Cliff Notes: The NeverEnding Story

| December 22 2012

Cliff Notes: The NeverEnding Story

Washington has once again taken America to the brink of disaster, right up to the edge and possibly over the fiscal cliff.  With less than a week to get a budget deal done and the Christmas holiday quickly approaching, businesses and investors are becoming increasingly pessimistic.  While lawmakers hold press conferences and do television interviews to try to avoid taking all the blame, what’s getting less attention is that millions of families and businesses are already feeling the real consequences of another Washington failure.

ONCE AGAIN, WASHINGTON TAKES AMERICA TO THE BRINK

With The Latest Offer Rejected By The House, Time Is Running Out For A Deal:

Congress Has Less Than A Week To Reach An Agreement On The Fiscal Cliff. “Now that Boehner has pulled his plan, House members and senators won’t vote on the end-of-year budget issues until after Christmas, giving them less than a week to reach agreement to avert tax increases and spending cuts set to take effect in January.” (Richard Rubin and James Rowley, “Boehner Drops ‘Plan B’ as Budget Effort Turns to Disarray,” Bloomberg12/21/12)

Time Is Running Out. “Time is running out to resolve the fiscal cliff crisis. The Senate is expected to wrap up a series of bills as soon as Friday before senators travel to Hawaii for Sen. Daniel Inouye’s funeral over the weekend. The Senate then wouldn’t return to session until Dec. 27. There wouldn’t be much time before all taxes on Americans would rise and the sequestration spending cuts take effect.” (Jake Sherman, Carrie Budoff Brown and John Bresnahan, “Cliff Chaos: Boehner Pulls GOP Bill,” POLITICO12/21/12)

CEOs Frustrated With Fiscal Cliff Standstill. “Time’s running out and the holiday is coming, so the worst-case scenario is increasingly becoming a probable scenario,” said Laurence Fink, chief executive of BlackRock Inc., a large asset-management company. (Damian Paletta, “CEOs Frustrated With Fiscal Cliff Standstill,”Wall Street Journal, 12/20/12)

Senate Won’t Reconvene Until Next Thursday. “Thursday’s events leave little time for Obama and bruised lawmakers to prevent across-the-board tax increases and deep spending cuts from taking effect with the new year…The House will not meet again until after Christmas, if then, and the Senate is expected to meet briefly on Friday, then not reconvene until next Thursday.” (Andrew Taylor, “Obama Vows to Press Ahead on Fiscal Cliff Solution,” Associated Press, 12/21/12)

If Deal Isn’t Made, U.S. Could Be Knocked Back Into Recession. “Time is fast running out to avoid the cliff – and a blow to the US economy that could knock it back into recession – and Obama is expected to cancel his annual trip to Hawaii for Christmas to keep negotiating in Washington. The two sides have less than two weeks before the deadline. If the country steps over for just a few days and then a deal is cinched, the impact would be modest, economists and budget analysts say.” (Zachary Goldfarb and Lisa Rein, “Over Fiscal Cliff a Slippery Slope,” Washington Post,12/21/12)

WAITING UNTIL THE LAST-MINUTE NOTHING NEW FOR CONGRESS

Last Minute Deal In 2011 Debt Ceiling Negotiations Led To Sequestration, Credit Downgrade:

Last-minute deal to avert federal default threatening “significant economic and political consequences.” ”New budget talks between top Congressional Republicans and President Obama made progress late Saturday, suddenly stirring optimism that a last-minute deal could be reached to avert a potential federal default that threatened significant economic and political consequences.” (Carl Hulse, “Amid New Talks, Some Optimism on Debt Crisis,” New York Times, 6/30/2011)

President Obama signed deal just hours before default. ”Hours before the U.S. faced a first-ever default, President Obama signed into law a compromise deal that averts a crisis by raising the debt limit, but signaled that he will not abandon his stalled efforts to raise taxes on the wealthy.” (Devin Dwyer, “Debt Ceiling Deal: President Obama Signs Bill as Next Fight Looms, ABC News, 8/2/11)

