Expectations have changed lately regarding fiscal cliff 2013. It's looking increasingly likely that we are going over it.
U.S. Treasury Secretary Timothy Geithner, U.S. President Barack Obama's lead delegator on the fiscal cliff talks, told CNBC the Obama administration is "absolutely" prepared to go over the cliff if Republicans don't change their tune on taxes.
President Obama and Republican House Speaker John Boehner on Wednesday, along with Congressional Republicans, reiterated their stance on the fiscal cliff. No compromise was reached, with just 25 days remaining before zero hour.
President Obama maintains there could be a quick deal if Republican lawmakers withdraw their resistance to raising taxes for individuals earning more than $250,000 a year, swapping for concessions on federal spending cuts and entitlement reforms.
"If we can get the leadership on the Republican side to take the framework, to acknowledge the reality, then the numbers aren't that far apart," the president told "The Business Roundtable."
He added, "Another way of putting this is we can probably solve this in about a week. It's not that tough, but we need that conceptual breakthrough."
The GOP Not Ready to Budge on Fiscal Cliff 2013 Tax Deal
Breaking through to Republicans won't come easy for Team Obama.
The GOP remains adamant they won't agree to any deal that raises taxes for anyone. Nor are they keen on adding to U.S. debt.
Geithner has restated there will be no deal without higher taxes for the wealthy, and without a change in congressional rules that makes it harder to block an increase in the U.S. debt ceiling.
"There is no prospect (for) an agreement that doesn't involve rates going up on the top 2% of the wealthiest Americans," Geithner stressed to CNBC.
In an interview with Bloomberg News this week, President Obama said, "The issue right now that's relevant is the acknowledgement that if we're going to raise revenues that are sufficient to balance the very tough cuts that we've already made and the further reforms in entitlements that I'm prepared to make, that we're going to have to see the rates on the top 2% go up. And we're not going to be able to get a deal without it."
Both sides have laid out their proposals to slash deficits by some $4 trillion over the next decade. The two parties couldn't be farther apart.
Republicans propose $1 trillion more in spending cuts than the Obama administration, which wants $800 billion more in tax increases and $200 billion to stimulate the sagging and stagnant economy.
Further complicating discussions is the president's call for including an increase in the debt ceiling in the final deal.
President Obama called it "bad strategy" for Republicans to think they will have more influence in 2013 to pull concessions out of the White House by threatening to let the U.S. default.
Speaking to U.S. company executives, the president said, "I want to send a very clear message to people here. We are not going to play that game next year."
John Brady, managing director at R.J. O'Brien & Associates in Chicago told Reuters, "The more the Republicans talk about raising or not raising the debt limit, that makes the market nervous, and makes the White House more nervous than Congress. The cliff can be punted into the future, but the debt ceiling can't be."
Preparing for a Fiscal Cliff Fall
With a deal looking unlikely at this point, the White House budget office has instructed all federal agencies to begin bracing for the probable automatic spending cuts that are set to kick-in on Jan. 1 if no agreement is reached, the White House confirmed.
Jay Carney, White House spokesman, said the Office of Management and Budget needs to take certain steps to be ready if no deal is reached, and has asked federal agencies for information so it could complete calculations on the required cuts.
Americans are anxiously taking heed of the fiscal cliff talks, or lack thereof, and don't have much trust in Congressional lawmakers. In a recent Gallup poll, just a mere 10% gave Congress a high or very high rating for honesty or ethic.
Along with the Congressional Budget Office's warning that a recession threatens in 2013 without a compromise, a fresh Quinnipiac University poll out today (Thursday) shows that 47% of voters surveyed say falling off the cliff would be bad for the economy.
Equally as glum, less than half (48%) see a deal by year's end.
For more information on what to do with your money as the fiscal cliff battle continues, check out this fiscal cliff investing analysis by Money Morning Chief Investment Strategist Keith Fitz-Gerald: Five Ways to Turn the Fiscal Cliff Into an Outstanding Investment Opportunity.
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