester.” As CNBC explains, the “sequester” is a series of spending cuts that are involved in the negotiations. It’s agreed that those cuts will be delayed, but the question is how long. Oh CONGRESS!!

It sounds like the Republicans and Democrats have decided to raise $600 billion in revenue by raising taxes on those individuals who earn more than $400,000 and families earning more than $450,000, up from the $250,000 that the President had been pushing for. Estate taxes will also go up and unemployment benefits will be extended, according to CNBC. VP Joe Biden even got involved in the negotiation, adding a veteran Congressional voice to the discussion.

House Speaker John Boehner had proposed that the tax increase threshold be set at $1 million and estate taxes remain the same.

We interpreted the President’s press conference tone as one that reflects the general feeling of the population. It’s been confirmed that this Congress — the 112th — has passed the fewest number of bills than any in decades. And the negotiations on this fiscal cliff situation have become just plain ridiculous and simply politically motivated at times.

While his tone was less than grave, the President stood his ground with regards to where he draws the line. He said:

If Republicans think that I will finish the job of deficit reduction through spending cuts alone — and you hear that sometimes coming from them, that sort of after today we are just going to try to shove only spending cuts down — shove spending cuts at us — that will hurt seniors or hurt students or hurt middle class families without asking also equivalent sacrifice from million airs or companies with a lot of lobbyists. If they think that’s going to be the formula for how we solve this thing, then they have got another think coming.

Despite the not-so-good news, the stock market responded in the affirmative, with the Dow Jones going up 166 points. The Nasdaq also closed up 60 points. The news that sent the markets up was the tax break.

Still, there is uncertainty about how the stocks will react in the days to come if a final deal isn’t reached, says USA Today.

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