Just five days remain for Democrats and Republicans to hammer out some kind of deal before the U.S. economy gets walloped with some $600 billion in tax increases and spending cuts at the federal level.
It's unclear if the parties can reach a fiscal cliff deal before the New Year, although they've shown little hope they can agree.
Republican House Speaker John Boehner on Friday put the burden on the president and the Democrat-controlled Senate to make the next move after they rejected his big concession on tax rates. Boehner agreed to extend tax rates on incomes under $400,000 (reduced from his previous threshold of $1,000,000) in exchange for steep spending cuts to reduce the swollen federal deficit.
"I don't want taxes to go up; Republicans don't want taxes to go up. But we only run the House. Democrats continue to run Washington," a frustrated Boehner said in a press conference Friday after he failed to rally support for his "Plan B," which never even made it to a vote among his own party.
While both sides have reduced expectations for an all-or-nothing deal, the two parties are still miles apart. Lawmakers are already prepping for the blame game should the New Year come without resolution.
No Fiscal Cliff Deal: Who Will Feel the Biggest Impact?As Team Obama and the GOP wrangle over a fiscal cliff deal and the deadline looms near, investors/taxpayers are trying to prepare for what's ahead.
The Pentagon, the Treasury Department and other federal agencies have cautioned employees that drastic moves could happen if the automatic spending cuts kick in as planned.
"Should we have to operate under reduced funding levels for an extended period of time, we may have to consider furloughs or other action," Treasury Deputy Secretary Neal Wolin warned in a note to employees late last week.
Businesses across all sectors are bracing for the fiscal cliff by cutting back on expansion projects and investments and implementing hiring freezes. Consumer confidence is also showing signs of deterioration as the cut-off date nears.
And while talks continue to focus on increasing taxes for the wealthiest Americans, lost in the dealmaking is the fact that falling off the cliff would hit middle- to low-income earners the hardest.
The fiscal cliff "clobbers low-income households with children," Robertson Williams, a senior fellow at the Tax Policy Center told The Journal. "It is striking how large some of the increases are."
For example, under current IRS rules households makings $10,000 to $20,000 with one child get a $2,761 payment based on a variety of tax breaks. Should a fall off the fiscal cliff come to fruition, that amount would be shaved nearly in half to roughly $1,324.
In addition to the steep increases less affluent households face, they also stand to lose a bevy of entitlements.
Newark, NJ Mayor Cory Booker voiced concerns Sunday on ABC's "This Week" when he said, "People are going to be cut out of programs that support the poorest Americans...This is really what bothers me right now."
With fiscal cliff deal talks on pause until Thursday when the debate resume, markets were slightly down today (Wednesday). They tumbled Friday following the fiscal cliff deal setback and continued to fall Monday.
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