Big Cliff Meeting Over…No White Smoke From WH Chimney

December 28th, 2012 at 10:08 pm

Read the details for yourself, but from what I’m picking up, resolution of the fiscal cliff before New Years still requires Rep Boehner to bring a vote up in  the House that will pass with majority D votes, and I’ve seen no indication that this will happen.

[Update: OK, I take that back…I can see a weedy, pot-hole-filled path to a deal before New Years.  Based on sketchy details I’m picking up in the air, McConnell and Reid are apparently huddling over a deal.  If they come up with something acceptable to both of them, McConnell will allow it to come to an up-or-down vote.  The word on the street is that if that deal passed the Senate, Boehner would allow it to come up in the House, where, depending on what’s in it, it could pass with mostly D’s.  This could all happen quickly, over the next two days.]

In their big meeting today, the President apparently stuck to his $250,000 threshold for the tax increases, though there’s behind-the-scenes chatter of a deal being discussed in the Senate with a $400,000 threshold.

That deal–if it should come into play, which it currently is not–may also keep the estate tax where it is now ($5m exemption, 35% rate) instead of accepting the WH reset to $3.5m exemption and 45% rate.  I suspect that if Congressional R’s (and probably some D’s) are inflexible on that point, the WH will not accept the change…nor should they.  Remember, the estate tax resets to $1m exemption and a 55% mere hours from now.

I suspect a deal that kept the threshold at $250K, suspended the sequester, patched the AMT and doc fix, and extended UI, would pass both houses of Congress and be signed by the President.  The question then is: will McConnell and Reid agree on such a deal (or something close to it–I can see McConnell pushing for a higher tax threshold)?  If not, it’s hard to envision, with a few days to go, any alternative path that doesn’t lead us off the cliff.  In which case, what they should be talking about now is how quickly they can reverse the damage.

Me, I’m feeling intense whiplash from all of this and while there’d be signs of relief were there a deal before the deadline, I’m not sure there’s cosmic economic significance between a small bore deal on Dec 31 or the same deal a few days later.  I rather them not cram out a deal if that means accepting bad decisions.

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5 comments in reply to "Big Cliff Meeting Over…No White Smoke From WH Chimney"

  1. rjs says:

    i dont see what the hurry is; there is no more “damage” on the 2nd than the 31st…the game changes in the WH favor with a new year, and the House members look better next year too..

  2. Richard nemo says:

    It seems to me that the tax increases(the top rates should be 70 percent) and sequester are good policy. Let them go into affect; and fix the unemployed and medicare payments–like make them permanent and at a higher rate–then do a trillion dollar stimulus. Problems solved. Lotta money for the welfare state and deficit vanishes because of tax hikes and economic growth. We need out of this liquidity trap! Kensyianism is the only way. All sane people know that. It is time to tax and spend after decades of austerity!

  3. Susie Madrak says:

    I was surprised and disappointed to see your Kudlow appearance. So now you’re in favor of means-testing Medicare? Do you really not see the long-term political problem it presents to make Medicare just another program at which Republicans can chip away?

    • Jared Bernstein says:

      Medicare already is means-tested –a little known fact. As you see in that post, I share your concerns. But we do have to slow the growth of health care spending, though here too, Medicare is less implicated than the private sector part of the system. Most of the savings should come from the delivery side–squeezing out the pretty deep inefficiencies, but raising premium costs in Parts B&D for higher income seniors seems fine to me. Think of it as a progressive tax and maybe you’ll feel better about it.

      Still, you may have a point re the show last night–there was a lot a dialogue swirling around and I’ll listen to it to see if I said anything I didn’t mean to, which sometimes happens–often because context gets lost.