The good news is that the Republican and Democratic leadership seems to have come to an agreement about renewing the Bush tax cuts. The bad news is that it was impossible logistically to pass a bill before midnight on New Year’s Eve when the cuts expire and automatic spending cuts kicked in. So we have jumped off the fiscal cliff, though there is hope that Congress will clamber back up it with a retroactive action. From CNBC:
With no vote likely on Monday night, the U.S. will technically be going over the “fiscal cliff” at midnight, sources told CNBC.
The emerging deal with the Senate would raise tax rates on family income over $450,000 a year, increase the estate tax rate and extend unemployment benefits for one year.
The parties were at an impasse over whether to put off the automatic, across-the-board spending cuts set to begin taking effect at midnight, and if so, how to pay for that. One official said talks were focused on a two-month delay in the across-the-board cuts but negotiators had yet to agree on about $24 billion in savings from elsewhere in the budget.
“Today it appears that an agreement to prevent this middle class tax hike is in sight,” Obama said in an early afternoon appearance from the White House, where he stood in front of cheering supporters.
“Over the next 12 hours, let’s see if we can get this done,” Obama said.
Obama expressed regret that the work of the administration and lawmakers won’t produce a “grand bargain” on tax-and-spend issues, but said that “with this Congress, it couldn’t happen at that time.”
Before he spoke, details of the emerging deal emerged. It would raise $600 billion in revenue over the next 10 years by increasing tax rates for individuals making more than $400,000 and households making above $450,000 annually, officials familiar with the talks said.
The deal would also delay a series of spending cuts known as the “sequester,” though a sticking point remains on how long that delay would last. McConnell said action on the sequester could continue in coming months. “Let’s pass the tax relief portion now, let’s take what’s been agreed to and get moving,” McConnell said.
Other details included increasing the estate tax rate, extending unemployment benefits for one year, officials familiar with the negotiations said. The officials, speaking on condition of anonymity, said an agreement would shield Medicare doctors from a 27 percent cut in fees and extend tax credits for research and development, as well as renewable energy.
The deal also would extend for five years a series of tax credits meant to lessen the financial burden on poorer and middle-class families, including one credit that helps people pay for college.
We are also going off the Dairy Cliff. The Farm Bill has also expired when the crystal ball touched down in Times Square. As a result, a price support mechanism devised in 1949 kicked in, whereby the U.S. government has to buy milk for $7-$8 per gallon in today’s money. This would more than double the price of milk in the supermarket. Reportedly, an agreement has been struck that would renew the Farm Bill, though, again, it remains for Congress to act.
The wild card in all of this is whether the party leaders can deliver the votes from their members. Some Congressional Republicans are said to be upset that spending cuts are not being included, with some Congressional Democrats incensed at the cutoff for higher taxes being raised to $450,000 rather than the $250,000 that President Obama campaigned on.