After another day and still no progress on fiscal cliff discussions, many are beginning to think we might not see a deal before the end of the year, or even at all.
Republicans on Monday proposed their counter-offer to U.S. President Barack Obama's initial deal and, like his, it was basically the same plan previously offered.
This has led many, including Bank of America Corp. (NYSE: BAC) CEO Brian Moynihan, to wonder how far apart the two sides really are, and how long the effects of delaying a deal will be felt.
"I'm more concerned about business behavior slowing down than I am about consumer behavior," Moynihan told CNBC this morning. "I think we're in danger if this thing strings out into 2013 that you could start to have problems of what 2014 would look like."
The Republican-proposed deficit reduction deal, which was quickly rejected by the White House, would save $2.2 trillion over the next decade by generating an additional $800 billion in tax reform, but not by raising rates, and saving $300 billion by cutting discretionary spending, $600 billion in "health savings," $200 billion in changes to the consumer price index and another $300 billion in mandatory spending.
This is in stark contrast to the president's offer, and so far it seems neither side will budge from their original positions and even begin to compromise.
Governors "Just Don't Know" About Fiscal Cliff
Leading members of the National Governors Association on Tuesday met with President Obama and congressional leaders, including House Speaker John Boehner, R-OH, in another attempt to spur progress on a fiscal cliff deal.
The group included Democrats Jack Markell of Delaware, Mark Dayton of Minnesota, and Mike Beebe of Arkansas, and Republicans Gary Herbert of Utah, Scott Walker of Wisconsin, and Mary Fallin of Oklahoma.
"We just don't know what Washington's going to do," Oklahoma Gov. Mary Fallin told The Oklahoman prior to her departure for Washington.
Federal aid to states comprises about one-third of states' revenues and many states, especially those with cities struggling to stay solvent, will be hit hard by the automatic cuts in spending enacted if we go over the fiscal cliff.
"The clock is ticking," Quincy Krosby, market strategist for Prudential Financial Inc. (NYSE: PRU) told Bloomberg News in a phone interview. "The focus is on what goes on in Washington. The market will be volatile. You've got to be very well hedged given that the market is so much headline-driven."
Fiscal Cliff Effect on Jobs Report
When Friday's nonfarm payroll number and unemployment rate are released it will be an indication of how much of an impact the fiscal cliff is already having on the U.S. economy.
The average estimate for jobs created in November is around 75,000, with unemployment staying at 7.9%. But, some analysts are predicting a much lower jobs number and unemployment ticking back up to 8%.
But if the report is disappointing, the silver lining could be that it motivates Washington to come to an agreement over the fiscal cliff.
"This week may bring some more progress towards a deal to prevent the U.S. fiscal cliff," Paul Dales, senior U.S. economist at Capital Economics told CNN. "November's employment report…may provide further incentive."
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