POLITICO: “Debt ceiling debate has lawmakers tired of last-minute jam.” (Manu Raju and Jonathan Allen, “Debt ceiling debate has lawmakers tired of last –minute jam,” POLITICO, 8/2/11)

Investors and soldiers worried over debt ceiling debate. “The flurry of activity came as anxiety built up in many corners, including among Wall Street investors worried about the effects on the markets and active-duty soldiers worried about their paychecks.” (Carl Hulse, “Amid New Talks, Some Optimism on Debt Crisis,” New York Times, 6/30/2011)

S&P Downgrades U.S. Credit Rating. “Credit rating agency Standard & Poor’s … downgraded the credit rating of the United States, stripping the world’s largest economy of its prized AAA status. In July, S&P placed the United States’ rating on ‘CreditWatch with negative implications’ as the debt ceiling debate devolved into partisan bickering.” (Charles Riley, “S&P Downgrades U.S. Credit Rating,” CNN Money, 8/5/11)

In 2009 Washington Debated The New Health Care Law Until Christmas Eve:

White House Makes “Last-Minute” Push. “House Democratic leaders pushed with mounting confidence Friday toward a historic vote on expanding the nation’s health-care system, and President Obama joined an intense last-minute lobbying campaign to pick up the last few votes needed to secure the measure’s passage.”(Lori Montgomery and Shailagh Murray, “Democrats Round Up Health Bill Votes”, Washington Post 11/7/09)

Showdown Over Health Care Act Ran Up To Christmas Eve. “With the final vote on the Patient Protection and Affordable Care Act slated to start after sundown Dec. 24, senators and hundreds of their health policy analysts, press secretaries and other aides — not to mention the universe of police officers, clerks and student pages who keep the place humming — wishing to be with their families will instead spend the holiday in Washington. And there’s a possibility the Senate could be called back next week, to take up debt-limit legislation.” (Philip Rucker, “Health-Care Vote Means Senators Will Spend Christmas Eve At The Capitol”, Washington Post 12/22/09)

FISCAL CLIFF POSTURING AND PROCRASTINATION THREATEN ECONOMY

Economic Indicators Already Showing Impact Of Cliff:

USA Today: “U.S. Stocks Join Worldwide ‘Cliff’ Selloff.” “Stocks fell Friday as worries about the U.S. fiscal cliff weighed on world markets. Shortly after the open in New York, the Dow Jones industrial average and S&P 500 index were down 1%, the Nasdaq composite index wa off 1.7%.” (John Waggoner, “U.S. Stocks Join Worldwide ‘Cliff’ Selloff,” USA Today, 12/21/12)

Fiscal Cliff Could Result In Another Credit Downgrade. “Ratings firm Fitch said on Wednesday it is more likely to strip the United States of its triple-A status if a political deal is not reached to halt $600 billion of spending cuts and tax hikes set for early next year. ‘Failure to avoid the fiscal  cliff … would exacerbate rather than diminish the uncertainty over fiscal policy, and tip the U.S. into an avoidable and unnecessary recession,’ Fitch said in its 2013 global outlook, published on Wednesday.” (Marc Jones, “Fitch Warns Fiscal Cliff Could Cost U.S. Its Triple-A Rating,” Reuters, 12/19/12)

Business Leaders Frustrated With Fiscal Cliff Talks. “A long line of America’s top chief executives have rotated through Washington in recent weeks, loudly urging lawmakers and the White House to reach a broad deal to fix the budget. They once sounded optimistic. Now many of them aren’t talking, and if they are, they’re gloomy.” (Damien Paletta, “CEOs Frustrated with Fiscal Cliff Standstill,” Wall Street Journal, 12/21/12)

  • “Pitiful And Embarrassing.” “Mark Bertolini, chief executive of health-insurance company Aetna Inc., called the state of play ‘pitiful and embarrassing,’ saying the chances are growing that a deal might not be reached by the end of the year to avert $500 billion in tax increases and spending cuts.”  (Damien Paletta, “CEOs Frustrated with Fiscal Cliff Standstill,” Wall Street Journal, 12/21/12)

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